Founder Series: Luke Fay of VentureCrowd

Crowdfund Vibe sat down with Luke Fay, CEO of Venture Crowd, to discuss the rise of crowdfunding in Australia. 

 

What was the motivation behind starting VentureCrowd?

VentureCrowd is democratising and scaling access to alternative finance. We are an alternative asset equity crowdfunding platform that provides investors with access to alternative investments, as well as entrepreneurs and property developers with access to alternative finance. All parties benefit from alignment, transparency and diversification.

The alternative asset universe has grown substantially over the past 10 years and can offer portfolio benefits such as uncorrelated returns, downside protection and improved risk/return profile. However, until VentureCrowd, direct investments in a diversified portfolio of alternative assets have been unviable to all but institutional investors or ultra high net worth investors with a family office due to large barriers to entry like ticket size, deal complexity and ongoing administration. Through fractional ownership, we offer our wholesale investors the ability to make direct investments into externally validated and curated alternative investments via an integrated platform. At the same time we provide high growth potential companies and curated property developers with access to funding that has been unavailable due to conservative risk appetites and capacity constraints from traditional sources such as banks and investment banks.

Our validation and curation process solves for adverse selection, so our investors have the confidence and protection of investing on the same terms as lead/professional investors in opportunities that they have committed capital.

 

Who are the main users of your platform? How do their needs differ?

We are a two sided platform. On one side we have an infinite supply of entrepreneurs and property developers who are looking for alternative sources of capital to grow their business or complete their project. On the other we have a pool of currently wholesale investors, who are looking for direct access to alternative investments. VentureCrowd uses fractional ownership and external validation to provide all parties with alignment, transparency and diversification through a fully integrated platform.

Our process solves for adverse selection and ensures businesses that are worthy of capital have access to it and we provide our investors with a curated and externally validated alternative investment opportunities.

 

From left to right: Sunny Yu (COO), Luke Fay (Interim CEO), Richard Case (GM Startups), and Philippe Roger (GM Credit)

From left to right: Sunny Yu (COO), Luke Fay (Interim CEO), Richard Case (GM Startups), and Philippe Roger (GM Credit)

 

How well known is crowdfunding in Australia? What is the coverage on crowdfunding like in the traditional media?

It is emerging from its “niche status” and becoming more mainstream. Media coverage has recently focussed on the Australian Government’s attempts to introduce equity crowdfunding legislation.

 

What is the current regulatory environment in Australia?

VentureCrowd is currently available only to Australian wholesale investors. The Australian Government continues to struggle with legislation relating to crowdfunding and the ability of retail investors to access it. The proposed legislation has limitations as it doesn’t address different asset classes and security types as it attempted to fit it into existing corporations law. We view this as inappropriate. Notably, the requirement for crowdfunded businesses to become public unlisted companies, which would require them to have a share registry of over 50 shareholders and imposes significant administrative and regulatory burdens on companies that need to focus on their business and achieving high growth. A share registry of this size also has significant implications for later stage VC funding or trade sale liquidity events as the registry can be considered too unwieldy for them to achieve the outcome they desire. Proposed legislation also did not consider crowdfunding platforms such as VentureCrowd that invest via a unit trust structure. The unit trust structure is desirable as it aggregates investors into one share holding, thus keeping the share registry clean for ease of administration and future liquidity events. It also protects investors as they act as one bigger, more influential group via an experienced trustee.

 

What is the largest fundraise that has occurred through your platform?

$4.2m for Ingogo. VentureCrowd is Australia’s largest equity crowdfunding platform, having completed over 20 startup rounds and 2 innovative property deals. We will complete our first credit deal very soon.We have a big pipeline of exciting opportunities across all our business verticals which be launched through the end of this year and into next year.

 

What is the most interesting project Venture Crowd has funded?

They are all interesting! Our platform and process is best in class and whilst I am reluctant to “pick” the most interesting deals, I think our two property deals are worthy of mention given they were arguably world firsts and presented a unique, innovative and highly popular way for our investors to participate in high quality alternative property transactions with strong tail winds behind them.

 

Where do you see crowdfunding in five years time, both in Australia & globally?

Acceptance as a mainstream investment option, significant growth in overall funding volumes, secondary market liquidity and consolidation as larger players scale up and swallow smaller peers.

 

Minor editing for clarity. 

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