All Posts By

Nina Rudanko

Enfuce Financial Services finalizes its PCI-DSS assesment

FOR IMMEDIATE RELEASE June 17, 2018

Helsinki, June 17, 2018– Enfuce Financial Services has completed the PCI-DSS attestation of compliance onsite assessment. We are, from this date on, the first financial service provider in the world to be certified while running our service in a public cloud. Since legacy is non-existing within our domain, we did not have that as a burden to hold us back. Our services have been designed and developed to be fully compliant from the early days of production.

“Earning the Level 1 PCI DSS certificate is never a walk in the park especially breaking ground by being the world’s first card issuing processor running on a public cloud. We have worked closely with Verizon during the preparation and assessment, and it has been a great help in the execution of a smooth certification process.

This now serves as a quality mark for our services, and will be a stepping stone for Enfuce, providing a baseline of security and compliance and proving our ability to execute and deliver on our promises to our clients.”

 – William Ekström. CTO, Enfuce Financial Services

All stages of the assessment were swiftly executed, with the firm and professional guidance of Verizon.

“We are pleased to have been a part of this PCI DSS compliance project, helping Enfuce successfully achieve the standard at this time. There is a clear link between PCI DSS compliance and an organisation’s ability to defend itself against cyberattacks and with this in mind it is no longer the question of ‘if’ data must be protected, but ‘how’ to achieve sustainable data protection in the long-term. It is critical that companies, such as Enfuce, are able to maintain this compliance so that their customers can be confident and assured of the security of their own transactions and protection of their data.”

– Rodolphe Simonetti, global managing director for security consulting, Verizon

Enfuce Financial Services is a forerunner in cloud-based payment infrastructure. We offer all of our products and services “as a service”, which means that we use our existing infrastructure when we on-board new customers. We are fully compliant with no legacy, which makes us agile but at the same time reliable in the ever-changing world of payments.


If you would like more information about this topic, please contact Wilhelm Lönnberg at +358 40 775 1135 or email at wilhelm.lonnberg@enfuce.com

You can also read more about the company at https://enfuce.com

Pohjoismaiden suurin joukkorahoituspalvelu Fellow Finance laajenee Ruotsiin

Fellow Finance tuo ruotsalaisille kuluttajille uuden rahoituskanavan perinteisen pankkirahoituksen rinnalle sekä sijoittajille mahdollisuuden sijoittaa ruotsalaisiin lainoihin.

Aluksi Fellow Finance tarjoaa palveluaan Ruotsissa yksityisille lainanhakijoille ja sijoittajille. Tulevaisuudessa palvelu on tarkoitus avata myös yrityksille.

”Olemme innoissamme Ruotsin avaamisesta. Ruotsin markkinalle laajentuminen on osa strategiaamme ja seuraava askel tavoitteessamme kasvaa Euroopan johtavaksi joukkorahoitus- ja vertaislaina-alustaksi. Näemme Ruotsissa hienon mahdollisuuden tuoda suoran rahoittamisen edut sekä lainanhakijoille että sijoittajille”, kertoo yhtiön toimitusjohtaja Jouni Hintikka.

Fellow Finance on ainoa joukkorahoituspalvelu, jossa sijoittaja pystyy saman alustan kautta tekemään helposti sijoituksia sekä yritysrahoitukseen että kuluttajarahoitukseen useissa eri maissa ja näin saamaan sijoituksilleen entistä kattavamman hajautuksen. Tavoitteena on muuttaa perinteinen pankkitoiminta suoraan lainaamiseen ihmisten ja yritysten välillä.

”Teemme lainaamisesta ja sijoittamisesta yksinkertaista, luotettavaa ja läpinäkyvää. Verrattuna perinteisiin pankkeihin ja rahoituslaitoksiin lainanhakija pystyy Fellow Financen palvelussa kilpailuttamaan lainansa tuhansien sijoittajiemme kesken, mikä takaa lainanhakijalle aina parhaan mahdollisen korkotarjouksen. Sijoittajat pystyvät puolestaan sijoittamaan hajautetusti suoraan yksityishenkilöiden ja yritysten lainoihin”, Hintikka jatkaa.

