Kirsty Grant, Chief Investment Officer
A key question we have had from many founders and CEOs is if this is a good time to be raising capital?
Over the last few weeks, we have shared a lot of content and resources with our community about the pros and cons of fundraising in this environment. In addition to this, we thought it would be helpful to also provide some insight and data on how investment activity on the Seedrs platform has behaved since the beginning of the Covid-19 crisis.
As you can imagine, we have been watching this closely. The general picture is an encouraging one: after an initial dip, all key metrics have recovered to or are now exceeding our usual averages. Below, we’ve outlined some of the key shifts we’ve seen, and our analysis of it.
We first started to see changes in investment activity on 12 March – when the UK moved from the ‘contain’ to ‘delay’ phase, and when the FTSE100 experienced its ‘second worst day ever’. From 12 March to around 23 March, there was a marked slowdown in activity.
Investment activity on Seedrs has always been heavily influenced by the number of businesses fundraising with us and their popularity. Like any other marketplace, Seedrs is influenced by the most simple of economic principles: supply and demand.
Fewer campaigns on the platform generally means less investment activity. During the 7 days from 12 March, the number of campaigns on the Seedrs platform dropped significantly:
- A number of entrepreneurs that were mid fundraise (but above their initial target) closed their campaigns early, keen to secure the investment and focus back on the business in these challenging times.
- At the same time, many startups that were due to launch their campaigns that week hit the pause button. Understandably, many entrepreneurs wanted to wait and see what the impact would be.
As a result, we had 45% fewer campaigns on the platform during that period in comparison to the 3 weeks prior.
We also saw a slowdown in investment activity during this period:
- Both the number of investments per day and the number of new sign ups to Seedrs per day, were down by about 64%, compared to the 2 weeks prior 12 March.
- The total amount of investment per day was also down about 60% over this period, which was partly driven by the lower campaign count.
- The total amount of investment per campaign was down, but not as significantly as the above metrics. It hovered closer to the 50% mark and was spikier, performing well at the time that certain new campaigns launched.
- Total investment per day and total investment per campaign were down, but did not show such a clear cut impact. These metrics were spikier over the period, with some campaigns still performing well.
From 23 March, we started to see activity returning, and the launch of a number of new campaigns began to stimulate activity again.
This was largely influenced by the success of a number of businesses in particular, with some success stories highlighted below:
Miso Tasty – an ambient food brand raised £384,088 from 384 investors during the peak of lockdown uncertainty.
The Cheeky Panda – a sustainable (and rather topical) business producing toilet paper, tissues and wipes from bamboo. Still live on the platform, but at the time of writing, had received £1,750,248 of investment from 841 investors.
Different Dog – a D2C dog food company raised £1,351,230 from 409 investors, weathering the COVID storm by proving the viability of a D2C business model in a locked-down world.
GeoDB – a big data marketplace that raised £1,518,780 from 1,003 investors throughout the months of March and April.
Since 30 March, we have seen all key metrics return to our usual averages or above – this includes sign ups, number of investments and amount of investment per campaign per day.
The last metric to return to normal levels was total investment through the platform (as distinct from per campaign). We saw the supply side (businesses seeking investment) reduce for a period of time, while founders and CEOs rightly focussed on internal stability over external fundraising. This meant that while investors were actively investing and seeking new opportunities, the opportunities open to them were limited, which in turn lowered the overall platform investment number.
Over the last 7 days, we have seen significant traffic and active investor engagement on the platform. As at the time of writing, total investment through the platform over the last 7 days is more than double the Q2 average for 2019, despite there still being a lighter load of campaigns on the platform than we normally see at this time of year.
Anecdotally, we are hearing of investors who have just received bonuses, looking for tax efficient ways to deploy capital. Everyone is online (and perhaps have more time up their sleeve), so we’re seeing a lot of engagement with our content pieces and educational webinars. We’ve also now moved to digital pitch events – and are getting a stellar turn out and response to these with over 700 investors signed up for our most recent event on Wednesday.
We have a full pipeline of businesses looking to raise funds with us over the coming months. A common misconception about the platform is that more businesses on the platform reduces the investment available to campaigns on an individual basis. Historically, this has proven untrue, as great businesses bring smart investors who recognise a good idea when they see one – the more supply we have on the campaign side of the market will always translate into more investment available to all businesses seeking funding.
So, back to the question posed at the beginning of this article: is this a good time to be raising capital?
To summarise, in a word, yes.
The Seedrs platform and its investor community has proven itself to be resilient to some of the macroeconomic uncertainties of previous months. While we are still far from the finish line of the COVID-19 pandemic and potential further economic uncertainty, we are seeing promising signs within both the startup ecosystem and investor communities.
Game changing ideas and innovative businesses will always receive investment. And now, more than ever, investors are proving to be altruistic and determined to make a positive impact.
The Seedrs team are working tirelessly to ensure that all businesses that raise with us are best placed to hit their funding target. If you are considering raising funds, or would like to speak to a member of the team, please feel free to get in touch.