The rise of Direct Investing: Capitama’s key learnings so far

2018-02-23T14:16:47+00:00February 21st, 2018|

Capitama soft-launched to our investor network in December 2016 as a market network connecting experienced investment professionals (e.g. VC firms, PE firms and direct lenders) to our growing network of sophisticated investors (e.g. HNWI’s, UHNWI’s, Family Offices, Private Investment Offices and Sovereign Wealth Funds), who were seeking to make private capital investments each year with more control and discretion.

From our considerable experience in corporate finance and wealth management, our goal is to make raising capital more efficient for fast growing businesses and enable deal sponsors such as venture capital firms to raise investment into their high growth businesses directly without the need to always bring in more institutional based capital.

With minimal marketing and our platform still being built, we have quickly proven our model and have already successfully helped raise investment into some very exciting companies such as Simba Sleep and have a growing number of registered investors that are sharing with us some very interesting preference based data as to what they want to invest in each year so as to make direct investing more efficient.

Some of our key takeaways so far are;

1. Capitama already has over £3bn of annual investment appetite from registered investors

With only a small but growing section of our network registering on Capitama (and no external marketing) we already have over £3bn of annual investment appetite registered from a wide range of sophisticated investors including individuals (HNWI & UHNWI), Family Offices, Private Investment Offices and Sovereign Wealth Funds.

There is a broad range of investor appetite for private investments per annum, starting at £50k for some individuals and as high as over £100m for some private investment offices and sovereign wealth funds. Of the c.£3bn looking to be deployed each year, c.60% is seeking equity investments and c.40% into debt capital. The demand for debt is therefore significant and is likely to be a by-product of the on-going low interest rate environment combined with perceived growing volatility in the economy in certain sectors.

2. Sophisticated investors are seeking a broad range of investment types

Although Growth Capital is the most popular investment type in our network at the moment (82.5%), most investors are looking to invest in a broad range that includes Early Stage (64.2%), Buy-outs (59.6%), Real Estate (52.2%), Income (49.5%), Private Equity Funds (39.4%), Social Impact Investing (29.4%), Hedge Funds (26.6%) and Donations, Philanthropy and Social Impact (22.9%).

This breadth of interest makes sense as it potentially reflects the risk diversification a sophisticated investor might construct when building a balanced portfolio strategy. It is worth noting that for UK investors seeking to invest in early stage and growth deals the UK Enterprise Investment Scheme is useful however it is acknowledged that it is the fundamentals of the company and team that are important, not the tax incentive. With Capitama, we are building partnerships with experienced deal Sponsors that can provide our growing investor network access to the investment types they are looking for.

3. Deal Sponsors are keen to find new sources of capital

From our successes to-date it is clear that experienced deal sponsors are seeking new, efficient ways to raise capital (primary or follow-on capital) so they can continue to focus on building the company they have invested in (or lent to) and not have capital raising be an on-going, resource intensive and time consuming job. This supports our strategy of working only with experienced investment professionals and not having a peer-to-peer model that is the basis of most crowdfunding platforms today as this does not usually sit very well with a sophisticated investor that appreciates that a successful investment usually requires strong oversight to reduce risks and maximise returns.

So what does the future hold?

We believe direct investing continues to grow in significance and volume amongst the private capital sector. We continue to see increasing numbers of entrepreneurs and wealthy families focus their efforts on direct investing and as an enhancement to traditional portfolio management offering improved returns and frankly something more tangible to hold and touch. Direct investing can be more of a public statement than another positive number in the portfolio but for others the best approach is a discrete one.

Private banks are putting greater effort into providing deal flow to private clients (a more entrepreneurial approach than before) albeit with their policies and procedures they find it hard to see the best investment opportunities and moreover still struggle with the due diligence and compliance implications of making recommendations.

For Capitama we continue to build on our investor network which in turn fuels our already healthy supply of high quality sponsor backed investments.
As we only show our investment opportunities to registered investors we invite sophisticated investors to register and welcome deal sponsors to get in touch if they are seeking access to direct private capital. You can do this here