Passion Capital Pioneers VC Fund Crowdfunding

Passion Capital, a leading UK-based early-stage venture capital firm, is initiating a crowdfunding campaign to finalize its £45 million ($62.5m) Passion Capital Fund III. This marks a potentially groundbreaking moment, as it represents the first instance of retail investors being offered the opportunity to act as Limited Partners (LPs) in a VC fund, at least within the European market.

Utilizing the Seedrs Platform

The firm intends to leverage the Seedrs platform – typically employed by startups for equity crowdfunding – to facilitate this investment opportunity. This approach is notably unconventional for a venture capital entity, where LPs traditionally consist of pension funds and family offices, rather than individual investors.

Seedcamp previously used Seedrs to enable its founders to participate in a fund-raising initiative, but this was conducted through a private allocation. Passion Capital’s strategy differs significantly, as it aims to open LP participation to a broad audience, even allowing for relatively small investments.

Investment Details and Portfolio Strength

A £350,000 allocation will be made available to the public. This offering could prove particularly appealing to retail investors, as their investment will be diversified across a portfolio of startups, contrasting with the typical single-company investments made through Seedrs.

Investors meeting the criteria of ‘high net worth’ or ‘sophisticated’ will be eligible to invest. Passion Capital currently boasts a portfolio of 83 technology investments, valued at an estimated £5 billion, including prominent companies such as Monzo, GoCardless, Butternut Box, Adzuna, and Marshmallow.

Fund III Investments and Future Plans

Passion Capital has already completed 11 new investments from Fund III. Investors participating through the Seedrs platform will automatically become stakeholders in these ventures. The firm anticipates making an additional 15-20 new investments.

Statements from Passion Capital and Seedrs

Eileen Burbidge, a partner at Passion Capital, stated that access to private venture funds is usually restricted to institutional investors. She emphasized their commitment to broadening their investor base and providing access to those interested in partnering with them through this unique collaboration with Seedrs.

Jeff Kelisky, CEO of Seedrs, described the collaboration as an innovative step for both the venture capital and equity crowdfunding sectors. He highlighted the opportunity for their community to participate in SME equity finance, potentially achieving substantial returns beyond direct investment campaigns.

Democratizing Access to Venture Capital

In an interview, Burbidge explained that the initiative was inspired by developments in the United States, such as Angellist Rolling Funds and the SEC’s expanded definition of qualified investors. This has led to increased access for retail investors to venture funds and General Partners (GPs).

She noted that this shift is challenging the traditional dynamics where institutional investors select fund managers, and is breaking down the perception of venture capital as an exclusive asset class. After exploring similar options in Europe and finding legal limitations, Passion Capital turned to Seedrs as a viable solution.

Fund History and Crowdfunding Genesis

The fund initially closed in August 2019 with £25 million, followed by an additional £20 million in August 2020, totaling £45 million – the same size as their second fund. The crowdfunding idea emerged after identifying a remaining £350,000 allocation.

Burbidge expressed her belief that providing retail investors access to a diversified venture portfolio is a positive development. She stressed the importance of investor education and awareness of the inherent risks involved, while also highlighting the benefits of broader participation in the technology sector.

Potential for Expansion and Future Outlook

While Burbidge refrained from commenting on potential increases to the allocation, the possibility remains if the crowdfunding campaign proves successful.

She expressed a desire to see more funds offer similar opportunities, noting that many retail investors would welcome access to leading funds like Sequoia, Accel, or Andreessen Horowitz. Providing exposure to a diversified portfolio is seen as a valuable benefit.

Increasing Diversity and Inclusion

Burbidge believes this approach will broaden the LP base, promote inclusion, and increase participation in venture capital. Passion Capital plans to utilize the Seedrs platform for Q&A sessions and engage with the investor community, potentially mirroring Monzo’s practice of hosting annual events for its crowdfunding investors.