Hi everyone,

We first caught wind of Finlete about a year ago. At the time, that vision was still a dream. But today, it’s finally real, with Finlete recently launching its first game-changing publicly-accessible athlete investment.

Through Finlete, both accredited and non-accredited investors can now purchase Echedry Vargas shares.

Echedry Vargas is a promising 19-year-old Dominican athlete currently playing in the Minor Leagues for a Texas Rangers affiliate team.

For Finlete, a lot has changed in the past year. But one thing that hasn’t changed since Finlete launched is poor athlete pay in the minor leagues.

It's one of the very reasons for the company’s existence.

Minor league baseball has a huge salary problem

While the Finlete model can be expanded to other sports, it’s no surprise they’re starting with baseball.

Plenty of sports have a developmental system, but perhaps none are quite as expansive as baseball.

There are a total of 11 main leagues within the Minor Leagues, along with 3 more “rookie leagues” and a smattering of smaller ​partner and independent leagues​ around the country.

That adds up to a tremendous number of players. But while the ​minimum salary​ in the Major Leagues is a cool $740k, Minor Leaguers aren’t so lucky.

• At the lowest levels of the Minor Leagues, minimum salaries ​are less than $20k​

• In fact, it’s only when you get to the highest level of the Minor Leagues (called Triple AAA) that minimum salaries even eclipse the ​average annual cost of living​.

• Even factoring in off-season jobs or speaking engagements, the financial results for Minor League players aren’t pretty.

While things have gotten better in recent years, stories abound of ​players living without refrigerators​ or going into games hungry because they can’t afford a meal.

And even with all that sacrifice, there’s no guarantee that the player is actually going to make the big time. Only an estimated ​10% of all Minor League players​ will ever play a Major League game.

Even putting ethics aside, there are some obvious flaws with Minor League compensation.

For a player to give themselves the best chance of breaking through (and, by extension, for teams to cultivate the best talent), they’ll need to:

• Optimize their health and nutrition

• Have access to the latest equipment like bats and gloves, and

• Work with trainers outside the organization, like strength coaches or physical therapists.

How on earth are they supposed to afford all this if they literally don’t know where their next meal is coming from?

Plus, there's the opportunity cost. Any time a player spends working an off-season job is time not spent training — further limiting Major League opportunities.

Obviously, there’s a gap here between the funding players need and the funding they have.

This is where ​Finlete​ comes in.

How Finlete works

Finlete helps bridge the Minor League funding gap with something called a ​future earnings contract​.

Here’s how it works:

1. Finlete Funding, Inc. (“Finlete’), raises money from investors, selling up to 100,000 shares of a series of preferred stock specifically tied to an athlete’s career earnings (different share series related to different athletes will have a different value based on Finlete’s contract with the athlete, the athlete’s sport, and their potential).

2. ​Finlete funds athlete contracts​ with money from investors. In return, athletes exchange up to 10% of their on-field Major League earnings for a set period (typically the next 25 years).

3. If and when the athlete gets to the Major League, Finlete issues dividends to investors for their series of shares, related to their specific athlete.

4. If the athlete doesn’t make it to the Majors, the athlete doesn’t have to pay Finlete or the investors back. It's not a loan, it's an equity investment.

Let’s use a concrete example to understand the numbers.

Suppose that Finlete invested in Carlos Santana, the current first baseman for the Minnesota Twins, during his Minor League career.

Assume that each Santana share is worth $50 and you purchased 5 shares for a total upfront cost of $250.

Currently, Santana’s estimated career Major League earnings are about ​$100 million​.

Since you own 5 shares out of 100,000, you’re entitled to 0.005% of that money – or $5,000, for a total gross return of 2,000%.

If we assume that you invested in 2005, the year that Santana got drafted, your annualized return over the course of the last 19 years would amount to 17.1%. Not bad at all!

And, since the 25-year clock hasn’t expired, there’s still a lot of earning potential left.

How does Finlete choose which players to invest in?

Of course, not every player is going to make it to the Major Leagues. So picking the right player to invest in is incredibly important.

Finlete is building a data-driven selection process, crunching numbers on more than a thousand players across dozens of determining factors including:

• Bat speed

• Batting average

• Slugging %

• Power

• Speed

• Age

• Team

• Track Record

• And a whole lot more…

This data-driven approach is obviously pretty reminiscent of ​Moneyball​, but it remains to be seen how well Finlete will be able to replicate this model in other sports that might be less conducive to analytics.

