Everyone democratizes everything. Startups “democratize” everything funding at AI, Deliveroo is offering shares in its upcoming IPO to clients as well as pension funds – and now VCs are “democratizing” venture capital as well.
London-based venture capital firm Passion Capital, known for backing fintech stars like Monzo and GoCardless in their early days, is now inviting ‘ordinary’ people to invest in its latest $ 45million pre-seed fund. pound sterling.
This is, according to the crowdfunding platform Seedrs, which facilitates fundraising, the first time that a European-based VC has opened a fund to crowdfunding investors.
This is not the only initiative available to allow people with shallower pockets to get a piece of the VC pie. From working capital of AngelList to the union of Nordic venture capital firm Unconventional VC, this is a growing trend.
Democratize the CV
“Starting from the United States, there is a cultural shift towards greater inclusion in all technology – and I think that’s fantastic,” says Eileen Burbidge, general partner at Passion. “AngelList’s sliding funds democratize general practitioners [general partners]; you don’t have to be a dot com founder who has a few millions to invest in a fund.
Historically, only people or institutions that could write huge checks have been able to invest in venture capital funds. But AngelList’s working capital feature allows VCs to continuously raise capital on its platform and take investments as small (in VC terms) as $ 2.5,000 per quarter. This opens up the possibility of investing in a venture capital fund to a much larger pool of people.
“This is a positive trend that we wanted to help activate, if not propel,” adds Burbidge. “If people are interested in tech, especially the UK tech ecosystem, we would like to have them as partners with us at Passion and increase the diversity of our LP base. ”
The minimum investment for funds on Seedrs is usually £ 100 – and the minimum (as yet undecided) that people can invest in Passion “won’t be much different”.
Passion is hoping to raise at least £ 350,000 through Seedrs, although this can expand “up to £ 1million” depending on demand.
“Some people at Passion worry that we haven’t got it all figured out,” Burbidge says. “I think it will go quickly – and if we are oversubscribed, we will go to our LPs [limited partners] and see if any of them will transfer part of their position [to open up more of the fund to crowdfunders]. ”
“We would like to have as many investors as possible,” she adds – although the people who support the fund through Seedrs are “strictly passive investors”. A candidate from Seedrs will represent them all.
Often, crowdfunding campaigns are as much a marketing exercise as they are a fundraising exercise. But this does not seem to be the case with the Passion fund.
To begin with, Passion has already raised this fund, its third. Via Seedrs, Passion’s partners will effectively sell £ 350,000 which they have subscribed to as part of the fundraising process.
Funds rarely end with a nice round number, Burbidge explains. “We had raised something like £ 23.9million, so to hit our first £ 25million, we as partners ‘stockpiled’ – that is. signed up to underwrite – the last £ 1.01million knowing we would continue to market.
While raising the second half of the fund – an additional £ 20million – the partners transferred some of it to new LPs, leaving them with £ 350,000.
“We thought we could continue to go to wealthy people to increase that amount, or we could fund it in a participatory fashion,” says Burbidge. “We asked Seedrs, ‘Why can’t you do what they’re doing in America? And they said, we think we can.
More where it came from
Passion is not the first venture capital firm to use the Seedrs platform to raise capital: another London-based venture capital firm, Seedcamp, has used it to raise investments for its fourth and fifth. funds. The main difference is that Seedcamp ran a private campaign – that is to say. invited a select group of portfolio company founders and mentors – with a much higher minimum investment (at £ 10,000) as Passion opens its fund to anyone who qualifies on Seedrs.
Other companies, like Fuel Ventures, have used Seedrs to raise part of the EIS funds.
Meanwhile, in the Nordic countries, Unconventional Ventures, a Copenhagen-based venture capital firm that invests in under-represented founders, is also keen to open up the investment to more people.
In November 2020, she launched UV Syndicate, which allows (almost) everyone to invest in the startups that she supports alongside her. Individuals must register and be verified by the Funderbeam investment platform and pay a one-time membership fee of € 150, and will then be presented with a range of investment opportunities, selected by the Unconventional Ventures team. The minimum investment is € 500 per transaction.
UK angel investor Andy Davis is also keen to empower more people to reap the potential benefits of venture capital investing. It is raise a pre-seed fund to support black founders in the UK, with a minimum contribution of £ 1,000.
Amy Lewin is the Associate Editor-in-Chief of Sifted. It covers VC, foodtech, mobility and the life of startups, and tweets from @amyrlewin.