GrowVC has slowly been marketing their concept in various social media networks and today is the date they're finally coming out with the concept and explaining it to the public. Back in December I had a chat with Valto Loikkanen, one of the co-founders of the company, and he told me the concept has been in finetuning for the last two years or so. They've put in a lot of effort to make sure their companies are registered and managed in the right way so that they are ready to scale once things start taking off.
The concept GrowVC is looking to disrupt is the age old venture capital business model. Many have complained that while business models in the online and mobile world have been turned upside down, one model remains loyal to the way business is done and that's the model of investing money into startups. Furthermore, the need for capital has gone down dramatically making smaller private investors more potential investors in startups than larger venture capitalists.
When users signup to the service, they are able to choose from three different roles for their accounts; startups, funders or experts. Each of these account types has a different set of features or possibilities attached to it. All these roles are key components of taking startups further. Startups apply for funding from the funders and experts are basically service providers, consultants, lawyers, and so on, helping startups on their path.
When signing-up to the service, you are required to choose the plan that most suits your needs. For example, startups pay a monthly fee that corresponds to the amount of funding they are looking to raise, while funder's pay the subscription fee that corresponds to the amount of the round they are willing to invest. Service providers pay a standard fee.
The smart part of this concept kicks in after the fees. 75% of all paid fees go to a community fund while 25% of the fees go to run the GrowVC business. The community fund is in essence a fund that is managed by GrowVC, but all investment decisions are made by the users themselves. When startups don't succeed and go bankrupt, the losses are covered naturally from the community fund. When startups do well and return on investment, 75% of all that return is paid out in commissions to the top members of the community while 25% is again taken by GrowVC to run the business.
I think this is a great addition to the venture capital business and will surely attract a lot of interest. Since their private beta, users have been able to sign-up to the service for free. GrowVC has now some 700 members in their community looking to start taking the concept forward with investments. Time will tell, will GrowVC become the model of the future.