CI reported earlier this week that Mainvest, a FINRA-regulated funding portal, is winding down operations. In an email, a spokesperson for the company provided additional insight into the unfortunate outcome.
CI noted that Mainvest was one of many companies that have been impacted by the failure of Banking as a Service provider Synapse. Mainvest shared that it was accurate that the dispute between Synapse and Evolve – a user of Synapse’s services, is impacting their users.
“Evolve Bank froze payment processing for Synapse users last week, and we—along with hundreds of other clients representing ~10MM end users—are still affected,” said the Mainvest representative.
They added that while much has been written about the Synapse failure, they believe there has not been enough, given the scale of the problem and the lack of action from federal regulators.
As CI referenced an X from a user who described the problem with Synapse/Evolve as similar to a bank run, the platform took umbrage to this statement.
“A bank run is not the cause of the dispute between Synapse and Evolve, and Mainvests’s userbase makes up ~.2% of affected users. We’re actively working towards a solution for our users, engaging with both Evolve and Synapse, contacting FINRA and federal regulators, and bringing in outside counsel.”
As for the decision to cease operations, Mainvest said there were many factors that drove their decision, a move they did not take lightly.
“It’s been a challenging environment from the start, with the pandemic hitting early in our lifecycle and ongoing volatility in the VC and Fintech spaces that have made fundraising difficult. Mainvest, alongside many other companies, is reliant on supposedly regulated third-party services to securely facilitate the back end of our marketplace(s). To be clear, the uncertainty surrounding Synapse’s bankruptcy, which is playing out in real time [and] affecting our users and millions of others, was the catalyst for this decision.”
Mainvest noted that they have successfully funding over $30 million into 405+ private firms across the country. Many of these firms would not have been able to launch without the assistance of their platform and they have received an outpouring of support from investors who were excited about the ability to invest locally.
“More RegCF platforms are using Revenue Sharing, potentially as a result of our use case being proven out. We hope to see the space continue to grow because of our core belief that everyday people should have more power in investment and economic development.”
Mainvest stated:
“As we wind down over the next few weeks, email support is still available for investors and we’ve prepared an FAQ. All portfolio information and transaction history will be emailed to users. For businesses, we’re scheduling 1:1 offboarding calls to ensure that they have a plan for facilitating payments moving forward. While this isn’t the outcome any of us wanted or expected, our main priority is ensuring that businesses can continue to see the benefits of community capital and that investors can stay connected with their portfolio businesses.”