6. Grow VC Group

Jouko Ahvenainen, the founder of Grow VC Group, has always questioned how transactions are organized and how efficient business ecosystems are built. Some years ago, Jouko’s lawyer was handling the sale of the rights to a name of a company he had founded, Data Storm, to an American firm with the same name wishing to enter Finland. The company made an offer. The lawyer’s advice: “Take it. You’ll never get a better offer.” Jouko’s response: “You’re fired.” Having got rid of the middleman he then renegotiated the deal himself, adding more than 10 percent more to the sale price.

The Grow VC Group has been systematically questioning the way that business and transactions are organized as it aims to get into new markets early and leverage learning across its ecosystem. By actively experimenting with finance and technology the Group’s companies aim to reconfigure business models and create platforms whereby a wide variety of individuals and businesses can both find opportunities for investment or raise funds. The Group has realized that current financial arrangements do not adequately leverage technology but instead rely overwhelmingly on middlemen such as investment banks, who have profited from these inefficient, non-scaling arrangements. Furthermore, after the 2008 financial crisis many in finance looked for new sources of growth and noted that the existing infrastructure was not efficiently connecting supply and demand. For example, many small- and medium-sized firms, as well as accredited and non-accredited investors alike, are potential sources of growth, yet markets underserve both. However, the Grow VC Group sees that there is a demand for improved finance infrastructure and more diverse business ecosystems as the world is increasingly connected through technology and transacting is done through software. The Internet is enabling new retail finance markets of ever-increasing choice and reach, better serving both supply and demand. Grow VC Group is positioning itself in the finance technology space, inclusively, as “a worldwide pioneer and leader in the crowd investing, peer-to-peer and online investment market.”

The Grow VC Group owns numerous companies built around a core vision to build an ecosystem of technology and infrastructure enabling financial connections in growing, and thus, uncertain markets wherever they may be. According to Markus Lampinen, one of Grow VC’s board members and the CEO of the Group’s CrowdValley.com, which offers the backbone for investing and lending services: “We can connect investment targets in California, for example, to a family office in Abu Dhabi. We create this market by providing visibility to different types of supply and demand without necessarily exposing either party. We do the matchmaking and negotiation of terms as the parties may not be able to talk to each other directly—they may even be competitors.” In providing this platform the Group is seeking to connect latent transactions that would otherwise remain unrealized as they are not on the horizon of the limited network of an investment bank. (The founders of Grow VC Group are well aware that large investment banks have large networks. However, as these are exceedingly reliant on personal connections the investment banks have not been open to leveraging the power of the Internet, the scale that it enables, and the opportunity to develop new ecosystems.)

The Group’s vision is ambitious. To not only redefine the possibilities of worldwide transactions by building a new financial ecosystem that can unleash the potential of technology to but to also open these opportunities to many different types of investors and leveraging the scale of crowdfunding. In technology-supported finance ecosystems there is no reason that everyone from $100 supporters to $100 million institutional investors could not participate. Also, by being so radically inclusive the Group extrapolates the logic by which venture capitalists operate. A single VC may be right often, but generally will not outperform a group of VCs, especially once they are connected to the invested crowd through technology. By being exposed to so many opportunities and sources of intelligence throughout their ecosystems the Group gains a competitive advantage relative to incumbents. To maintain an efficient deal flow with such a high volume the Group bundles the various investors’ smaller monies into larger transactions using the same logic by which mutual funds gain transactional efficiencies. However, instead of supporting the heavy infrastructure of mutual funds, for example, the Group allows supply and demand to connect directly through technology.

The Group’s novel organizational structure has resulted in an ecosystem in which all stakeholders are catered to by dedicated companies supporting both the investors or issuers of lending and finance, those seeking funding and investment, as well as those providing the digital marketplace for the ecosystem. The entire ecosystem in turn is able to leverage the software developed by Crowd Valley. This software platform enables the rapid scaling of financial transactions globally while ensuring efficiency despite high volumes. The global platform of numerous companies has been developed over time, and is well equipped, to address idiosyncratic local regulations such as particular financial requirements regarding creditworthiness checks as well as the detection and avoidance of money laundering, for example. The platform also allows for customization and interoperability with other software platforms through APIs, the code that translates transactions across digital systems and rapidly allows for the platform use to scale across the Group’s companies and beyond.

Having developed a technology to enable a finance ecosystem of lending and investing the founders leverage the platform’s potential by focusing on increasing the deal flow or volume while reducing fees that middlemen have traditionally been able to charge due to a lack of market transparency. The transparency afforded by Grow VC Group’s approach, a business model that catches a wider array of potential investment opportunities both in scale and in scope, does not mean everything becomes public or open. Instead the Group is about being able to, discretely, connect those looking to invest with those needing investment, worldwide. The ecosystem also can benefit investment transactions by bundling demands for services or projects. For example, small activities such as “changing the street lamps in a city to LED lighting”—which by as a stand-alone transaction maybe a small job that affords an individual municipality little bargaining power—can be pooled together to form an interesting proposition that can transform the transaction into a buyers’ market.

Having challenged the rules of the finance game by creating a new digital ecosystem for lending and investing the founders’ nightmare is for the Group to be seen as a bank. One of the challenges of being categorized as an equivalent to the traditional incumbent financial actors, in addition for avoiding the regulatory burden that would follow, would be the difficulty of maintaining the momentum that allows Grow VC Group to learn quickly and to move rapidly enough to be able to learn and build the necessary presence in different emerging verticals throughout the developing ecosystem. Grow VC Group aims to build its global, an inclusive ecosystem that leverages the full potential of demand and supply for lending and investing. However, as this near-term future ecosystem continues to develop, the Grow VC Group also needs to make their own activities profitable in the short run. In other words, be poised and ready for the new financial order but not to burn through their own position in the process.