Perustamisestaan vuodesta 2014 lähtien Fellow Finance on välittänyt yli 270 miljoonaa euroa rahoitusta sijoittajien ja lainanhakijoiden välillä ja on Pohjoismaiden suurin lainapohjainen joukkorahoitus- ja vertaislainapalvelu (lähde: Altfi). Fellow Finance palvelee rahoitusta hakevia Suomessa, Ruotsissa, Saksassa ja Puolassa. Sijoittajia on 50 maasta.

”Nopea kasvumme on osoitus siitä, että asiakasystävälliselle ja läpinäkyvälle palvelulle on suuri kysyntä kaikilla markkinoilla. Rahoitusta kauttamme hakeneet ovat arvostaneet helppoa tapaa kilpailuttaa lainansa. Sijoittajat puolestaan ovat olleet tyytyväisiä mahdollisuuteen sijoittaa vaihtoehtoiseen sijoitusmuotoon, mikä ei korreloi perinteisten osake- ja korkosijoitusmuotojen kanssa”, Hintikka toteaa.

Vertaislainapalvelun tarjoaminen edellyttää Ruotsissa maksulaitoksen toimilupaa. Fellow Finance on Suomen Finanssivalvonnan valvoma maksulaitos ja tarjoaa nyt palveluaan rajan yli EU-alueella ja onrekisteröity Ruotsin Finanssivalvonnan (Finansinspektionen) valvottavien yhtiöiden rekisteriin (Företagsregistret).

Lisätietoja:

Jouni Hintikka, toimitusjohtaja, Fellow Finance Oyj, Puh. 040 5855 009, jouni.hintikka(at)fellowfinance.fi

Fellow Finance – Crowdfunding for People and Businesses

Suomalainen Fellow Finance Oyj on Pohjoismaiden suurin ja ensimmäinen euroalueen joukkorahoituspalvelu, joka tarjoaa sekä vertaislainapalvelua kuluttajille että lainamuotoista joukkorahoitusta yrityksille. Fellow Finance on välittänyt rahoitusta yli 270 milj. eurolla ja palvelulla on 370 000 käyttäjää 50 eri maasta. Fellow Finance Oyj on perustajiensa ja Taaleri Oyj:n omistama yhtiö, jolla on Finanssivalvonnan myöntämä maksulaitoksen toimilupa.

Lue lisää: www.fellowfinance.fi

Boardman Grow VIP-jäsentilaisuus

Event board

Vaihtoehtoiset sijoitus- ja rahoitusmuodot herättivät kiinnostusta Boardman Grow VIP-jäsen kasvuyrittäjyysverkostossa 25.5. Olohuone oli täynnä verkoston jäseniä kuuntelemassa keskustelua, jossa panelisteina olivat Fellow Financen perustaja Jouni Hintikka, Invesdorin perustaja Lasse MäkeläSasu Ristimäki, SRI Capitalista ja Päivi Jääskeläinen, OPn liiketoiminta-alueen johtaja ja OP Helsingin vt. toimitusjohtaja. Moderaattorina toimi uunituoreen Fintech Finlandin toiminnanjohtaja Nina Rudanko. Fintech Finland perustettiin buustaamaan suomalasten Fintech firmojen kasvua ja kansainvälistymistä

 

Suomessa joukkorahoituksen kaikki muodot kasvussa

Lasse Mäkelä kertoo idean Invesdoriin lähteneen ärsyyntymisestä rahoituspalveluiden monimutkaisuuteen. ”Halusimme tehdä listaamattomien yritysten rahoituksesta mahdollisimman ymmärrettävää, läpinäkyvää ja digitalisoitua”, Mäkelä kertoo. Invesdorin kautta on sijoitettu yli 55 miljoonaa euroa ja noin 5 % hakemuksen tehneistä yrityksistä lopulta päätyy palveluun yleisön nähtäville.

