Vauban brings co-investment in Europe with LUX SPV and VC funds

In April 2021, Xaviel Niel, investor and co-founder of Kima Ventures, made a seed investment of €4 million along with a few other investors in Zefir. In February 2022, Sequoia Capital offered €20 million in Series A to Zefir, valuing the French startup at around $132 million, according to Dealroom.

With this and many other similar transactions, Niel has become one of the best investors in Europe. We are seeing the emergence of a wave of multi-millionaires via deals such as Spotify, TransferWise and Delivery Hero. However, the path to becoming an angel investor remains difficult.

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To overcome some of these challenges, we are seeing the emergence of a new model, where a number of angel investors are coming together to form a syndicate. This not only allows them to enter with more investment capital, but also to tap into each other’s network. For such an elaborate mechanism, it is necessary to have a supporting architecture. Vaubanheadquartered in London, makes it easy for investors to become venture capitalists.

Capital remains an obstacle

Imagine you only have $5,000 as an investor and you know you are missing out on a major investment opportunity. This reality has repeatedly hit investors with startups like Airbnb, Uber, Stripe, Klarna, Revolut, Spotify, Shopify, to name a few. These examples prove to what extent 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 called co-investing. It does this through funds and special purpose vehicles (SPVs) where investors pool their capital by meeting the minimum ticket size for private investments and being able to market their deal flow!

Rémy Astié, co-founder of Vauban, affirms that they are now witnessing the rise of emerging managers and solitary generalists (General Partners) with a solid network. He says another challenge facing the investment community is that “people who want to invest in their own network often don’t know where or how to start.” Others find traditional investment channels 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 barriers that prevent people from becoming angel investors. The co-founders also believe that the process of setting up a fund is both complicated and expensive.

“It involves many intermediaries, including lawyers, accountants and fund structurers. It can be difficult to know what type of vehicle to choose or where to base your vehicle. There is also a significant initial cost to set up the traditional method and the uncertainty if you will succeed in raising funds to justify this cost”, explains Astié.

In other words, venture capital, which helped the world see Facebook, Uber, Airbnb and a number of fintech and delivery start-ups investing in technology, has remained unfashionable in its own workings. Vauban’s co-CEOs say VCs still rely on spreadsheets, paper documents and employ lawyers, accountants and fund administrators to operate.

Vauban removes this antiquated mode of operation by offloading the process of creating and managing a venture capital firm to the cloud. This turns the whole process into a real-time experience and also consolidates different services under one platform.

Luxembourg, engine of European expansion

Vauban Lux launch
With LUX SPV, Vauban wants to facilitate the investment of European investors in startups | Image credit: Vauban

As a cloud-based platform, Vauban operates globally with jurisdictions in the UK, British Virgin Islands, and Delaware. Today, the company is creating an entity in Luxembourg to connect with European investors and help them achieve their startup investment goals. Under this new jurisdiction, Vauban offers venture capital funds for solo GPs and emerging venture capitalists as well as SPVs for family offices, venture capitalists and limited partners seeking co-investment.

Astié argues that venture capital as an asset class has outperformed public markets over the past ten years. He says Vauban helped his investors participate in fundraising for startups like Revolut, Space and Airbnb. It wants to bring similar exposure to smaller fund managers in Europe with the launch in Luxembourg.

“Luxembourg is the holy grail of fund management in Europe,” says Astié. “He is unparalleled in terms of reputation, neutrality and familiarity.”

This reputation also has a cost which 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 offers cheaper and faster to start funds and SPVs.

With its LUX products, Vauban aims to help emerging managers and VCs in Europe enter the European market and easily unlock jurisdiction. Vauban also helps investors navigate the complex Alternative Investment Fund Managers Directive (AIFMD), which is seen as a major hurdle in Europe.

Under the 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 up to a year to implement. “Our launch product covers this complex AIFMD requirement to unlock LUX funds for our clients,” says Astié.

A paradigm shift in investment dynamics

Vauban Lux SPV
Vauban extends its jurisdiction with the launch of LUX SPV | Image credit: Vauban

Vauban wants to give more people the opportunity to invest in startups. Astié and Musset believe that one of the biggest trends in the investment fraternity is that more people want to get involved in venture finance.

With the maturation of the startup ecosystem in the European Union, we are seeing an increase in the number of unicorns and large releases. According to Dealroom, Amsterdam 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 manufactures new unicorns in Europe, exiting investors are also reinvesting their capital into the ecosystem. “Operators turned VCs are a huge driver and they have a lot of experience and connections to offer EU startups,” Astié tells us.

With its LUX products, Vauban not only expands its jurisdiction but also offers a unique platform for professional investors in Europe. While investors show little appetite for risk and start-ups become hesitant in their fundraising, Vauban stands out as a platform facilitating dealmaking. It will be interesting to see how Vauban helps European investors not only find the right investment, but also find hidden unicorns.

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