8 Nov 2023

Rebooting VC

Martijn de Wever, CEO and Founder, Floww:

Venture capital needs a reboot. Interestingly, the fund structure hasn’t changed in the 50 or so years since venture started. We’ve continued to use the same slow, admin-heavy documentation and processes, while managing many disparate vendors.

I used to be a trader. When I started out as a VC, I was struck by the lack of access to the key tools and systems available on the trading floor – access to data, unified transaction mechanisms, post-investment tools for reporting to one’s investors. So much was paper-based and laborious. VC hasn’t modernised, which makes the structuring and management of funds challenging.

The lack of structural and technological solutions creates a hurdle in terms of liquidity, which is ultimately what the private market needs. People want to invest in venture, but don’t want to be stuck in traditional 10-year lock-up periods (a challenge for VCs that is magnified by the rates cycle that we’re in). Private companies stay private for longer and the cost of capital has gone up, raising expectations on returns.

Time value of money is different when interest rates are where they are today – why would you want capital locked up for a decade? As a result, LPs are rethinking the asset class.

Without an effective secondary market, we cannot shorten the time of the investment. But creating one isn’t easy.

The net effect of these structural challenges is that less cash flows through the system. Funds want to do more fundraising, and private companies want better access to capital to grow – and this is where technology comes in.

At Floww we saw an opportunity to solve the problem of the fund structure, create efficiency, and re-engineer it to be secondary-ready by design. That set us on a course to develop FlowwFunds  – our new full fund management solution.

We’ve changed the way that funds work, deconstructing the fund via our technology. The analogy I like to use is that of the electric vehicle versus the combustion engine. Electric cars have fewer moving parts – there’s less risk of something going wrong. Our solution is completely end-to-end – all workflows involved in setting up, launching and deploying a fund are on one platform. There is no need to manage different vendors; FlowwFunds includes full custody, administration and regulatory hosting. Traditionally siloed processes, including investor due diligence, are all managed on our platform. The set up for secondary-ready funds also supports VCs in generating new revenue and fee opportunities.

A key innovation of FlowwFunds is Floww Certificates – globally tradable instruments that are secondary-ready, to drive increased liquidity. This enables the creation of new types of funds, a more desirable asset class with flexible, shorter lock-up periods.

FlowwFunds removes the burdens and frictions of structuring a fund. More cash flows through the system, meaning VCs get back to what we do best – deploying funds and working with entrepreneurs to fuel innovation.

Find out more about FlowwFunds