Everyone is democratising everything. Startups are ‘democratising’ everything from financing to AI, Deliveroo is offering shares in its upcoming IPO to customers as well as pension funds — and now, VCs are ‘democratising’ venture capital too.
London-based VC firm Passion Capital, known for backing fintech stars like Monzo and GoCardless in their early days, is now inviting ‘ordinary’ folk to invest in its latest £45m pre-seed fund.
This is, according to equity crowdfunding platform Seedrs, which is facilitating the fundraise, the first time that a Europe-based VC has opened up a fund to crowd investors.
It’s not the only initiative out there to enable people with less deep pockets to get a piece of the VC pie. From AngelList’s rolling funds to Nordic VC firm Unconventional VC’s syndicate, this is a growing trend.
“Starting from the US, there’s a cultural shift towards greater inclusion across all of tech — and I think that’s fantastic,” says Eileen Burbidge, general partner at Passion. “AngelList’s rolling funds are democratising GPs [general partners]; you don’t have to be a dot com founder who has a few million to be an investor in a fund.”
Historically, only people or institutions who could write huge cheques have been able to invest in VC funds. But AngelList’s rolling funds feature allows VCs to continuously raise capital on its platform, and take investments as small (in VC terms) as $2.5k per quarter. That opens up investing in a VC fund to a much bigger pool of people.
“It’s a positive trend and one that we wanted to help enable, if not propel,” adds Burbidge. “If people are interested in tech, in particular the UK tech ecosystem, we would love 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 (as yet undecided) minimum that people will be able to invest in Passion “will not be significantly different”.
Passion hopes to raise at least £350k via Seedrs, although this could stretch “up to £1m” depending on demand.
“Some people at Passion are worried that we’re not going to get it all,” says Burbidge. “I think it will go quickly — and if we do get oversubscribed, we’ll go to our LPs [limited partners] and see if any of them will transfer some of their position [to open up more of the fund to crowdfunders].”
“We would love to have as many investors as possible,” she adds — although the people who back the fund via Seedrs will be “strictly passive investors”. One Seedrs nominee will represent them all.
Often, crowdfunding campaigns are as much a marketing exercise as a fundraising one. But this doesn’t seem to be the case with Passion’s fund.
For starters, Passion has already raised this fund, its third. Via Seedrs, Passion’s partners will effectively be selling £350k which they underwrote as part of the fundraising process.
Funds rarely end up with a nice round number, explains Burbidge. “We had raised something like £23.9m, so to get to our first £25m close we as partners ‘warehoused’ — ie. signed up to underwrite — the last £1.01m, knowing that we were going to keep marketing.”
While raising the second half of the fund — a further £20m — the partners transferred some of that to new LPs, leaving them with £350k.
“We thought we could keep going out to high net-worth individuals to raise that amount, or we could crowdfund it,” says Burbidge. “We asked Seedrs: ‘Why can’t you do what they’re doing in the US?’ And they said, we think we can.”
More where that came from
Passion isn’t the first VC firm to use Seedrs platform to raise capital: fellow London-based VC firm Seedcamp used it to raise investment for its fourth and fifth funds. The key difference is that Seedcamp ran a private campaign — ie. invited a select group of portfolio company founders and mentors — with a much higher minimum investment (at £10,000) while Passion is opening up its fund to anyone who qualifies on Seedrs.
Other firms, like Fuel Ventures, have used Seedrs to raise portions of EIS funds.
Meanwhile in the Nordics, Unconventional Ventures, a Copenhagen-based VC firm which invests in underrepresented founders, is also keen to open up investing to more people.
In November 2020, it launched the UV Syndicate, which enables (almost) anyone to invest in the startups it backs alongside it. People have to register with and be verified by the Funderbeam investment platform and pay a €150 one-off membership fee, and will then be presented with a range of investment opportunities, selected by the Unconventional Ventures team. The minimum investment is €500 per deal.
British angel investor Andy Davis is also keen to enable more people to get in on the potential upside of VC investing. He’s raising a pre-seed fund to back black founders in the UK, with a minimum contribution of £1,000.