When investing, your capital is at risk.
Seedrs has helped hundreds of campaigns successfully fund on the platform, each powered by individual investors on the lookout for new growth opportunities. Our mission is rooted in finding ways of connecting these investors to the ambitious entrepreneurs building the businesses of the future. So we thought, why not introduce them to our most active investors as well?
We sat down with James Murdoch, Angel Investor and shareholder in over 400 Seedrs-funded businesses, to get his opinion on everyday private equity investing, and how to identify the companies best engineered for long-term success.
How did you first become interested in private equity investing and what drew you to Seedrs as an option to do so?
Several years ago now, I came across a press report on a potential investment that piqued my interest. As it turns out, the opportunity was through Seedrs, and that was really the gateway into this whole experience.
What was one of the first investments you made on the platform?
Back in 2013, Seedrs carried out a successful funding round for Happy Days, a new musical production at the time, which was based on the hit TV show, Garry Marshall. Garry is a pretty legendary Hollywood director, with films such as Pretty Woman, Beaches, and The Princess Diaries under his belt, so I was drawn to the opportunity. I thought, how fun would it be to sponsor a theatre production?
This was before the idea of investing more seriously and consistently came onto my radar, but from that point onwards I’ve always had an eye on the Seedrs site as new startups, disrupting different sectors, open up for investment.
How has your previous professional experience prepared you to build a successful investment portfolio in this asset class?
Throughout my career I’ve built extensive knowledge of the end-to-end processes involved in running a business entity, which to this day helps me identify the key determinants of a successful business at every phase of its lifecycle. That, paired with an appreciation that there are always risks involved and an understanding of traded markets have been very valuable in building my Seedrs portfolio over the years.
What are some of the key factors or metrics you look for when investing in private businesses on Seedrs?
You’ve likely heard it before, but that’s because it’s true; the best strategy, which I always adhere to, is diversification. In other words, invest small amounts across many opportunities, so as to avoid putting too many eggs into one basket. With that in the back of my mind, there are three key things I look for in each investment opportunity before making a decision. First, I make sure the valuation is sensible and appropriate in relation to the stage of the business. Second, I make sure it’s a viable and innovative idea and third, I always keep an eye out for a realistic percentage equity offering.
What have been some of the highlights of your Seedrs portfolio?
There are a number of investments I look back on fondly, not only because they’re doing well, but because they’re contributing to the wider development of the industries in which they operate.
The Cheeky Panda for example, the tissue product brand (which is currently raising another round on Seedrs) is both performing well and contributing to the greater good, by using sustainable material. Aduna, the superfood brand, is encouraging the use of less well-known African crops to bring previously localized, health-forward products to mass market. Chapel Down and Curious Brew are both beverage businesses I’ve invested in, and whose products I regularly enjoy in my own home to this day – and Love Cocoa keeps us all supplied with chocolate!
As evident from the above, I do often consider business models underpinned by sustainability when choosing my investments, however I do so as part of a broad portfolio. Seedrs has also introduced me to countless company offerings in the peer-to-peer and property fields, including Landbay, Assetz Capital, WiseAlpha, CrowdLords and Brickowner, allowing me to continuously experiment with alternative investments.
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?
The Secondary Market has enabled me to manage my investments as a portfolio, and take some profit after the HMRC tax relief holding period. The specific tools in place to help investors manage tax claims have also been valuable. They allow me to recoup SEIS/EIS and loss reliefs against income tax simply and quickly, which has been beneficial in managing a large portfolio.
What businesses recently live on the platform do you find the most interesting and why?
The Sustainable Accelerator fund, whose funding round closed quite recently, appears to be both profitable and friendly to global sustainability goals. It will be very interesting to follow this opportunity, to see if an Accelerator such as this can effectively improve the rate of success over statistical business outcome probabilities.
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?
So far, I have continued at the minimum to always exercise my pre-emption rights, so as to prevent share dilution, and I’m continuing to make some new, smaller investments. The current crisis has undoubtedly been hard on many – but there are companies out there right now that are actively seeking new opportunities, and others that are preparing to take advantage of the eventual recovery.
Like many investors, I am erring on the side of caution when investing at this time, but as always, I want to support the many incredible entrepreneurs who have found the energy to build the right business model right now, and are making plans for a credible future.
What advice would you give to investors who are new to this asset class?
Make sure you only invest what you can afford to lose, don’t put all your eggs into one basket, spread your risk and build up your portfolio over time. You can learn a lot from spending time mulling over investment guides, and seeking advice from fellow investors. Make the most of the tax advantages, ensure you can understand and execute the administration, and have fun.
What keeps you busy when you’re not investing in startups?
Right now, family, friends, food, writing and gardening are keeping me busy (and sane) during lockdown. Having a chat on Zoom with half a dozen friends in a virtual pub seems to do the trick. Once life is back to normal, I’m looking forward to going to church service and live theatre. I’ll be going straight to the opera.
For further investment insight from James Murdoch, including a review of Accelerator /Incubator Funds on Platforms, and an assessment of his portfolio performance, we recommend giving his monthly equity crowdfunding articles in Angel News a read.