Investment manager Braveheart has teamed up with a crowdfunding website to launch a fund billed as one of the first of its kind.
The Perth-based firm, which specialises in business angel-style investments, will build a portfolio of firms that are also fundraising on Crowdcube.
Braveheart chief executive Geoffrey Thomson said the launch of the innovative Crowdcube Venture Fund could “open the floodgates” for others who were looking at such funds.
He told The Scotsman that the company had trawled through crowdfunding platforms to see if the latest fundraising craze was worth joining, eventually choosing to partner with Crowdcube because of its scale.
Founded in 2010, the website allows companies to pitch at 57,000 registered investors and is regulated by the UK financial watchdog. Last year it raised £12.2 million for 54 UK businesses, a 500 per cent rise on 2012.
Thomson, pictured below, said: “We were sceptical at first but the market has moved on. The more respectable [crowdfunding platforms] are doing good levels of business.
“We thought it was a good time to get into bed with these guys.”
Thomson noted that many users registered with crowdfunding sites have yet to back a venture, but contrary to popular belief those that did usually invested several thousand pounds.
The Crowdcube fund aims to offer an alternative for the more wary investors. It has a minimum subscription of £2,500 – much lower than most venture capital funds – as it seeks to appeal to a new breed of small investor.
He said: “There are a large number of investors who like the crowdfunding concept but who, for one reason or another, find the DIY route problematic. We hope they will find this new initiative of interest.”
In order to qualify for investment from the fund, a company must raise at least 33 per cent of its required total through the Crowdcube platform.
Braveheart’s Strathray subsidiary, which will carry out the fund management role, will in some cases agree in advance to back a firm once it reaches the milestone, thus providing reassurance to other small investors.
In other cases, Thomson expects that negotiations will start once a venture has a certain amount of funding in place.
Strathray will negotiate its investment terms separately from the Crowdcube pitch, and although they are likely to be broadly similar, the fund manager will take a hand in guiding the firm as is the usual practice for angel investors.
“We will be looking for things like observer rights on the board,” Thomson said. “If we make a big investment we will be working closely with the company, particularly in terms of planning an exit.”
The Crowdcube Venture Fund aims to invest in between five and ten companies this year, out of more than 50 which are expected to meet its criteria.