Jouni Hintikka on vuonna 2013 perustetun joukkorahoitus- ja vertaislaina-alustan Fellow Financen yksi perustajista ja toimitusjohtaja. Fellow Finance haluaa muuttaa perinteisen pankkirahoituksen suoraan lainaukseen ihmisten ja yritysten välillä. Hintikka kertoo, että lainamuotoisen joukkorahoitusmarkkinan arvioidaan kasvavan 53 % vuosittain 2016-2020.

Nina Rudanko esittelee Sasu Ristimäen ICO-guruna ja kryptoteknologiaosaajana. Ristimäki kertoo kryptoteknologian mahdollistavan tavan mullistaa pääomien kohdentamisen sitä tarvitseville yrityksille. Kryptoteknologia tarjoaa tähän uuden mallin ja on siksi uhka perinteisille pankkitoimijoille.

OP:n Päivi Jääskeläinen kertoo digiajan olevan täynnä mahdollisuuksia hakea vauhtia kasvuun. Pankeilla on ensimmäistä kertaa edessä tilanne, että ne joutuvat elämään monessa maailmassa samaan aikaan. Iso osa asiakkaista elää perinteisessä pankkimaailmassa, ja toisaalla edelläkävijät vaativat uusia palveluita ja mitä digitaalisemmin asiat saa hoidettua, sen parempi.

Nopea kehitys työntää toimijoita toisiaan kohti

Keskeinen vaihtoehtoisten sijoitus- ja rahoitusmuotojen mahdollistaja on digitalisaatio, jonka avulla luodaan markkinapaikka sijoittajan ja yrityksen tai kuluttajan välille. ”Nopeimmin kehittyy se missä luottopäätöksiä tehdään ja minkälaisen datan pohjalta niitä tehdään. Fintech-maailma on siellä vahvasti. Eräs toimija hyödyntää jo Amazonin asiakaspalautteita luottopäätösten tekemisessä”, Jääskeläinen sanoo.

Ala kasvaa ja kypsyy, mutta panelistit eivät usko, että finanssiteknologiayritykset ja perinteiset pankkitoimijat työntävät toisensa pois markkinoilta. ”Yhteistyö tiivistyy eri suuntiin. Vastakkainasettelu on turhaa kärjistystä, loppupelissä kyse on kuitenkin aina asiakkaan tarpeista”, Mäkelä sanoo. Pk-yritykset tarvitsevat rahoitusta, mutta finanssikriisin ja kiristyneen regulaation takia se on entistä haastavampaa. Näin lainarahoituksen rinnalle haetaan pääoman sijoittajia ja riskinkantajia. ”Rahoitushankkeet, joihin pankki ei lähde mukaan tai luottopäätös kestää liian kauan, ohjautuu meille”, Fellow Financen Jouni Hintikka sanoo.

Vaihtoehtoiset rahoitusmuodot ovat levinneet valtavirtaan, kun isot pankit ovat lähteneet mukaan. Asiakkaille yleistyminen tarkoittaa parempaa palvelua. ”Tälläkin viikolla keskusteltiin muutaman finanssiteknologiayrityksen aihioista. Ketterät fintechit kehittävät uutta, mutta meidän vahvuutemme ovat ne asiakkaat ja pääoma. Fintechit ovat todella hyviä löytämään tunnistamattomia asiakastarpeita”, OP:n Päivi Jääskeläinen sanoo.

Onko Suomeen helppo tulla finanssiteknologiayrityksenä?

Tarpeita ja potentiaalia uudentyyppiseen yritysrahoitukseen on olemassa, mutta alku ei ollut helppo. ”Ensimmäisenä meneminen uusille markkinoille ei ole se helpoin tie”, Hintikka sanoo.

