Plum Alley Investments Membership FAQ
Plum Alley is a venture firm investing in early stage companies with new technologies and medical breakthroughs driving progress in the world.
What is membership?
An annual commitment to be part of a group of committed women, men and families who want to invest in early stage companies with gender diverse founding teams in the STEM fields.
Who can join?
Membership is open to families, multi-party LLCs and individuals. To invest in a company, you must be an “Accredited Investor” as defined by the SEC. There is no requirement to invest.
What is an accredited investor?
The Securities and Exchange Commission (the “SEC”) set the guidelines for what it means to be an accredited versus non-accredited investor. The SEC defines an accredited investor, in the context of a natural person, as anyone who has an earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, or has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). The SEC sets these criteria because they want to be sure that investors have both the knowledge and financial ability to make investments with risk.
How can I join as a member?
Information regarding membership levels is available here
What does Plum Alley do?
We source companies for investment and bring thought leadership and community to Plum Alley investors. We review and evaluate hundreds of companies that meet our stated criteria. We analyze the company and prepare an investment Q&A. We produce videos and summaries of founder discussions and commentary from industry leaders
We present the companies and investment opportunities to our members with company founder showcases and private zoom sessions for discussion which are led by our team. Our members decide individually if they will participate in an investment on a company by company basis. Plum Alley Management Company manages the syndicated investments.
What is Plum Alley’s investment focus?
- 1. Emerging Technology and Medical Breakthroughs. The STEM fields will dominate our economy and present a massive opportunity for financial return and the ability to create the future we want with our investment dollars and relationships. We look for companies with a proprietary product or service with massive opportunity to scale.
- 2. Gender Strength and Diversity in Founding Team. Diverse thinking and decision-making leads to better products, businesses and outcomes. Data consistently shows companies founded by women are under-funded. Yet, research shows women founders outperform and do more with less capital. This presents a huge opportunity for strong returns.
- 3. Series A Stage Focus. We invest at the Series A level to achieve promising returns with somewhat reduced risk as companies have more demonstrated progressed and traction to evaluate. We will opportunistically look at Series B and late seed stage.
Does Plum Alley provide opportunities to invest in follow-on rounds?
Plum Alley aims to participate in 1-3 follow-on investments per year. We generally do not participate in extension, bridge or interim financings. We look to offer opportunities to exercise pro rata on follow-on financings where there is a new priced round led by an outside investor. Each follow-on investment is reviewed by the Plum Alley team using the same investment criteria as new investments. There is no guarantee that follow on investing will be available for all syndicate investments.
Are there benefits beyond investments.
We offer high quality special educational events for members and investors including private dinners and sessions with relevant industry experts in the areas of critical and new technology, innovation and investing. Our members are inspired and informed as they shape the future with their investments.
What is a syndicate?
Plum Alley members making direct investments into private companies do so via a Plum Alley syndicate, which is a Special Purpose Vehicle or a Limited Liability Company (LLC) (“Syndicate Company”) that the Plum Alley Management Company creates and manages. Each member investor purchases an ownership interest in the Syndicate Company, rather than directly buying the securities of the underlying private company (“Target Company”). The syndicate investment vehicle allows Plum Alley to pool capital among members and provide access to deals otherwise not open to individual investors. The Plum Alley Syndicate Company is the investor on the Target Company capitalization table. Plum Alley members own a pro rata stake in the Syndicate Company and share administrative and investment expenses on a pro rata basis. The Plum Alley Management Company serves as the Syndicate Manager for all syndicates.
What are syndicate expenses?
Plum Alley members do not currently pay a management fee when investing in a Plum Alley Syndicate. As a member you get the chance to pick and choose your investments as a benefit of being a member of Plum Alley. Members are able to leverage our sourcing, analysis and expertise, but have final power and authority to make their own decision to invest. Members who elect to make a syndicate investment share administrative and investment related expenses for each respective syndicate on a pro rata basis. Plum Alley reserves the lesser of $75,000 or 10% of the aggregate capital contribution for each syndicate investment to cover estimated syndicate expenses for the life of the investment (estimated to be seven years on average). Syndicate expenses include administrative, accounting, legal, filing and reporting costs and investment related expenses to organize and manage the syndicate company.
What carry does Plum Alley charge?
Plum Alley charges a carry on the syndicate investments. Plum Alley currently charges a 15% investment carry on syndicate investments. Carry is only charged at the time the private company has a liquidity event and only charged on capital gains on top of the initial investment amount minus the pro rata expense amount (i.e. any returns above the original investment are shared 85% to the investor and 15% to Plum Alley). Plum Alley anticipates the carry will increase to 20% later in 2020.
How does the syndication process work?
Plum Alley Investments engages in ongoing conversations with prospective early stage companies for investment (“Target Companies”). Plum Alley features early stage companies that have been reviewed by our internal team giving members an opportunity to meet the founder (in-person or virtually) and learn about their venture. Plum Alley proceeds with a syndicate investment for those companies that generate interest among members, who determine themselves they want to move forward with an investment. Plum Alley Investments syndicate sizes vary depending on the opportunity and member interest. The average investment size has ranged from $500,000 to $1.5 million.
