The digital investment platforms is growing in Europe. The market is young and unfortunately much of the deal flow is either bad or overvalued. But there are already some very successful investment cases. Revolut, a UK-based digital wallet which entered Nordic countries recently, raised 1 million pounds in July 2016 from crowdfunding at GBP 42m valuation. This summer the company was valued at GBP 1.2 billion and crowd investors were offered to sell back their shares for 19x return.
In investment portfolios, unlisted equities are still a small and uncommon asset class. Many wealth managers and investment professionals recommend that investors should have 5-15% of their total portfolio in unlisted equities but these have mostly been available to high net worth individuals only. Digitalisation helps to open these opportunities to retail investors but not everyone feels comfortable doing the stock-picking, particularly internationally. In the public markets, retail investors are served by mutual funds, while VC funds provide diversified investment opportunities to institutional investors.
The traditional financial industry has been slow to react. The existing legal structures were not applicable due to initially small size of the investable market. The legal & admin work related to a fund structure dictates a minimum size for a fund and the typical fund lifespans of up to 10 years can be challenging for early stage investing in minority stakes. Also, VC funds are typically not open to retail investors.
As the ecosystem grows and matures, we believe equity crowdfunding will become a natural alternative for companies aiming to list in the junior markets like Nasdaq First North. Consequently, there should be ample room for evergreen structures investing in minority stakes of such companies prior to public listings. We expect our role to grow into one that institutional investors play in stock market listings.