Ensimmäiseksi Invesdorin perustajat menivät Finanssivalvonnan puheille keskustelemaan toimiluvan tarpeesta. Mäkelä kertoo halunneensa tehdä asiat läpinäkyvästi alusta asti: ”Se oli oppimista puolin ja toisin, kun kävimme läpi digitaalisia mahdollisuuksia”. Uudentyyppisen toimijan tulo markkinoille ravistelee vanhoja toimijoita ja Mäkelä kertookin Invesdorin kohdanneen vastarintaa kolmessa aallossa: ”Ensin bisnesenkelit suhtautuivat meihin epäillen, sen jälkeen pääomasijoittajat ja kolmantena investointipankit, mutta nyt teemme yhteistyötä”.

Joukkorahoitus on yleistymässä EU-maissa lainsäädännön selkiytymisen myötä. Kaikki eivät kuitenkaan vielä ole samalla viivalla. ”On tullut ilmi, että suomalaisilla fintech-yrityksillä on etu. Esimerkiksi Espanjassa tunnistautuminen pitää hoitaa paperiteitse, mutta Fivan luvalla voisimme toimia Espanjassa. Kaikilla Euroopan mailla on sama direktiivi, mutta tulkinnat vaihtelet maittain”, Mäkelä sanoo.

Miltä finanssiteknologian tulevaisuus näyttää?

Vaihtoehtoiset sijoitus- ja rahoitusmuodot ovat punoutumassa tärkeäksi osaksi rahoitusmuotojen verkkoa. ”Alalla on hirveästi lähtöjä, erilaisia finanssiteknologiapalveluita alkaa jo olla. Seuraava vaihe on rajapintojen kokoaja. Se on varmasti joku iso toimija, joka sen ottaa ja iskee tähän markkinaan”, Mäkelä sanoo.

Rahoitusmarkkinat sirpaloituvat ja eivätkä ole enää kiinni perinteisessä pankkisektorissa kuin aiemmin. ”Voimakkain paine kohdistuu maksamiseen ja avoimiin rajapintoihin”, Jääskeläinen analysoi tilannetta pankkisektorin näkökulmasta, ”Vähiten uhkaa on asuntolainoille, sillä puhutaan pitkästä vakuudellista pääomaa sitovasta rahoituksesta”. Hintikka tarttuu tähän ja lupaa yrityksensä tarttuvan asuntolainoihin heti kun aika on kypsä ja korkotaso oikea.

Paljon mediassakin esillä ollut koodaripula vaivaa myös finanssiteknologia-alaa. ”Osaavat ihmiset ovat selkeä kasvun este”, Hintikka sanoo, ”Kehittyäkseen ala tarvitsee lisää koodareita, nimenomaan tekijöitä, ei projektipäälliköitä. Me olemme palkanneet Eritreasta ja Vietnamista, kun Suomesta ei löydy”.

Ristimäki maalaa tulevaisuuskuvan, joka ei hänen mukaansa välttämättä ole edes niin kaukainen: ”Jo 1970-luvulla Nobel palkittu ekonomisti Friedrich Hayek on kirjoittanut, että taloudelle olisi hyvä, että olisi yksityisiä vaihtoehtoisia rahoja ja liikepankeilla pitäisi olla oma raha, joka pakottaa pankin kredibiliteettiin, mutta olisi vaihtoehto keskuspankkirahalle. Nyt kryptoaikana se ei ole kaukaa haettu ajatus, että olisi pankki, jolla olisi oma kryptovaluutta.”

 

Of angels, crowds and digital investing

Summary

New digital investing platforms are revolutionising investing in unlisted equities and giving retail investors access to opportunities previously inaccessible to them. I don’t believe there is a conflict between the new, more “democratic” finance and the more established players like VC funds and business angels. There will be roles for all of them in the ecosystem but in addition, a new class of digital lead investors will emerge.

The Angel-Crowdfunding interface

I am a business angel. I am also the chairman of a digital investing platform. I regularly still receive comments from other business angels that these roles are in conflict with each other.

Some angels feel threatened by the growth of what is often called equity crowdfunding. They claim that in-depth sector knowledge and relationships are invaluable to the target companies, something “the mob” can not provide. Meanwhile, the most enthusiastic promoters of digitalization boldly claim that not only angels but the whole VC fund industry will be wiped out by the new platforms. The finance industry is being democratised, and about time according to the digi-enthusiasts.

