Two former Crowdcube executives have teamed up to launch a new secondaries fund, and have raised $10m as they target a final close of $25m. Crowdcube’s former VP of capital markets Sam Lawson left the company in 2022 and founded the firm, named Flywheel Capital, last year. He’s also joined by Darren Westlake, cofounder and former CEO of CrowdCube, who is partner and chair of the fund.
Flywheel hit its first close in September and has so far raised $10m across its fund and special purpose vehicles (SPVs). Allocator One, a platform for first-time venture capital funds, is an anchor backer of Flywheel, says Lawson in an interview with Sifted, adding that it also counts a range of family offices and founders as LPs.
Flywheel’s entry into the market comes as Europe begins to build its specialist marketplace of secondaries vehicles. The past year has seen firms such as Isomer Capital and Launchbay Capital launch secondaries funds.
Flywheel’s fund is live and is buying up stakes in VC funds along with providing liquidity for equity-holding company employees and founders.
“A lot of these funds are reaching the end of their term and really need liquidity,” he says. “So they’re asking companies to help them get that.”
Lawson says it’s writing checks between $1m to $5m and most recently took part in a secondary for Estonian mobility company Bolt.
The fintech flurry into secondaries
In the last few months, employee share sales, a type of secondaries deal which sees equity-holding employees cash in on their stocks, have become more common, particularly in fintech.
In August, Revolut kicked off the hype by announcing an employee share sale that secured the UK fintech a $45bn valuation. Since then, fellow neobank Monzo, payments fintech SumUp and — as of last week — investment platform Moneybox have followed suit.
Lawson says that the secondaries concentration in fintech is largely due to the maturity of the sector.
“I think fintech is leading forward, just because that's where most of the great high-value companies in Europe are today,” he says. “But I think over time, we're seeing a lot of green shoots in green energy, in healthcare and in AI as well — we'll see more breadth in terms of secondary activity going forward.”
We’re already starting to see that diversity of secondary activity become a reality — last Thursday, used clothing marketplace Vinted secured a €5bn valuation by closing a secondary share sale of €340m.
A hybrid approach
Still, Lawson notes that while it might be easy for top-tier names to facilitate such transactions, it’s a lot harder for the rest. He maintains that there still aren’t enough investors willing to take high-risk positions in illiquid venture assets.
Lawson says it’s using a hybrid approach to venture secondaries to help mitigate that risk.
Flywheel will leverage what’s called a “preferred equity secondary structure”, a strategy they’ve borrowed from the private equity world. Preferred equity is a financing option that sits between debt and equity and is more flexible than traditional debt, which typically has a strict deadline for repayment. For instance, it can be used to provide early liquidity for VCs to return to LPs even as they retain control of their portfolio.
“Our whole view as a business has always been that liquidity is venture's missing link,” he says. “The more liquidity you have, the faster the flywheel moves.”
Flywheel Capital has a cap of $50m and is expecting to reach its target of $25m in the coming months.