As an individual member, may I invest through a Trust or an LLC?
Yes. You may invest through a Trust or a single member LLC.
How does Plum Alley oversee its investment opportunities?
Each time Plum Alley Investments provides access to an opportunity to invest in a private company, we form a new investment Syndicate Company to hold the securities of that private company. Importantly, each investor will be purchasing an ownership interest in the syndicate company, rather than directly buying the securities of the private company. This simplifies paperwork both for the investors and the private company. Each new syndicate is formed as a Delaware limited liability company (an "LLC"). Each LLC is managed by Plum Alley Management Company. The investors are the “Prospective Investor Members” of the LLCs. The relationship between the Syndicate Manager and the Prospective Investor Members is defined by the LLC's “Operating Agreement.”
What reporting should I expect?
Plum Alley Investments will provide all investor members of its syndicates with K1 filings and will also share periodic material information and announcements in accordance to the terms of each investment opportunity.
When might I see a return on my investment?
Investing in private companies is risky and there are no assurances that a particular company will produce a positive return. Plum Alley Investments seeks high potential companies with strong products and services and leadership teams, however there is no guarantee of a financial return on investment. The investment horizon for private companies can take time. Plum Alley typically invests at the Series A stage, selectively at late seed or Series B. Investors should anticipate a 5 to 10 year time horizon for each individual investment. Some companies can go far beyond that before having a liquidity event.
A return occurs when a company has an event that will produce money for the investors—i.e., company goes public, sells to another company, or returns capital through a tender offer, dividend or liquidation. If a company ceases operation you may have a loss for tax purposes that can potentially offset other gains. You are advised to consult your tax advisor. We recommend all investors consider a portfolio approach when allocating capital and build a portfolio of companies to diversify risk. Just as with public market securities, most investors diversify their portfolio with different companies.
What if an investment does not succeed--Will I have a capital loss for tax purposes?
Can Plum Alley Investments guide me in making my investment decisions?
No. Plum Alley Investments reviews many companies and investment opportunities and we present only companies that we believe our members would have an interest in considering for investment. While we present opportunities to members, the sole decision to invest or not resides with our members based on their individual preferences and circumstances.
How much should I invest?
The amount to invest in one company or in a group of companies depends on each member’s individual circumstances and things such your other investments, your need for money and your desire to support companies for reasons beyond a financial return. We do not advise or recommend what may be suitable or appropriate for members. Some investors consult outside advisors when considering these decisions, but ultimately can and should make their own choice.
Is there a minimum investment amount?
The minimum investment amount for participation in a syndicate is typically $10,000. In specific cases this may vary. The average investment size ranges from $25,000 to upwards of $250,000.
Is there a maximum investment amount?
Maximum investment amounts are determined by your level of membership. Information regarding membership levels is available here.
How many investments should I make?
The number of investments that you make depends on the amount of disposable income you have to invest and how many companies you wish to have in your portfolio. While there is no specific ideal amount or quantity to invest, it is generally recommended that investors diversify the companies they have in their portfolio similar to public company investing.
What is due diligence?
Due Diligence is defined as "research and analysis of a company or organization done in preparation for a business transaction". The particulars of what a person does and what material is reviewed depends on a number of factors such as: is someone else doing due diligence and can you use their materials to review and make a decision? Does the potential investor have access to enough material to feel confident to make the investment, knowing that there are unknowns and assumptions based on what may or may not happen in the future? In all cases, the investor should not make a decision to invest if they are not comfortable with the information they have been provided.
How do I measure the impact a company may have?
Measuring the impact of a company depends on the type of company and the nature of the business. Measuring the impact starts with knowing what the company can do, in what scale and who is affected. We help our members see the potential a company can achieve but there are no guarantees the company will meet the goals.
How should I view investing with Plum Alley Syndicates along with my other investments?
Investing in private companies is an important part of an overall investment strategy. Plum Alley is not an investment advisor, and we do not make any recommendations as to your individual portfolio construction and the allocation of assets. Plum Alley may share thought pieces and research regarding investing in private markets or considerations for allocating capital across private and public company investments. We also periodically host discussions with experienced investors who share their expertise. All decisions for members regarding investments are made by you. However, the final decision about your asset allocation is made by you.
Are there other ways I may be involved with the company?
Yes. There are at times opportunities for our members to try the products and services of some of our companies that we feature or offer for investment. There are also opportunities to interact with companies for some of our members with particular expertise that may help drive growth for the companies. We do have a formal no solicitation policy for other members and founders.
How might I be on the Board of a private company?
If you have an interest in serving as an advisor or on the Board of one of the companies we know or work with, please send us a note with your area of expertise. The decision for any possible involvement will be made by the company.