On November 11, 2020, CEE Legal Matters reported that Karanovic & Partners had helped set-up Ventu.rs, the first Serbian crowd-investing platform. CEEIHM spoke with Luka Pejovic, Director at Ventu.rs, to learn more about the matter.
CEEIHM: Congratulations on the recent set-up! How did this idea come to be and how long was the process of creating Ventu.rs?
Luka: Thank you very much!
Before I started working on establishing a crowd-investing platform, I was a part of the BDO Serbia M&A and Fundraising Team and it seemed that we encounter the same issues over and over in our work. The traditional bank-centric Serbian financial market, with mostly foreign-owned banks, has proven to be extremely conservative, risk-averse, and not interested in local innovative companies and projects. My colleagues and I have encountered this issue more than once while working with MSMEs and startups on fundraising projects.
While banks and investment funds catered to the needs of larger companies, there was a clear funding gap in the smaller segment. We analyzed other markets and the ways this funding gap is addressed and crowd-investing seemed like one of the possible solutions to this issue for Serbia. Furthermore, we noticed the speed with which newly-founded companies go through the early phases of their life cycles. One day they are below our radar, the next day they are so large they become clients of some of the largest competitors of BDO. It seemed BDO could perfectly position itself as a problem solver in the early phases of innovative companies' lifecycles and capitalize on that relationship once they grow in the later phases.
CEEIHM: As already reported by CEELM, "the platform is a joint project of BDO Business Advisory from Belgrade and CONDA from Austria, supported by USAID’s Economic Development Cooperation Project and the Austrian Development Agency." Who initiated the project and what was the case put forward towards the other institutional partners?
Luka: BDO Serbia explored the possibilities of establishing a crowd-investing platform in Serbia, but all the research required support, both in terms of funding and expertise. We presented our idea to the USAID Cooperation for Growth Project, which is focused on the improvement of access to finance in Serbia, and they were very interested in the subject. They financed a very comprehensive market study, which, in the end, helped us a lot and that we used as a blueprint for our work afterward. We were tasked by them, together with Karanovic & Partners to conduct the said study.
After all the possibilities were explored, BDO chose to partner with CONDA, an Austrian crowd-investing pioneer and founded the platform as a joint venture. Due to the fact that this was a Serbian-Austrian cooperation, our project received funding from the Austrian Development Agency. Colleagues from BDO Austria were invaluable in the process of securing this funding.
As previously mentioned, USAID was very interested in introducing alternative and innovative finance options, so our cooperation with USAID continued beyond the mentioned study since they financially supported the promotional activities for our platform launch. Furthermore, they are covering part of the costs for the first five campaigns on our platform.
Both ADA and USAID recognized the importance our platform could have in improving the access to finance for micro and small companies and the general economic development in Serbia. We are only a small crowd-investing platform, targeting a niche, but we were the first alternative financing option in Serbia and we believe that we have opened the doors to others who want to do something innovative and progressive in the financial market. I think that was what they counted on when they decided to give us their support.
CEEIHM: What would you say was the most complex aspect of the set-up in terms of legal matters?
Luka: In my opinion, the most complex aspect was adapting the crowd-investing business model, established originally in Austria and Germany, to local legislation. Serbian crowdfunding laws are still non-existent so our lawyers hat to find the foundation for our business in existing laws, which was not always easy.
Furthermore, drafting the loan agreements and other contracts, needed for such a platform to work, was a task that goes beyond only legal matters. One has to keep in mind what is customary to the local market and which solutions, although legal, might not work in Serbia. This also required a lot of creative work from both our team and our colleagues from Karanovic & Partners.
CEEIHM: What was Karanovic & Partners' mandate specifically? What were the aspects you asked them to advise on? And, while on the subject, why did you opt to use them in particular as your legal counsel?
Luka: Originally, USAID mandated both of our firms to conduct the study, which was aimed at clarifying if and how crowd-investing is viable in Serbia from both business and legal point of view. Since they were very cooperative, professional, and, above all, very good lawyers, it was only logical to continue this partnership in later phases.
After the study, they helped us with establishing the platform from a legal perspective, drafting the relevant contracts, and even formalizing some of our business processes with us, such as legal checks of applicants on the platform. At every step of the way, they have proven their expertise, but much more importantly shown that they are true partners with their client’s interest in mind. This did not surprise us, since we were aware of their great reputation, which was one of the reasons why we opted to use them as our legal counsel.