I believe both views have some merit but also that both views are overplayed. I believe digital investment platforms can actually facilitate new ways for professional and retail investors to co-invest. Angels, retail investors and the VCs can, in my view, co-habit the same ecosystem but a lot needs to be done before the system can be claimed healthy.

Luckily, the regulatory environment and overall political attitudes have become more positive towards fintech and digitalisation, enabling growth of the digital platforms. But like in any business, there have been excessive uses of the liberties, including over-agressive selling and actual frauds among the companies raising funds. On the other hand, not all angels add any value to the target companies apart from the money they provide.

In this article I will elaborate my thoughts on these developments and make some predictions about the future. Later, together with partners, I will announce the launch of a new investment company which will act as the lead investor in digital financing rounds.

Angels, disrupted

Feeling of being under threat of disruption is foreign to most business angels. Wealthy individuals who see themselves as enablers of disruption, they spend their time investing capital and in other ways helping their target companies. Start-ups the angels invest in challenge their industry leaders by digitalization, better scaling, superior customer experience or by cost leadership.

Curiously, disruption is often promoted and searched for in all other businesses apart from angel investing itself. The value chain from business angels via VC funds into an exit via a trade sale feels like a sacred cow, deserving protection from digitalization or any form of disruption. The newly emerging platforms have triggered some business angels to give derogatory comments about digital platforms and their investors (“the crowd”), giving the impression that eternal wisdom only resides in the heavens above. A more cynical commentator might claim that too easy fundraising raises the valuations of start-ups and consequently makes it more difficult for the angels to earn their living from capital gains.

The benefits of the digital platforms

The reaction tells about failure to make a distinction between digitalising the processes of investing in unlisted shares on the one hand and the implied idea of collecting money from the second Fs on the other. (The three Fs, Friends Fools and Family is a well-established fundraising audience).

Indeed, digitalizing the fundraising processes is a necessary step in enabling collecting investments from a large number of people, were they angels or mortals. But digitalisation does not necessarily force the start-ups to open their fundraising rounds to the general public. Whatever the target audience is, more streamlined digital back-office tools make it possible to coordinate diversified portfolios of investments in unlisted shares, information flow from companies to investors and increasingly also the post-round capital from back from the companies to investors. Particularly in cross-border cases these are very important developments, for angels and “the crowd” alike. For smaller angels (tickets in thousands of euros) the digital platforms offer an effortless way to find investment targets and diversify the portfolio.

The angels do deserve lower valuations – if they truly are angels

Even so, many business angels genuinely add value to their targets and many unicorns would not have made it without the early injection of capital and know-how from business angels. There is an important role for the business angels to fill in and they can never be replaced by digital platforms or the crowds. But the angels will need to answer questions about what business angels actually do and how do they add value.

The Fiban (Finnish Business Angels Network) website claims: “Business angels usually endeavour to actively influence the success of their investment (compare stock market investing). The investment may be in a form other than money. In fact, according to studies, substantially better results are achieved in a company by investing in sweat equity and network equity rather than simply private equity.”

If we follow this logic to the conclusion, it means that that the valuations in angel rounds need to be lower than what the company’s fair value. Nicely, this confirms the angels’ longstanding wish to enter with lower valuations. In return of the shares, angels do offer more than just money. Conversely, the equity crowdfunding valuations must be higher than angel round valuations – this is a simple mirror image of the argument that angels add value with their involvement with the start-ups.

But this does not mean that equity crowdfunding rounds should by definition be overvalued – actually it can be argued that the “IPO discount” should also be present in equity offerings via the digital platforms. Neither does this mean that anyone deserves a lower valuation by simply claiming to be a business angel.

The angels need to prove their divinity

Recently, a company launched fundraising within the Fiban community of Finnish business angels. The angels were invited to participate in the €250k round at “pre-crowdfunding valuation”, which was then expected to give instant return afterwards. The paper wealth would be created to the participating angels when similar shares would be offered to the “crowd” at higher valuation.

