Reinventing Early-Stage Investment

London-based Startup Funding Club has reinvented early-stage investment by developing a unique co-investment model – discover the journey of SFC.

Since its launch in 2012, the Seed Enterprise Investment Scheme (SEIS) and its older brother EIS have encouraged many investors to finance early-stage companies attracted by the schemes’ generous tax breaks. While investment firms typically rely on managing one single type of investment – angel, fund, or crowdfunding –, the London-based Startup Funding Club has reinvented early-stage investment by developing a unique co-investment model. The new strategy established by the firm allows High Net Worths to choose between investing in startups via its Angel Network or its funds, or by combining both modalities. With this approach, SFC maximises the investor’s potential returns while also helping startups maximise the potential of their funding rounds.

Investors meet startups at the latest SFC Pitching & Networking event.

Launched on the same year as SEIS, Startup Funding Club originated as an angel network. Nonetheless, the company quickly developed its unique co-investment model and launched its first SEIS fund in 2014. Now in its fifth year, SFC co-manages six investment funds and fully manages a seventh. The organisation prides itself in being more than a simple “broker” and sets itself apart from other investment firms by, not only investing directly in startups, but also assisting with the investment process – including due diligence and deal execution. Furthermore, the early-stage investors are also heavily involved in the post-investment period, providing support to their Alumni companies and using its network of investors and partners to actively aid in their development.

The one-of-a-kind investment model presents numerous advantages for both investors and entrepreneurs. While the latter are able to source their funding more efficiently and receive support from SFC’s team of entrepreneurs and business angels, the former have the opportunity to co-invest alongside experienced angels of the award-winning SFC Angel Network and Startup Funding Club itself. Investing at an SEIS/EIS stage also gives investors the chance to gain exposure to innovative products and disruptive technologies while the companies are still in its early days, meaning that they can have a greater influence on the management of the business and help ensure they get the right support from the beginning.

Dozens of SFC-funded companies gathered for the SFC Alumni Summer Party last August.

Investors also benefit from having a wide range of investment opportunities carefully sourced by SFC to choose from, with fund investors receiving exposure to a diversified portfolio assembled by the fund managers. Being based in one of the largest startup hubs in the world, SFC profits from an exceptional deal-flow and reviews 2,000 applications for funding every year. The high demand for its services has forced Startup Funding Club to become very meticulous in its selection process, on-boarding only the best candidates. The huge amount of applicants is also key in building SFC’s portfolio, allowing it to have great diversification. As previously hinted, the relationship between Startup Funding Club and its investee companies does not finalise once the investment has been made. Startups are backed by the organisation and angel investors through their journey, with SFC often sitting at their board meetings. The young businesses also go on to become part of the SFC Alumni Network, enabling entrepreneurs to meet and support each other.

Despite its young age, many investors and entrepreneurs have already relied on Startup Funding Club’s model and expertise. The organisation’s angel syndicate currently has over 300 active angel investors and, to date, SFC has invested over £13 million and boasts of a diversified portfolio of more than 100 businesses, which include high growth companies such as Onfido and eMoov. Investors and early-stage companies are not the only ones that have put their trust in the firm’s co-investment model. SFC counts on an extensive network of partners which includes the London Co-Investment Fund.

Angelika Burawska, Stephen Page and Joseph Zipfel collect the Lead Syndicate of the Year Award 2016.

Startup Funding Club’s track record has not gone unnoticed by organisations as the UK Business Angels Association either. The firm has been recognised as a leader in the early-stage investment world, with the SFC Angel Network being named the Lead Syndicate of the Year award in 2016 and finalist for the same title this year. Further evidence on SFC being a referent in the UK startup scene is its finalist status as Best Angel Syndicate and Best SEIS Investment Manager at the Growth Investor Awards 2017, which confirms its proficiency in its two investment modalities. These accolades bear testimony to the quality of the deal-flow and the strong activity and diversity of the SFC Angel Network and the SFC Funds. Having proved the effectiveness of its unique co-investment model, the group has now launched its first solo-managed SEIS/EIS fund, the SFC Angel Fund, which embodies the organisation’s core principles.

The SFC Angel Fund follows the unique investment model of Startup Funding Club, allowing fund investors to co-invest with the SFC Angel Network and to get actively involved with fund companies. By following this model, fund investors gain access to the most exclusive early-stage deals in the UK, which are curated and advised by highly skilled and experienced entrepreneurs and business angels. Investors in the fund will acquire a portfolio comprised of the best 10-15 candidates that approach Startup Funding Club. In addition to being outstanding, all companies have the added value for investors of qualifying for SEIS or EIS. The SFC Angel Fund is a one-of-a-kind in its treatment of these schemes, allowing investors to choose which scheme they want to benefit from – with the option of investing through both.

Despite having originated as a small-scale angel network, Startup Funding Club has evolved into much more. With the launch of its first fund and subsequent establishment of its innovative co-investment model, the firm soon became a stand-alone in its industry that is yet to be replicated. The system has proven advantageous for investors and entrepreneurs alike, who benefit from being part of an award-winning organisation that caters to the needs of both parts. The unique co-investment strategy has helped put SFC in a leading position in the UK’s early-stage investment world, and set the firm as an example of innovation for aspiring entrepreneurs that may one day ring Startup Funding Club’s doorbell.

Investment in early-stage companies involves high risks for investors. Investments through Startup Funding Club are only open to professional and sophisticated investors.