Interview: Lasse Mäkelä, Founder of Invesdor

I’m working on a book on equity crowdfunding in Europe. Invesdor is one of the best platforms in Europe, in my view. Equity crowdfunding is an interesting way to raise initial funding for startups and more of them use it.

It is attractive for investors, too. For small, idividual investors or experienced business angels. Some companies were even able to get a follow quickly on investment from a VC after after a successful campaign  (the VC fund Inventure noted: “Previously Yoogaia listed a campaign on FundedByMe which rased €92,172 by 81 investors in an equity crowdfunding campaign, which makes it a good proof of concept that Inventure is investing in a crowdfunded company further down the line). Let’s see if more VCs will screen equity crowdfunding platforms and will invest in super-succesful campaigns … If not, let’s set up a new fund to do that … 😉

In the US, it is quite common that super angel investors use equity crowdfunding platforms to create syndicates to invite others to invest along with them. This model is still quite exceptional in Europe. Recently, Invesdor agreed to cooperate wih the business angel network FiBAN. Examples of co-operation between angel networks. All actions aimed at improving growth company financing are good, therefore co-operation between business angels and equity crowdfunding makes sense. “For us, the most important thing is to create reliable operating methods for the markets of early-stage companies both in terms of business angel investments, crowdfunding and other means of financing,” commented CEO of FiBAN Jan D. Oker-Blom.

The US is always ahead — funds backing future deals of best angel investors on equity crodfunding platforms are emerging . MicroVentures is one of the financial industry’s first organizations which merges crowdfunding with the venture capital industry (Actually, I find both models very interesting and look into them with some people. Contact me if you think you might help).

And here is my interview with Lasse Mäkelä, CEO of Invesdor:

Why do you run an equity crowdfunding platform?

The reasoning is two-fold. One, unlisted growth companies are bottlenecked by a lack of alternatives to meet their financing needs, which is also costing the society. Two, from the potential investor’s standpoint, there are incredible amounts of money just lying on bank accounts which could be used much more productively. What equity crowdfunding does is connect these two needs to solve both. Unlisted companies can fund their growth while realizing significant marketing and product validation benefits, while at the same time people can choose to put the money on their bank accounts to use by investing in growing businesses that they see potential in and actually make a difference, which is something they traditionally have not been able to do.

Why is your platform unique? Can you give some details abut how it works? What companies / investors are eligible to raise/invest?

What differentiates us from the competition is our expertise and networks: we know what we’re doing, and we actively co-operate with other established parties in the startup and corporate financing field, which results in big synergy benefits that are also reflected on the target companies and investors. We are also in the middle of the application process for an investment firm licence, which will allows us to further build on these existing strengths. Our platform is a matching service for unlisted companies and investors. In a nutshell, it’s share issues taken to the transparent and lean online environment. There is a simple list of criteria that target companies must meet to apply, whereas anyone in charge of their finances can invest provided that their local legislation allows it.

What are the biggest challenges for you when building your platform? (Legal compliance, build a community of investors, attract good projects, …)

The biggest current hurdle, which may yet prove to be a blessing, is the regulation that has followed a new interpretation on crowdfunding made by the Finnish financial authority this summer. Overall, the international regulatory framework is fragmented which sometimes results in confusion and uncertainty in the public discussion. The upcoming authorization will definitely build public trust towards the industry, which will likely grow volumes as well.

What type of companies go to your platform to raise money? How successful have they been?

All types of companies, really. Early stage, later stage, B2C, B2B, tech, food and drink, movies, you name it. In total we have received applications from some 400 companies, while 72 of these have resulted in actual crowdfunding rounds opening. Out of the 72, 23 have been successful.

What do successful campaigns have in common?

Marketing. They know their target groups for their offering, and they work hard on the marketing of the offering.

What are typical mistakes that startups make when raising money?

Overvaluing the company is always an easy mistake to make when you are just starting out and looking for seed finance. Perhaps the major one, however, is that entrepreneurs believe that once they open their offering, the investors will come. Hence putting effort into marketing being the common denominator in successful cases.

What type of investors do you attract? Do you work with experienced business angels? Are you planning to? Can they create investment syndicates (AngelList model)?

We have worked with wealth management houses in the past and are currently focused on developing our co-operation with the most active business angel network in Europe, FiBAN, which we are also a member of.

What are your plans for the future?

Once we have received the authorization from the FIN-FSA we will be internationalizing rapidly and becoming the leading player in European cross-border crowdfunding.

What are the main challenges of equity crowdfunding in Europe? How do you see role of the EU?

The fragmented regulatory landscape, for sure. Harmonization of regulation would be a big step forward, but for the near future that seems like a tall order. While we are moving into the bigger regulated leagues by applying for financial authority authorization, not all platforms can do the same, and the confusion and uneven playing fields remain.

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More about FiBAN

FiBAN is the largest Nordic business angel network measured in investment sums. Business angels are estimated to invest 50 million euros per year in Finnish potential growth companies. The vast majority of the sum is invested by members of FiBAN. During the two years of Invesdor’s existence, a total of 2.7 million euros have been invested through the service.

Why is the cooperation of business angels with equity crowdfunding platforms good, according to Invesdor?

• In addition to capital, business angels possess much expertise and knowledge to pass on to early stage growth companies. Angels and crowdfunding can complement each other exceptionally well.
• One well working model is one in which a business angel first invests a larger amount, after which the company seeks supplementary capital through crowdfunding, Mäkelä comments

As a co-operation partner of FiBAN, Invesdor will be providing crowdfunding services and events to members of the former. FiBAN’s members include more than 400 Finnish angel investors.

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