CapitalRise, the multi-award winning online property lending platform offering market leading returns of 7-12% p.a. successfully raised £5,767,915 from 1148 investors in three separate rounds on Seedrs.
We sat down with Uma Rajah, CEO and Co-founder of CapitalRise, to discuss their experience with crowdfunding and their top tips for a successful raise.
Tell us about how CapitalRise started? Where has your vision taken you so far?
CapitalRise was founded by three individuals. Fintech pioneer Uma Rajah, Alex Michelin and Andrew Dunn, both co-founders of luxury property design and development firm Finchatton. Since 2001, Finchatton has developed over £2bn of luxury property in prime central London and worldwide. As developers themselves, they were aware of the obstacles that developers faced when raising money to fund development projects as traditional bank lenders have been retreating from the space as a result of regulatory changes, which came into effect after the global financial crisis. This created a funding gap which CapitalRise was created to fill.
Previously, this type of investment into prime real estate development loans had only been accessible to institutions with millions to invest. Through developing proprietary technology, we have created a platform for individual and institutional investors to access private real estate debt investments in some of the UK’s most sought-after locations such as Mayfair, Belgravia and Knightsbridge against some the finest real estate assets in the UK market. Nearly 5 years later, we are still the only platform in the UK offering investments of this calibre.
For our platform investors, all investments are secured with a legal charge against prime real estate assets. This means that if borrowers fail to repay, we can force the sale of the asset to recoup investor funds. We have never had to do this as all of our loans have performed but securing a strong security package for every loan is an essential part of our process. Since inception, we have paid our investors an attractive average rate of return of over 9% pa and we have a clear track record of zero investment losses or investment defaults to date. Investors select specific projects that they want to invest in depending on their preferences and the average investment term is between 16-17 months. Each investment earns a fixed rate of return typically between 7-12% per annum depending on the project, these can also be tax-free if eligible investors invest via our IFISA.
Tell us about your fundraising journey before Seedrs?
Prior to raising on Seedrs, we were funded using seed capital from our founders and a family office and in between our two Seedrs raises, we raised equity from a VC, Revolt Ventures.
When you came to Seedrs, why did you decide it was the right time to raise a round?
We first decided to raise with Seedrs because at that stage of our journey we had proven our business model and proven strong product market fit – we were ready to scale the business. Our first raise was in 2019 and following its success, we decided to raise again in 2020. We raised over £2.3m in each of these Seedrs fundraises. Our first one was the 7th largest raise on the Seedrs platform that year and the more recent one was their 14th largest raise in the year. We are very proud to be part of the Seedrs alumni community.
At the time of your Seedrs round, what other fundraising options did you consider, and why did you choose crowdfunding?
We felt there was a great synergy between ourselves and Seedrs on several levels.
Firstly crowdfunding with Seedrs was a great opportunity to promote our business and market our platform to Seedrs investors. We thought that Seedrs investors would understand our business and the attractiveness of our product very easily as they were, by definition, already comfortable with investing online and were knowledgeable about investments of this type. Many of the Seedrs investors subsequently became platform investors of ours which helped to grow our customer base.
Secondly, this gave us the unique opportunity to allow our platform investors to invest in the equity of our company. This has been a very powerful way to increase the strength of our relationships with our customers to build fantastic brand loyalty.
We have a strong and loyal customer base who love our product which has contributed to us holding a 5-star Trustpilot rating, which is pretty rare in our sector. We wanted the opportunity to enable them to become shareholders in CapitalRise and ultimately benefit from the success of the business that they are helping to build through their loyal custom. It was very humbling to see how many of them invested heavily in our campaigns and have continued to be solid advocates of the business.
Thirdly, as a crowdfunding platform ourselves it seemed a natural and an obvious choice for us to utilise crowdfunding as a mechanism to raise equity for the business.
Why did you choose Seedrs? Why did you feel we were the right partner for your business?
As a well-known and well-respected brand in the equity crowdfunding space, Seedrs was a natural choice for us. We had been talking to the Seedrs team on and off for many months, possibly even a year, before launching our first raise and from those early interactions we felt that they were going to be a good partner for us, with a good track record in and a good understanding of our sector.
The team were great and we felt as though we were in very safe hands.
Why did you feel crowdfunding/Seedrs was suitable for your business?
Our core business is a prime property crowdfunding platform so it felt natural to raise equity in the same way.
