Founded by tech-company veterans (including several former Uber employees), Mainvest is a stellar example of how to make online alternative investing look and feel a lot like ecommerce. Some novel investment vehicles, and a clear focus on local businesses sets MainVest apart from other Reg CF portals.
- Website: https://mainvest.com
- Investment Types: Startups/Business Financing
- Security Types: Debt
- Sectors: Restaurants
- Minimum Investment: 100
- Advertised Returns: 20-60%
- Open to all investors
- Most investments open to non-accredited investors
- Excellent website user experience, including solid investor education materials
- Very transparent invesment terms
- Novel "petitions" feature allows prospective investors/customers to ask for particular businesses in their community
- No investor fees
- Short track record
- Relatively low number of available investments, and mostly in Massachusetts
- Minimal investment activity (several open investments have raised less than $1000)
Reg CF is finding a nice niche serving the kinds of businesses that aren’t likely to attract interest from traditional venture capital, like restaurants and retail. Mainvest follows the lead of LocalStake in squarely targeting just those kinds of businesses with their investment offerings.
Types of investments MainVest offers
MainVest offers debt investments in small, local businesses like restaurants, breweries, beauty salons, and yoga studios. As of this writing, all of their available offerings are in Massachusetts. While most investments are open to everyone (via Reg CF), most are also open (with higher maximumus) to accredited investors (via Reg D).
What do you get when investing with MainVest?
There are 3 types of securities offered by MainVest. All of them are debt investments, with some flavor of revenue share component based on the time horizon of the investment:
- Term loan. Pays investors interest-only for the first year, then principal and interest for the next four years.
- Revenue Sharing Notes (RSN). Pays 5% of revenue to investors quarterly until a 50% total return is reached. If the principal and 50% return haven’t been paid back in 5 years, the full remaining balance is due at the end of 5 years.
- Equity-alternative revenue note (EaRN). Longer maturity (10 years) and a lower cap (25%), but then residual revenue share (2%) until the end of the 10 years.
MainVest fee structure
Small Change itself doesn’t charge investors any fees, but does charge issuers a percentage of the amount raised (typically 6%), which investors should understand reduces the amount of capital the business actually receives for operations.
Potential returns and cashflow
Investments made via MainVest are high-risk investments in small businesses.
With the revenue share investments, the borrower pays a predetermined percentage of their revenue each quarter until a defined multiple of the original investment is reached (either 1.25 or 1.5, depending on the security type). For example, with the Revenue Sharing Notes, investors receive 5% of sales (which may fluctuate each month) until investors receive 1.5X their original investment, but for no more than 5 years (if investors haven’t received the 1.5X by then, the full amount comes due).
The revenue share model is clever, and it’s obvious why it’s appealing to businesses facing unpredictable cash flow.
It can be a bit tricky to compare investments apples-to-apples, but as a rule of thumb to get an approximate IRR equivalent, you can take the multiple, raise it to 1 divided by the term in years, and then subtract one. For example, with a multiple is 1.5 and a term of 5 years, 1.5^(1/5) - 1 = 8.5%, which is a far cry from the advertised returns of 50% or more (which may indeed represent total returns, but investors should be sure to understand the time horizons involved). Note that if the full multiple is paid before the term is over, the effective rate of return would be higher.
Breadth of offerings on MainVest
As of this writing there are 7 investment opportunities avaialble, all in Massachusetts.
Regulatory framework and due diligence expectations
MainVest is an SEC registered Title III Funding Portal. That means they are subject to a range of rules and obligations around investor education and due diligence. All developers offering Reg CF investments on MainVest will have been through background checks of key officers and owners, and there are clear links provided to the relevant SEC filings made by the developer.
Prospective investors also have access to an online channel for asking questions of the issuer (and viewing answers of prior questions from others).
MainVest in the news
MainVest On Bringing Everyday Investors To Main Street Shops
MainVest Co-Founder and CEO Nick Mathews says the platform is designed to help local people meet and invest in Main Street entrepreneurs.Read More