Passion Capital, one of Britain’s first early-stage venture capital firms, will crowdfund the final leg of its latest £ 45million ($ 62.5million) fund, Passion Capital Fund III. TechCrunch understands that this is the first time that retail investors have been invited to become LPs in a venture capital fund, at least in Europe.
Passion says it will use the Seedrs platform, which is normally used by startups themselves for crowd-equity fundraising campaigns. The move is highly unusual for a VC, where LPs are normally drawn from pension funds and family offices, rather than from the “person on the street”.
Seedrs was previously used by UK venture capital accelerator Seedcamp to enable its founders to participate in fundraising, but the fundraiser was allocated privately. What is different about the Passion movement is that almost anyone will be able to become an LP in their new fund, even if it is a very small one.
An allocation of £ 350,000 will be made available to the public. The offer could well prove attractive to retail investors, as their one-time investment would be applied to a range of startups rather than through the direct investment of a single company traditionally done through Seedrs.
Any investor who self-certifies as “high net worth” or “sophisticated” will be able to invest in the fund. Passion Capital’s portfolio of 83 technology investments is estimated at £ 5 billion and includes Monzo, GoCardless, Butternut Box, Adzuna and Marshmallow.
Passion says it has already made 11 new investments from Fund III, of which investors through the Seedrs platform will automatically be a part, with 15 to 20 additional new investments planned.
Passion Capital partner Eileen Burbidge said in a statement: “Investing in a private venture capital fund is generally reserved for institutions. We are opening our doors to a much wider range of investors in this unique collaboration with Seedrs as we seek to diversify our investor base and increase access for investors who may be interested in partnering with us.
Jeff Kelisky, CEO of Seedrs, added: “This is a very innovative collaboration for both the venture capital and equity crowdfunding space… It gives our community another opportunity to participate in the SME equity financing that offers additional investment opportunities and exceptional potential. returns, beyond the direct investment campaigns that we also run.
Speaking to me in an interview, Burbidge added, “We had seen what was going on in the United States, with Angellist Rolling Funds, then the SEC expanding the definition of qualified investors and basically this democratization of retail investors. finally having access to venture capital funds and general practitioners. It’s, kindly, breaking that age-old dynamic of where institutional investors choose these age-old fund managers, and the whole notion that the company has been that elitist and unattainable asset class for retail investors.
Burbidge said she spoke to Angellist about the possibility of doing something similar in Europe and realized it wasn’t legally possible at the moment, so she asked Seedrs, who confirmed that ‘they could do it.
“We closed the fund first in August 2019, it was 25 million, then in August 2020 with 20 others, so 45 million, which is the same size as our second fund. And during the pandemic. But, she says, after processing their records, they eventually found out that they had a stipend of £ 350,000 left, which became the germ of the crowdfunding idea.
“I thought we had 350,000 left, why don’t we fund it. All this movement that allows retail investors to access venture capital funds and invest – to get that exposure to a whole portfolio – I just think that’s a very good thing. I think it’s great for everyone involved. Obviously, as long as they’re educated and they know the capital is at risk and it’s not the retirees putting their last savings in, and those usual types of crowdfunding warnings. But I like the idea that people are exposed to technology and not have to do a minimum check of £ 150,000. “
While Burbidge declined to comment further on the matter, there is of course the implication that this allocation could be increased, if crowdfunding takes off.
She added, “There isn’t a retail investor in the world who wouldn’t want to access the latest Sequoia fund, or the Accel right fund or the Andreessen Horowitz funds… we think it’s great to give investors retail exposure to a portfolio. I think it would be great if more funds did.
Burbidge believes actions like Passion’s “will increase the diversity of the LP record base. It increases inclusion and gives people more access. It just creates more participation and breaks down old barriers. We will have the Seedrs platform for questions and answers. It will be up to us to decide how much we want to engage with this community, just as Monzo does with its crowdfunded investors. Monzo holds a public event every year for all of its crowdfunding investors. I would love to do an event… it would be great to meet people who have invested in this fashion.