Outfits old and new are starting to push the limits of the equity crowdfunding model. The past year has seen a greater number of well-established businesses gravitate towards the industry as a means of raising capital. We’ve even seen a couple of examples of an equity crowdfunder playing an instrumental role in the execution of an IPO. Not to mention the flotation of the twice OurCrowd-funded ReWalk Robotics – which supplied the sector’s first demonstrable example of a profitable (and highly profitable at that!) investment.
Harnessing and indeed hoping to accelerate this evolutionary phase is the recently launched Venture Founders. Established by a pair of former JP Morgan investment bankers with extensive private equity and corporate advisory experience, the platform is on a mission to bring a more professional edge to the equity crowdfunding process. Venture Founders has cherry-picked best practice procedures from a number of established industry participants, as well as incorporating a few innovative elements of its own design. Crucially, the platform will work uncommonly closely with its fundraisers – up to and beyond the point of raising money – in an effort to maximise successfully funded businesses’ chances of long term success.
We caught up with Founders James Codling and Paul Moravek in order to fill in the blanks…
Could you give us a brief introduction to the platform and explain the impetus behind its launch?
VentureFounders is much more than a crowdfunding platform. We offer long-term advisory services to businesses seeking funding and try to match them with investors wanting to access early stage and growth capital opportunities.
The background to setting up the business is that we both had long-term careers in major financial institutions that gave us exposure to structuring large-scale finance deals across a wide range of sectors and industries.
We also have a strong entrepreneurial side and had both already set up small businesses.
Crowdfunding seemed like a perfect fit for us to utilise all the knowledge and skills that we had acquired and create something of our own. Like many of the entrepreneurs we work with, we have aspirations to build a successful business that makes a difference.
We created VentureFounders to offer our investors a compelling range of carefully curated investment opportunities in businesses that we believe in. We pre-screen all of the investment opportunities on our platform, conducting detailed due diligence before presenting them to our investor base.
The team’s extensive experience in corporate finance, private equity, deal structuring and start-ups means we are well placed to identify the businesses with the potential to succeed and generate a return for our investors. We take a partnership approach with businesses throughout their fundraise and beyond because we think this creates added value for those businesses and offers them the best chance of delivering a strong return for investors.
Venture Founders has been fairly vocal about trying to bring a greater level of professionalism to the equity crowdfunding industry. That starts, presumably, with the types of businesses that the platform seeks to work with. What's the typical Venture Founders fundraiser and how far developed do such businesses tend to be?
VentureFounders is highly selective and seeks out businesses that meet our criteria. We are looking for growth capital opportunities and companies that are typically past proof of concept. We look for businesses with strong management teams that have the ability to scale and deliver sustained growth and profitability, a competitive advantage, a clearly defined path to commercialisation, and viable monetisation options.
In your opinion, what essential protections (share type, voting rights, drag along tag along, etc.) should equity crowdfunders look to identify before investing in any project?
Investing in small but potentially fast growing and scalable businesses can yield attractive returns but it is not for everyone and there can be significant risks. Investors should always think about whether they know their rights, regardless of whether their investment is small or large in the context of an overall fundraising.
Check if you are a true minnow, or part of a wider pool of investors with combined rights. Check if you get to vote in key matters and what terms you are agreeing to in receiving ongoing information to understand how your investment is developing.
VentureFounders has deliberately chosen a nominee structure for investors because we believe it gives them the best protection.
We are able to ensure that the appropriate structure is agreed and put in protections against dilution, for example. From a business point of view it also means that they can communicate to their numerous shareholders through our platform and information flow is managed without the need to manage each individual shareholder on a one-to-one basis.
Tells us about the importance of continuing to work with businesses up to and beyond the point of actually raising money?
We believe that the role of crowdfunding shouldn’t end just because the investment round has completed. We create long-lasting relationships with our investment businesses, checking in throughout their growth cycle, often taking a board observer seat and providing regular updates to shareholders and helping to maximise returns on their behalf.
Businesses in their formative years are normally crying out for more than just finance, they need support from a partner with a vested interest as well as introductions to relevant people who can help with their business plan. We see that as being a core part of our role at VentureFounders.
Venture Founders has made a fast start - where do you see the platform a year from now?
We have ambitious plans for growth over the next 12 months, we know that there are more and more entrants into this market and we will be working hard to present the best opportunities to our investors and making sure that we are creating a trusted platform for the discerning investor.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.