Impact investing and crowdfunding exit – a world first as E-Car Club is bought by Europcar
Last week, it was announced that Europcar has bought E-Car Club, which was the UK’s first all-electric car club. It’s certainly excellent news for the entrepreneurs and investors who backed this high-growth business – and for those of us interested in impact, it’s hugely positive that the world’s first successful exit from equity crowdfunding was an impact investing deal. Impact investing exits are becoming more common as the market matures and add further power to the idea that there is assumed impact “trade-off”; being good for the world can be good for returns.
E-Car Club offers car sharing through their fleet of electric cars, working closely with councils and social landlords to help people access affordable (and eco-friendly) transport options. Andrew Wordsworth and Christopher Morris, its founders, are often described as social entrepreneurs, and Christopher Morris himself explained “a social mission is at the heart of our business”.
It is no surprise to us that the first acquisition of an equity crowdfunded company came with a company with a social mission at its core. We know that customers (and those famous millennials) care more and more about social and environmental impact, and that sustainability positively affects company performance; it makes sense that stand-out startups would be those focused on creating change.
This is not the only noteworthy aspect of the transaction, however; the investment itself also demonstrates the power of collaborative investment. E-Car Club was backed by the crowd, (63 people to the tune of £100k in exchange for 20% equity), and angel investors also backed the business in 2013. Funding rounds that include the crowd alongside experienced investors (whether individuals or institutions) are becoming more common, and enable the business to draw on the value-add of each method.
Crowdfunding is a great balance for the strategic capital individual investors bring. Where values-aligned angels are invaluable in helping to grow a business (because they bring much more than just their capital), crowdfunding brings in investor capital that is not strategic in the same way (your crowd won’t usually be after a board seat), which might allow a smaller raise with better-suited angel investors.
Crowdfunding also gives evidence of market validation; if potential customers are willing to come forward with cash to get a business going, investors can read in that the power of the brand to engage its customers or clients too. And, anecdotally, haven’t we all heard one friend who has invested on Crowdcube or a similar site who is desperate for us to buy the product/go to the restaurant? A crowd of investors is a crowd of brand advocates who’ve paid you for the privilege. Crowdfunding can be a great marketing tool – while angel investors can be the key strategic resource the company will need to draw upon as it grows.
From this first funding round, with angels and the crowd, E-Car Club then raised £500,000 from Centrica-backed social impact fund Ignite. This fund has been a key example of so-called “corporate social venturing“, focused on growing businesses focused on creating positive social change in energy-related industries.
Angels, retail investors and institutional backers alike will have received handsome returns from their investment in E-Car Club, while they value they brought – monetary and otherwise – has surely been vital in the company’s journey to exit. It’s clear that values-alignment has mattered; capital has come from impact-focused investor Ignite, and from angels, but the crowd mattered too.
It’s a win for crowdfunding, and of course for the investors themselves, but for impact investing in the UK too – and let’s look forward to more exits, and more investments, like this one.