Finlete also described one other major advantage they have in scouting talent — they get to see players' performance in the Minor Leagues before making their decision.

In contrast, when teams like the Rangers scout a player and sign them to a contract, they might only get to see them play in college or local semi-pro leagues (especially if they’re an international player).

Only signing players that are currently succeeding in the Minor Leagues helps filter out some of the players who might perform well at lower levels, but don’t quite live up to expectations.

Does Finlete have any competition?

There’s one other major player in the athlete investing space — a company called ​Big League Advantage​.

But the key difference here is that BLA is a private fund that’s not open to most investors.

Plus, they’ve been criticized in the past for ​exploitative contract terms​ – a far cry from Finlete’s community-oriented approach focused on helping athletes succeed.

Finlete is truly the first of its kind, offering access to athlete investments to pretty much anyone (if you’re curious, they’re doing this through ​Regulation CF​, a regulation allowing firms to legally navigate around ​accreditation​ barriers).

In fact, under Regulation CF, Finlete just launched its first investment offering after signing Echedry Vargas to a future earnings contract.

Investing in Echedry Vargas

Finlete couldn’t have picked a better athlete before launching their first investment offering than Echedary Vargas. His story truly characterizes the mission of the company.

In 2022, Vargas was signed by the Texas Rangers from the Dominican Republic when he was just 16 years old.

Despite his obvious talent, Vargas was only offered a signing bonus of $10k — ​half the average​ signing bonus for a Minor League athlete.

In all likelihood, the Rangers probably didn’t have high hopes that Vargas would amount to anything!

In fact, they assigned him to play in the ​Dominican Summer League​ – generally considered to be one of the lowest levels of professional baseball.

But Vargas defied expectations, registering a ​.301 batting average and a .368 on-base percentage​ (for non-baseball fans, those numbers are very good).

Proving himself to the Rangers, they bumped him up to the ​Arizona Complex League​, where he would face tougher competition.

Rising to the challenge, Vargas did even better, with a .317 batting average and a .388 on-base percentage.

Now, Vargas has already been called up to the next level, assigned to the Rangers’ single-A affiliate the ​Down East Wood Ducks​ (yeah, some of these minor league teams can have interesting names).

Vargas is starting to pick up steam, with commentators ​identifying him​ as a top prospect and some teams even trying to trade for him.

Of course, he still has a way to go before potentially reaching the majors.

But if fans and investors support him through Finlete’s offering, his odds will likely improve – and, of course, those supporters would benefit from any Major League contract he signs.

Let’s dig into the details.

Investment details

Finlete Funding, Inc. (“Finlete”), is selling ​100,000 shares of “Echedry Vargas Preferred Stock​,” which are shares that are tied to Echedry’s Major League earnings through his contract with Finlete..

This class of stock is capped at 100,000 shares, so investors don’t need to worry about future dilution.

And since this is a Reg CF offering, both accredited and non-accredited investors can participate – although there are some SEC limitations on the amount that non-accredited individuals can actually invest.

Here are the numbers:

• Share Price: $8

• Minimum investment: $96, or 12 shares.

• Maximum raise: $800,000 (aka the full 100,000 shares).

• Minimum raise: $50,000 (if Finlete fails to raise at least this amount, investors will get their money back).

As an example, let’s say you made the minimum investment today and Vargas signed his first Major League contract in 2027 for $1.5m.

Then you’d be entitled to $180, or a gross return of 87.5% (23% annualized over three years).

And frankly, that’s significantly lower than the average MLB salary today, which stands at ​almost $5 million​ – meaning there’s a lot of potential upside here.

You’d receive dividend payouts twice per year directly to your ​Finlete account​ — within the first two weeks after the All-Star Game (July) and within the second two weeks after the World Series (October).

As for the funds Echedry receives, a sample expense report generated by Finlete includes things like equipment and coaching – but also family support and housing.

And while the financials look good if Echedry succeeds in his Major League career, investors should understand that these shares are a pretty novel asset class.

While owning shares in sports teams has historically ​been a strong investment​, there’s a lot more uncertainty when it comes to owning shares tied to the career performance of players.

