When investing, your capital is at risk.
We’re constantly working to adapt the Seedrs platform to meet the diverse needs of investors across the globe, so they’re able to pick the companies they want in their portfolios with confidence. When investing in private companies, seasoned investors do a lot of their own research and analysis to determine which opportunities are right for them.
Over the last few weeks, we’ve been connecting with some of our most active investors to find out how they make decisions, and why they chose Seedrs to build their portfolios in the private equity space. We sat down with Simon Weishar, member since 2017 and shareholder in dozens of Seedrs-funded companies, to find out how he applies his knowledge of the public markets, and a passion for investing to building his Seedrs portfolio.
How did you first become interested in private equity investing and what drew you to Seedrs as an option to do so?
I first started investing in private companies through a number of German platforms. The first investment I ever made was into a campaign that a friend of mine had launched. After that, I started taking a lot more interest in private equity investment, browsing different platforms that offered different opportunities. Naturally I came across Seedrs as an option to get access to a broad spectrum of campaigns in all sorts of sectors.
I noticed that Seedrs posed several advantages over other platforms – the business model really catered to the needs of investors and protected their rights in the process, which was something that I quickly realized was a huge benefit in managing these kinds of investments in the long term. Since then, I’ve only invested through Seedrs.
What was one of the first investments you made on the platform?
The first investment I ever made was in Football Index a few years ago. This was the world’s first football stock market of its kind, where you could trade virtual shares in top players. It was a novelty at the time, and as an avid football fan it piqued my interest. It was an inherently scalable product with potentially very high margins that had a market-first advantage. The team was diverse and experienced, covering a breadth of industry expertise, and by nature, the business had a strong proposition in which customers could become fans and vice versa.
That was the first move for me. Since then I’ve gone on to make approximately 100 investments on Seedrs, and continue to exercise my preemption rights when given the chance.
How has your previous professional experience prepared you to build a successful investment portfolio in this asset class?
I work in digital marketing by trade, but before I started investing in startups, I had always taken a particular interest in the stock market. Over time I learned to analyse and evaluate various companies’ propositions and business models, which helped me understand how companies develop throughout their lifecycles.
Investing in public markets is more of a short-term play. However, in analysing publicly listed companies, you can get a feel for the growth trajectory that a private business will undergo before they go on to IPO or get acquired by another company. By investing in public companies, you can get a better idea of the criteria that growing businesses – even some of the biggest businesses in the world – are meeting that serve to accelerate their growth. Regardless of the stage a business is at, whether it’s a startup, scaleup or pre-IPO, the fundamentals that define whether it’s equipped for success are all the same. A lot of what I’ve learned over the years I attribute to investing in public markets.
What are some of the key factors or metrics you look for when investing in private businesses on Seedrs?
As with any investment, there is always a toss-up between risk and reward. With that in mind, the risk an investor takes on is always higher when investing in private companies. That’s why it’s crucial to ask all the important questions right from the get go, the answers to which will help you evaluate whether potential return will offset that risk.
Firstly, take a look at the company valuation. How valuable could the company be in comparison to its actual valuation if it succeeds? And how likely is a success? On any platform, Seedrs included, you’ll come across a number of businesses disrupting different industries. Over time, you’ll become more and more familiar with company valuations, and how to assess whether they’re appropriate, and an indicator for future returns.
Secondly, it’s always important to dial it back and think about a company’s core product offering. Is there a need for this product? What does the business’ industry traction and revenue look like? How does the business sit within the wider competitive landscape – do they have the best product? Thinking through the eyes of a user can help you determine whether a company’s proposition is truly disruptive, and whether the gap in the market it’s filling is significant enough to drive meaningful growth.
Lastly, a lot of a business’ success is derived from it’s team. A company may have the best idea in the world, but without the right passion, experience and incentive working behind the scenes to bring it to market, a good idea won’t cut it. Take a look at the core members of a company’s team – are they incentivised through options? Is their industry experience fit to foster growth and innovation? Those factors may very well differentiate the businesses that succeed from the ones that don’t.
