Growthdeck is pioneering a new investment category, called 'Personal Equity', that seeks to provide a better way to connect sophisticated individual investors with businesses seeking funding. It aims to combine the best elements of mainstream Equity Crowdfunding with those of the traditional, but exclusive, worlds of Private Equity and Venture Capital. 

Why Personal Equity?

The rapidly expanding Equity Crowdfunding (ECF) industry has given millions of smaller investors the chance of taking stakes in early-stage UK businesses. But in our view the industry has suffered from a widespread lack of robust due diligence and little investee support. While the choice of investments is high, the quality is often low. On the other hand, traditional Venture Capital (VC) and Private Equity (PE) firms provide much more robust due diligence, but they rarely allow access to smaller, sophisticated investors, and the fees for businesses can be prohibitive for smaller raises.[DB1] 

Personal Equity aims to bridge the gap between ECF and traditional VC/PE by providing fast, convenient multi-channel access to investment opportunities, underpinned by professional due diligence, industry sector expertise and ongoing investor support. It aims to help give small firms faster, less expensive access to capital, with the benefit of support from industry experts. Investors can gain access to higher quality investment opportunities, on consistent terms, reassured that the opportunities have undergone thorough due diligence and will benefit from ongoing support. 

"Incrowdible" indeed

ECF platforms accounted for over £230m capital raised in 2015¹ and new entrants are entering the market all the time, from the UK and abroad. Like many other industries, equity investment has been 'disrupted' by the early-mover platforms that have enabled more or less anyone to access a hitherto exclusive asset class. With tiny investment thresholds (£10) and a production line of easily digested brands, a huge UK audience of micro-investors has been created with considerable investing power.

But many ECF platforms are simply channels through which investors provide money to businesses in return for equity. They are often uninvolved in the assessment of risk, with little or no long term interest in whether a business succeeds or fails (or indeed whether an investor makes any return). In addition, many are dependent on volume, as there is no accumulation of 'carried interest', either from the businesses or the investors. So, it's ultimately dependent on gaining scale fast, which inevitably undermines the emphasis on quality.

 

Personal Equity avoids these problems by combining the best attributes from the professional world of equity investing with the efficiency, access and speed of an online platform.

Better quality investment opportunities

Another key difference between the Personal Equity approach and a vanilla ECF platform is the filtering of investment opportunities. Rather than leaving investors to pick the winners from 30 or 40 live offers, Growthdeck prefers to create the short-list for them. Only a handful of businesses that we meet will go on to be offered to our investors. And those that do will be subject to a thorough and often lengthy process of due diligence, rooted in years of Private Equity experience. Our horizon is three to four years ahead, if these businesses should exit and our investors should receive their returns. For that to happen we need to pick the best opportunities in the first place.

Growthdeck also takes a small vested interest in every business - our 'carried interest' - which ensures our interests are aligned with investees and other investors alike. Unlike some platforms, we don't take any profit from investors on a successful exit. It's all yours.

Better supported businesses

A VC firm doesn't give money to a business and then walk away. They take an active role in help steer that business to a successful conclusion. Likewise, we aim to provide significant support to our investees, through our panel of industry experts, wider network of entrepreneurs, and our own team of experienced professionals. And, as Nominee, Growthdeck will appoint a Non-Exec Director or observer to attend investee board meetings and report back to shareholders.

The crowdfunding phenomenon has shaken up the traditional world of equity investment and opened up a whole new audience to the opportunities presented by small business growth. But fundamental, and potentially terminal, issues remain, from low investment quality and increasing failure rates, to instances of fraud and a clear lack of ongoing support.

The hybrid approach of Personal Equity aims to solve many of these issues and form a reliable, transparent and professional connection between millions of potential investors and the UK growth businesses of today (and tomorrow).

Read more about Personal Equity