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Here’s an interesting move. Founders Future, a well-known VC firm in the French tech ecosystem, acquired Sovefund, an equity crowdfunding marketplace. Although terms of the deal have not been disclosed, Sovefund is expected to be profitable by 2022 with around 20 employees.
Following the move, Founders Future now has two separate but complementary businesses. With its VC fund, which I recently covered, Founders Future raises money from limited partners, including professional investors and family offices, and then invests in promising startups. In other words, it’s VC as usual.
With its crowdfunding platform, it matches retail investors with startups that want to raise money from their community of users or with personal finance experts who want to diversify their savings with risky but potentially profitable investments. Going forward, Founders Future and Sovefund will still operate completely separately – there will be no synergy between these two activities.
So why would a VC firm go downstream and acquire a crowdfunding platform?
“We saw two major trends. The first trend that you’ve certainly seen is that you have a new generation of investors that want to be more hands-on with companies, both public and private. They want transparency and they want to invest in the real economy,” Mark Menasse, founder and CEO of Founders Future, told me.
“The second observation we have made is that, our work with the fund is very professional and very disciplined in its daily approach. And we can bring these methods to a company involved in crowdfunding financing. And it’s true that it hasn’t been done very much,” Menasse said.
And Founders Future has already seen how crowdfunding companies work with some of the firm’s portfolio companies – for example, Tester and 900.care raised some money on British investment platform Crowdcube, expanding to France in 2022.
Raising the Standards for Equity Crowdfunding
Sovefund’s two co-founders Benjamin Vautin and Georges Viglietti will remain at the helm of the crowdfunding platform going forward. But Founders Future has plans to invest several million over the coming year or two to grow Sovefund’s team.
“What we want to do is to bring our know-how to ensure that Sovefund becomes more professional and really a suitable platform for co-investing with professionals. That’s really what we want to achieve,” Menasse said.
Since 2014, Sovefund has handled 103 crowdfunding campaigns. In total, the companies have raised €81 million from more than 110,000 retail investors (that’s $86 million at today’s exchange rate) – with no word on the performance of these investments. Recent missions include Aquateur, Agriloops, Loonie, Axioma, Extracadabra and Futura Gaia.
Recently, Sovefund received an agreement to be certified as a European Crowdfunding Service Provider. This means it may also work in other European countries in the future.
But the Sovefund team (and Founders Future) wants to go a step further based on regulatory changes. Ultimately, Sovefund would like to provide the opportunity to invest in funds such as VC funds, impact funds, etc., but this is not possible yet.
Founders Future’s move is also interesting because of the timing. VC investment worldwide has slowed down in the last few years. Since many VC firms are still making deals that would have made sense a few years ago, it’s time for startup CEOs to find creative ways to extend their runway.
“The potential investment pool among individuals is huge. So you have people who want to invest in companies they know and use – or they have positive sentiment for these companies. And their numbers are huge,” Meneses said. “So I think the best thing about equity crowdfunding is that it is an alternative or a complement in contexts where financing is difficult for companies.”
