2016 was a record breaking year for Seedrs with over 134 deals funded and over £85 million invested into campaigns. We were also named the most active investors into private companies in the UK, according to Beauhurst.
Industry wide, equity crowdfunding has entered a real coming of age period in the UK, outperforming private equity investment in high growth companies. And the number of co-investments between the crowd and VC firms are on the up.
2016 also saw deals get a lot larger with raise sizes increasing each quarter across the year. Companies like Veeqo (who originally raised a seed round of £30,000 in 2013) returned to the platform to raise series-A size rounds and contributes to the £780,000 average raise size that rounded off Q4.
With all of this in mind, what do we think is in store for 2017?
Rise of co-invested deals
We expect to see the continued rise in co-investments. We’ve already built a sizeable list of co-investment partners (who frequently invest on the same terms of the crowd) featuring Draper Esprit, Unilever Ventures, Ascot Capital and Zoopla, among others.
Prominent venture capitalists such as Simon Cook, CEO at Draper Esprit, have also expressed sincere belief in the relationship equity crowdfunding platforms and more traditional investors will continue to build: “We are strong believers that VCs, angels and the crowd can work together to provide the right long-term patient capital for the best entrepreneurs. Together we can empower teams to build global companies that last, and for that benefit to be enjoyed more widely.”
Size of raises will increase on average but SEIS and EIS will still be huge deal-makers for smaller rounds
We’ll still see a continued rise in the size of deals, especially with more co-investment partners coming in, but SEIS and EIS will still be massive investment draws.
Our 2016 Portfolio Update shows that a hypothetical portfolio of investments made in smaller deals could significantly outperform one that invested in all medium or large deals, especially on a tax-adjusted basis where smaller deals qualify for the generous SEIS and EIS tax reliefs. We expect SEIS and EIS to be sticking around, especially with the Government striving to maintain interest in British businesses post-Brexit.
Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. Seedrs does not provide legal, financial or tax advice of any kind, and nothing in this blog constitutes such advice. If you have any questions with respect to legal, financial or tax matters relevant to your interactions with Seedrs or its affiliates, you should consult a professional adviser.
Investors will continue to diversify
Investors will still look to maintain diverse portfolios. Our Portfolio Update shows that investors who have portfolios containing more than 10 investments don’t just stick to any one industry. We expect this to continue as investors build educated portfolios to minimise risk and maxmise potential return.
2017 will see the rise EdTech, MedTech and A.I.
2016 was huge for on-demand businesses globally with Uber and Deliveroo leading the charge. We expect to see the continued growth of the on-demand industry but mainly through already established businesses as the space starts to get a bit crowded. On-demand businesses have generally been great for equity crowdfunding with companies such as Blow LTD and Milk Beauty being a hit with investors, as they’re easy to understand which lends well to crowdfunding. ‘Physical’ businesses such as restaurants have also been popular in the equity crowdfunding space during 2016 as they have strong, established customer bases to tap into to bolster their efforts.
In 2017 we expect to see more from Education Technology and Medical Technology leveraging the power of equity crowdfunding as these industries get further opened up to disruption from the earlier players. We also expect to see a boost in Artificial Intelligence companies looking for funding as the technology required to get a business in this space off the ground gets cheaper and more accessible with real-world, consumer-facing applications becoming more feasible.