What has been one of the highlights of your Seedrs portfolio? This can be an investment that has performed well, or a business with a mission you find of particular interest.
At the moment I’m really enjoying following the success of Plum. Starting simply as a savings-bot through the Facebook messenger, Plum has evolved over time into a fully fledged financial assistant, designed for the modern, savvy consumer. It now has a new iOS and Android App and offers a lot more than just saving. Plum users can now invest in companies that share their values, and actively compare prices on their service providers, allowing them to save on all the little things that make a difference in the long run.
In their first crowdfunding round there were a couple aspects I had to mull over. There were already a few competitors in the space with similar offers, so how would Plum stand out among them… and make money? Plum had already thought of this.They released a feature allowing users to invest their savings directly through the app, change their service suppliers and get cashbacks when they spent on certain e-commerce sites such as Asos. As such, there are now a number of different offers that as a whole, provide customers with a valuable product, while simultaneously creating revenue streams for Plum.
In my opinion, they now have the best quality product compared to competing saving apps and the fastest, most seamless user interface I’ve come across. All these factors give investors such as myself confidence that they could be one of the winners in this market. Thanks to the Seedrs Secondary Market, I’m able to increase my position over time, and continue growing alongside them.
As a seasoned Seedrs investor, you’ve witnessed a number of changes to the platform roll out over the years. Which have been the most valuable to you and why?
Without question, the Secondary Market, this really was a game changer in the industry. Until now, investing in private companies had a lot of hurdles to it for the average investor. Unlike public market investing, private equity was traditionally more of a long-game for investors, who had to wait for some kind of liquidity event before realising any returns. Seedrs’ Secondary Market creates liquidity in historically illiquid market.
What businesses recently live on the platform do you find the most interesting and why?
One of my favorites, which just closed its most recent crowdfunding round is Luggagehero, the luggage storage service that allows people to store their things conveniently while they travel, by connecting them with local businesses. I invested in LuggageHero’s very first round on Seedrs. I thought the idea was great and the team was even better. Even through difficult times for the travel industry such as those we’re facing today, the LuggageHero team always stays positive and finds a solution.
Is sustainability something you think about when building your portfolio?
Sustainability isn’t my main focus, but if a startup is fulfilling real, substantial demand for a product that has a sustainability factor, then it’s something I’ll definitely consider. Take The Cheeky Panda for example. There has been increasing demand among consumers for sustainable tissue products, and The Cheeky Panda is bringing a high quality product to market that meets that demand, supported by a well-engineered business model. In this case, sustainability is a core part of the proposition, and has been one of the drivers of success for the company. It’s more important to think about the sustainability angle is helping the business catering to demand and deliver something important, rather than just a hot topic on its own.
Certain investors may be hesitant to invest in this asset class during difficult times such as the Covid-19 crisis. How has the current economic climate impacted your investment decisions right now, and going forward?
The crisis hasn’t changed my investment patterns very much. However, these unprecedented economic changes have brought to light certain vulnerabilities in companies’ business models – in every industry. While I’m still investing with the same vigour as before, I’m definitely paying closer attention to how this situation has impacted specific startups. Those with the most defensible business models, that have managed to adapt their offering to navigate unfavourable public policy measures, are the ones best fit to withstand volatility. Things will of course go back to normal eventually, but all the companies that are coming up with innovative strategies to get through difficult times will likely be the best suited to grow the most when times are good.
What advice would you give to investors new to this asset class?
To keep it brief, only invest what you can afford to lose, and don’t pull all your money into one startup.
What keeps you busy when you’re not investing in startups?
Investing has always been my passion, I spend a few hours a day analysing company fundamentals, reading updates and following growth. When I’m not doing that, I’m usually playing sports. Especially during lockdown, getting a daily workout in has been a godsend to stay sane and focused.
What’s the best life hack you’ve found to survive lockdown?
Take a walk or run every day to get some fresh air, and facetime with the people you can’t meet in person. Sometimes the most unlikely circumstances can help you reconnect with people. We’re all in the same boat!