With that in mind, let’s look at the pros and cons of this opportunity.

Finlete pros and cons

Pros

Access to a community

One of the biggest benefits of this opportunity is getting to participate in a community of fans all involved in the journey of an athlete.

Sure, the financial side of an investment is always important – but Finlete also understands that sports are about more than just money.

The Finlete team wants to build a community of what they call Fanvestors.

Fanvestors will gain access to a whole slew of really cool perks. Think exclusive meet and greets, signed merchandise, and personal messages from each athlete.

Finlete has even discussed organizing a Fanvestor trip to see Echedry play — he’ll probably be one of the few Minor League players with a dedicated fan section.

Increased chances of success for Echedry

There’s a special aspect to this investment not seen in most opportunities — by buying shares, you’re increasing the likelihood that your underlying investment is successful.

If you buy shares of Apple stock, for instance, it probably won’t make a difference to the company’s future.

But supporting Echedry by buying shares also makes it more likely that he’ll make it to the majors by helping ensure he has the resources he needs to focus on his health and baseball – and, by extension, increases the odds that the investment in his shares pays off.

Plus, the inherent marketability of having a dedicated team of Fanvestors can’t hurt when it comes to signing a deal.

Backed by a great team and institutional partners

Finally, Finlete has assembled a tremendous team to make this deal (and many future ones) possible.

• Rob Connolly, Founder and CEO, is a seasoned entrepreneur with multiple successful exits.

• Max Eisenberg, Advisor, co-founded ActionStreamer, the sports-tech startup behind many sports and entertainment “firsts” including the ​first-ever live NFL QBCam​.

• Michael Bryan, Advisor, was the former CFO of Big League Advance and has negotiated hundreds of earnings advance contracts.

• Mark Grant, Advisor, has 20+ years of experience in the baseball world, both as an MLB player and current color commentator for the San Diego Padres.

Plus, Finlete is backed by blue-chip institutional investors, including ​Draper Startup House​ and ​ComcastNBC​.

Cons

Liquidity is very uncertain

One drawback to Echedry Vargas Preferred Stock is that future liquidity may be a concern.

Of course, investors in a Reg CF raise ​need to hold their shares​ for at least 1 year, so these shares aren’t something you can resell right away regardless.

But it’s currently unclear if you’ll actually be able to sell these shares at all, or how they’d be valued if you did.

Finlete could eventually introduce an ​alternative trading system​ (ATS) on their platform to allow investors to trade shares back and forth – but even in that case, liquidity might be pretty shallow. Or they could begin trading on an ATS, or national exchange, in which case the shares would become freely tradable through a brokerage account.

Here’s the deal: in the absence of concrete plans for liquidity, investors should probably assume that this is going to be a very long-term investment, just to be on the safe side.

Could be high risk

Let’s face it – it’s really hard to become a financially successful professional athlete.

Earlier, we mentioned that just 10% of Minor League athletes make it to the Majors, but that’s just the number of athletes who play a single game in the big leagues.

The number of players who actually manage to build a lucrative, long-term career is probably far lower.

And this isn’t just about talent or hard work – random injuries can also occur.

But still, with high risk can come high reward.

Remember Shohei Ohtani’s ​$700 million contract​ with the Dodgers?

Just imagine if Finlete can help the next Ohtani make it to the big leagues – and what that would mean for the athlete, the fans, and, of course, the investors.

To learn more about Finlete Funding, Inc., visit ​finlete.com​.

For investor relations, please contact ​[email protected]​.

If you'd like a personal introduction to Rob Connolly and the Finlete team, reply to this email. 🤝

Check out Finlete →

Disclosures from Alts

• This issue was sponsored by Finlete

• The ALTS 1 Fund holds no interest in any companies mentioned in this issue.

• This issue contains no affiliate links

This issue is a sponsored deep dive, meaning Alts has been paid to write an independent analysis of Finlete and their associated markets. Finlete has agreed to offer an unconstrained look at its business, offerings, and operations. Finlete is also a sponsor of Alts, but our research is neutral and unbiased. This should not be considered financial, legal, tax, or investment advice, but rather an independent analysis to help readers make their own investment decisions. All opinions expressed here are ours, and ours alone. We hope you find it informative and fair.

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