Without further information, it is probably unclear to the reader what the angels have contributed or what virtue they practice to deserve this kind of instant gratification. Many Fiban angels already invest via the digital platforms anyway, so a logical step for the company would be to combine the rounds into one, with angels acting as the lead investors in the forthcoming round. This would probably satisfy everyone else apart from the angels.

The justified criticism towards the angels notwithstanding, it is clear that without compensation the position of a lead investor is not an enviable one. If the investment succeeds, every follow-on investor will claim the credit. If the investment fails, they blame the lead investor.

Roughly, we can divide the value-add brought by angels or other lead investors into four categories

  1. Industry know-how and connections which will help target companies in their business, often brought in via participation in the board
  2. Closely related to the industry know-how, in-depth due diligence of the company technology, IPR plus judgement on valuation – is it attractive or not for new money after the due diligence?
  3. Genuine sweat equity brought into the company by consulting, actual operational work or management, including team build-up and even founding the company in case of e.g. university spin-offs.
  4. Ability to move fast and finance e.g. a single event risk or help the company in an acute liquidity crisis that can not wait

In addition, the angels often can write bigger tickets than individual members of the passive crowd or retail investors can. This can lead to better negotiation position vs the company but the lighter admin benefit from bigger tickets is being challenged by the digital tools that can seamlessly manage big number of smaller tickets.

It is clear too that in the Fiban example above, participation in the round did not automatically provide any of the benefits 1-3 to the target company or later investors. Possibly the benefit number 4 was provided although this is unclear.

The challenges I describe exist in somewhat different form for the VCs but they enjoy ability to write clearly bigger tickets than angels and they also can defend their position in later rounds. The best VCs also have the connection network on global level, not national or regional like most angels do. But the basic challenge remains the same – simply being someone is not enough, the companies can nowadays raise substantial funds from non-expert investors via the digital platforms.

The problems with the crowd

The problems within the crowfunding ecosystems are also undeniable. Last year, a company raised funds via a plaform in Finland with €17m pre-money valuation while the company had pretty much nothing to show, apart from plans for an app. The round even succeeded and raised millions of euros. Perhaps not surprisingly the company came back to the owners a year later for more capital. It is probably fair to say any respectable angel or VC firm would not have touched the case, driven by a team of first-time entrepreneurs.

The problem of overvalued basket cases successfully raising millions from crowdfunding is a real one. But I believe it is also a temporary one or at least the phenomenon is cyclical. The next downturn will bring multiple down-rounds among the crowdfunding alumni and no doubt there will be a fair amount of schadenfreude from the angels. As a consequence, many retail investors will withdraw the market or at least become much more critical in their investments in the future.

But digitalisation and, I believe, access of retail investors to unlisted growth company investment are not cyclical phenomenons. These are secular trends that will shape the investment landscape even more profoundly in the future. But the ecosystem is currently not healthy and several developments are necessary to improve it as well as to make the professionals-retail investor interface work better.

  • The retail investors will need to become more critical of the investment cases and, in particular, put more focus on the valuations of the cases.
  • Where this is not possible, eg due to lack of time or expertise, the investments from the crowd will need to be pooled into bigger entities managed professionally.
  • Answering to this need, a new offering of funds or investment companies will need to emerge. Unfortunately, the current fund structures have been too heavy and inflexible for this. I will come back to this later.
  • Professional and well-informed lead investors are needed for the public crowdfunding rounds. Endorsement from the lead investors will facilitate the best cases to reach their funding targets and improve the quality of the succeeding cases
  • Angels will need to embrace the digital platforms as tools. Like an angel does not carry the investments to the targets as cash in a bag (using banks instead) they should not make the admin work, SHA signings or syndication manually either. They should focus on what value-add they can bring to the table in return for lower valuations.

