In April 2021, Xaviel Niel, an investor and co-founder of Kima Ventures, made a seed investment of €4M along with few other investors in Zefir. In February 2022, Sequoia Capital offered €20M in Series A to Zefir, valuing the French startup at around $132M, according to Dealroom.
With that and many other such deals, Niel has become one of the top investors in Europe. We are seeing a wave of multi-millionaires emerging via deals such as Spotify, TransferWise, and Delivery Hero. However, the path to become an angel investor remains challenging.
To overcome some of these challenges, we are seeing the rise of a new model, where a number of angel investors band together to form a syndicate. This allows them to not only enter with a bigger investment capital but also tap into each other’s network. For such an elaborate mechanism, there is a need for a support architecture. Vauban, headquartered in London, makes it easy for investors to become venture capitalists.
Capital remains a hurdle
Imagine having only $5,000 as an investor and knowing that you are missing a major investment opportunity. This reality has struck investors multiple times with startups like Airbnb, Uber, Stripe, Klarna, Revolut, Spotify, Shopify, to name a few. These instances prove how capital remains a limiting factor for investors.
To solve this challenge, platforms like Vauban bring investors together. If Shopify is a platform for merchants then Vauban is a platform to make private investments more accessible by investing together, also referred to as co-investing. It does this via funds and special purpose vehicles (SPVs) where investors pool their capital by meeting minimum ticket size for private investments and being able to commercialize off their deal flow!
Rémy Astié, co-founder of Vauban, says they are now seeing the rise of emerging managers and solo GPs (General Partner) with a strong network. He says another challenge facing the investment community is that “people wanting to invest in their own network often don’t know where or how to begin.” Others find the traditional channels of investment to be unnecessarily expensive and time consuming.
Vauban wants to solve these challenges
Astié, also sees capital, deal flow and navigating the investment structure as some of the hurdles keeping people from becoming angel investors. The co-founders also feel that the process of setting up a fund is both complicated and expensive.
“It involves a lot of intermediaries including lawyers, accountants, and fund structurers. It can be hard to know which type of vehicle to choose, or where to base your vehicle. There’s also a large upfront cost to set up the traditional way and uncertainty if you will successfully fundraise to justify that cost,” Astié explains.
In other words, venture capital, which has helped the world see the likes of Facebook, Uber, Airbnb, and a number of fintech and delivery startups by investing in technology, has remained old fashioned in its own operation. The co-CEOs of Vauban say that VCs still rely on spreadsheets, paper documents, and employ lawyers, accountants, and fund administrators to function.
Vauban is doing away with this antiquated way of functioning by offloading the process of starting and running a VC firm into the cloud. This turns the whole process into a real-time experience and also bundles different services together under one platform.
Luxembourg to drive European expansion
As a cloud-based platform, Vauban operates globally with jurisdictions in the UK, British Virgin Islands, and Delaware. Now, the company is establishing an entity in Luxembourg to connect with European investors and help them with their startup investment goals. As part of this new jurisdiction, Vauban is offering VC funds aimed at solo GPs and emerging venture capitalists as well as SPVs for family offices, venture capitalists, and limited partners looking for co-investment.
Astié says venture capital as an asset class has outperformed the public markets over the last ten years. He says Vauban has helped its investors participate in funding rounds for startups like Revolut, Space, and Airbnb. He wants to bring similar exposure to smaller fund managers in Europe with the Luxembourg launch.
“Luxembourg is the holy grail for fund management in Europe,” says Astié. “It is unparalleled in terms of reputation, neutrality, and familiarity.”
That reputation also comes with a cost that makes Luxembourg the ‘Rolls Royce’ of fund administration in Europe. According to Vauban, the typical cost to set up a LUX fund is around $200,000, which is too high for emerging fund managers. With its LUX products, Vauban is offering funds and SPVs that are cheaper and faster to get started.
With its LUX products, Vauban aims to help emerging managers and VCs in Europe to enter the European market and easily unlock the jurisdiction. Vauban is also helping investors navigate the complex Alternative Investment Fund Managers Directive (AIFMD), which is deemed as a major hurdle in Europe.
Under AIFMD, Luxembourg requires investors to set up regulated investment fund managers. Astié explains that this process can be costly in legal fees and can take as long as a year to get implemented. “Our launchpad product covers this complex AIFMD requirement to unlock LUX funds for our customers,” says Astié.
A paradigm change in investment dynamics
Vauban wants to bring the possibility of investing in startups to more people. Astié and Musset feel that one of the biggest trends in the investment fraternity is that more people want to get involved in venture funding.
With the startup ecosystem maturing in the European Union, we are seeing a rise in the number of unicorns and big exits. According to Dealroom, Amsterdam has produced two unicorns in the first half of 2022 and now has a total of 20 unicorns. In Europe, London leads with a total of 81 unicorns followed by Berlin with 31, Paris with 30, and Stockholm with 24 unicorns.
As the startup ecosystem mints new unicorns in Europe, the investors exiting are also reinvesting their capital back into the ecosystem. “Operators turned VC are a huge driver and they have a lot of great experience and connections to offer EU startups,” Astié tells us.
With its LUX products, Vauban is not only expanding its jurisdiction but also offering a unique platform to professional investors in Europe. With investors showing little appetite for risk and startups becoming cautious when raising funds, Vauban is entering the scene as a platform that facilitates dealmaking. It will be interesting to see how Vauban helps European investors with not only the right investment but also find hidden unicorns.