How did you pitch crowdfunding to your lead investors?
It was very easy to pitch a Seedrs raise to our lead investors because it was something we had considered for a while. The benefits for us were clear and obvious – it didn’t take long for them to agree!
Talk us through what running a campaign was like?
As our core business involves running crowdfunding campaigns to raise money for property development loans, it felt very natural running an equity crowdfunding campaign. On both occasions, the raises we undertook were managed quite smoothly alongside our day-to-day business. The basic steps are the same and we are well set to handle the processes involved. We are very used to handling large volumes of investor queries and trying to provide them with high quality responses in a very timely manner. We also gained great PR coverage that increased our business profile which is very helpful for a fast-growing business.
What were some of the aspects of crowdfunding you weren’t aware of that turned out to be essential for a successful round?
In our experience there are 2 key areas to focus on when running a Seedrs campaign.
Firstly, it is important to dedicate sufficient time to producing high quality material to aid your raise. Preparation is key but often it takes longer than expected. Allow for long lead times and give yourself time to be creative! Allow time to iterate and improve your materials and allow sufficient time for all the internal and external approvals you will need to get sign off. We created a video to accompany our pitch deck that explained who we were and what we were raising for. This was very well received but can be quite time consuming to produce.
Secondly be prepared for the number of questions you will receive, and how you will manage them. During our raises we had lots of questions and it is important to respond quickly. Be prepared to free up time to run a 24/7 operation while the campaign is live. Investors are likely to review campaigns out of work hours, so ensure you are contactable in the evenings and at the weekends. We were lucky as both our campaigns hit our fundraising target within hours, so our campaigns weren’t live for very long, so whilst it was very intense at the peak it didn’t last very long.
What were some of the highlights of your campaign?
When we look back, we are very proud of the how quickly our raises were funded. For both raises, we reached our target within a matter of hours, smashed through our fundraising targets and raised over £1m in hours of going live. We were overfunding very early on in our campaigns and were wowed with demand.
What investor feedback did you receive, and how has it helped you navigate your crowdfunding campaign and growth?
Following on from our two raises we had really positive feedback from our platform investors. It was heart-warming to see how many of our customers invested in our business. Many investors in our first round invested again in our second. We are delighted that in total, over 1100 individuals invested in our Seedrs fundraises.
How would you describe your overall experience working with Seedrs?
Overall, the experience we have had with Seedrs has been a pleasure and we would absolutely do it again! We found that once you have done one raise and understand the process your next campaign will be even smoother. Preparation is the most time-consuming part of the process, but it is worth the investment.
What have the proceeds from crowdfunding/your Seedrs round helped you achieve so far, and what plans do you have in the pipeline for the upcoming months?
Both Seedrs fundraises provided us with more funding than we expected to support our growth and expansion. Before our first raise, we had lent £25 million and had repaid nearly £5 million in capital and returns to investors. Now, two years and two raises later, we have lent over £103 million and have repaid over £54 million to investors.
The reason we chose to do a second raise earlier than we needed to was because we saw a surge in demand for our product during the pandemic. Property finance lenders were withdrawing from the market which opened up an opportunity for us to accelerate our growth and capitalise on the increased demand we were seeing. Much of the funding was allocated to technology development to improve scalability and recruitment to help grow the team more rapidly. This enabled us to grow our live loan book by 196% in 2020.
Despite 2020 being a challenging year for businesses globally, we grew at rapid pace and successfully acquired a significant amount of new investors. Between March 2020 and March 2021, revenue increased by 132% and our overall gross profit was up by 1,500%! To help service this increasing demand, it was essential for us to recruit additional staff. Our raise also contributed towards the recruitment of seven new members of staff (including two senior hires). All were successfully onboarded during the national lockdown in the UK.
Aside from the funds, what have been the long term benefits of your crowdfunding campaign?
Our Seedrs investors have been great advocates of the business by referring others to us. They have also provided fantastic encouragement for us as business. We find it very encouraging to see investors continue to reinvest with us, be it in subsequent Seedrs rounds or investing in the investment opportunities in prime London and the prime Home Counties on our platform.
In return we believe it is very important to provide our investors with regular updates. One effective way we do this is by providing quarterly reports to keep investors up to date on recent progress and achievements.
To find out more about CapitalRise, visit their business page.