High start-up valuations may unravel when proper investors come on board
SMEs should treat crowdfunding for early-stage cash with caution for fear of making things difficult when they try to raise funds later.
Private equity firms and venture capitalists will likely not support high valuations awarded by unsophisticated investors on crowdfunding sites, said Google European venture-capital boss Tom Hulme.
Speaking to The Sunday Times, Hulme urged entrepreneurs raising money through crowdfunding to be “conservative” about early valuations to ensure investors benefit from later funding rounds.
Hulme is European head of GV, the venture capital arm of Alphabet, Google’s parent company.
Over the past five years, Hulme has invested more than £157m backing entrepreneurs in artificial intelligence, fintech and healthcare. Recent investments include flu vaccine Vaccitech, and barcode scanning platform Scandit. Perhaps its best-known investment is travel aggregator site Secret Escapes.
GV has $2.4bbn currently under management.
To date, more than half of Hulme’s investments have been in Britain.