Spin-offs and the valley of death

Meanwhile, I’ve been closely watching as the Finnish universities have improved their commercialisation operations. By now they’ve become more adept in preparing academic innovations for commercial use and funding from Tekes has helped a lot. There remains a lot of work to be done but it is highly likely that a growing number of university spin-offs will be seeking private capital in the next years, at least in the fields of life sciences and fintech, where I am most active and have the best visibility to the deal flow.

But there remains a gap to be filled between the within-university pre-commercialisation work and the stage where the companies are mature enough to attract capital from internationals professional VCs. The business angels are not numerous enough and often do not have deep enough pockets to support companies over the valley of death. Active angels also face time restrictions and can not work with many spin-off companies at the same time. Early-stage angel investing is a close-combat sport and exhausting even to the most experienced players.

Meanwhile, it would be wrong to say that the capital is not available – remember the successful rounds of low-quality companies with high valuations. And multimillion VC rounds keep being announced in the Nordics. Unfortunately, the minimum size for a viable VC fund is close to €50m due to regulatory, compliance and commercial reasons and this kind of money has proven impossible to raise & sensibly invest in the seed and crowdfunding stages. Capital is obviously available but it will need to be structured better to be of long-term use in the early stages of company formation.

A vision for the ecosystem

In the vision for the future investing ecosystem in Northern Europe there will certainly be a role to play for all existing players, but the roles will evolve over time. It is always risky to predict the future but here are my assumptions on how the players will adopt to the new environment.

Angels will learn to use the digital platforms to their advantage. In majority of their cases, particularly the smaller and more passive tickets they write, they will start using the platforms much like any retail investor. The platforms do very valuable work when they conduct the heavy-lifting part of legal DD, enabling angels to diversify more easily. In their main cases, of which an angel can have only a few, they will operate much like before except with the added option of inviting other angels (in private rounds) or the crowd (in public rounds) to participate in their cases.

VCs will also learn to use the digital platforms, and this is increasingly already happening. Much of VC learning curve will be similar to the angels, but it would make sense for the VCs to start using the minibonds or other lending functions of the platforms more aggressively. While the best superstars of VCs will always be more likely to be exited in trade sale vs an IPO, there will be a group of very decent cases that are proceeding well but will still need a financing round before the company is ready for e.g. an IPO. Doing a debt-based crowdfunding round is a natural step to raise capital for such companies and prepare the crowd for the IPO, while avoiding dilution.

Platforms will most likely differentiate in their offering and specialize in different parts of the value chain. Some will find a special sector as a speciality, some will continue to focus on a particular region or country, some will build a boiler-room specialty in placing power and some will out-license the technology even more. It is also possible that the “front office” parts of the platform functionality will grow apart from the “back office” functionalities like money flow management, cap table management, post-round IR functions. But in any case the platforms will provide very useful digital tools for the angels and retail investors. Articles of association, trade registry extracts and SHAs will be available easily, money-laundring checks done digitally and syndication happens online instead of angels running around the city with paperwork to sign. This is of particular benefit in cross-border investment rounds.

Lead investors of private placements will emerge as new players. Often built as evergreen structures (like Dough), they will be more aloof than genuine business angels but more involved than individual crowd investors. Lead investors will add value primarily by selecting the best cases and improving the value of the cases that go through, but also by pooling smaller investors’ capital into bigger entities, increasing their negotiation power and enabling entry to possible pre-crowdfunding rounds, and guaranteeing enough firepower for the target companies in future rounds – assuming the business develops as expected and pre-defined milestones are met.

Stock markets will benefit and indeed the more numerous growth companies with long cap tables should make the IPOs a natural “exit method” for companies taken this path. VCs will always have their fund lifecycles and trade sales will play a role but it does not take much imagination to see the emergence of digital platforms and crowdfunding turning the tide back to public markets. Hopefully, we will be able to put the horrible term “de-equitisation” into history books.

Summary

Everything will change but essentially everything will remain the same. Capital has been raised from large numbers of people for thousands of years. Only the technology we use is new. We should always invest responsibly, whatever the latest fad might be.

This article is written by Tero Weckroth