Equity crowdfunding done properly
Seedrs is one of the world's leading equity crowdfunding platforms.
We allow investors to invest as little or as much as they like in businesses they believe in and share in their success. We allow ambitious businesses at all stages to raise equity capital and build community. And we do it all through a simple, online process.
This campaign forms part of a £10 million fundraising round led by Woodford Patient Capital Trust and Augmentum Capital. Those two institutions are investing £7.5 million between them, and we are opening the remainder of the round to existing shareholders and new investors.
There are vast numbers of growth-focused businesses who need equity capital to take their first steps, commercialise or scale. The market for this capital is historically opaque, inefficient and clubby. Many potentially great businesses struggle to raise they capital they need, and many of those who do raise capital want more out of the process than just getting a cheque.
Meanwhile, investing in growth businesses appeals to many people for many reasons, including financial returns; a desire to support businesses started by friends, family and community members; and the excitement and enjoyment of it. However, the transaction costs involved in making investments has meant that historically only people with lots of time and lots of money have been been able to invest in this asset class.
This is a classic market failure, and Seedrs solves it by providing a simple, online platform that benefits businesses and investors in five key ways:
1. Money. We give businesses access to capital from a wide range of investors, and we give investors the opportunity to invest however much they like and earn returns on dividend or exit.
2. Support. Businesses can get advice, support and connections from their wide base of investors, while investors can get involved in their investee companies or else be passive and watch them grow from afar.
3. Validation. Businesses get affirmation from lots of investors voting with their wallets; meanwhile, investors get the benefit of the wisdom of the crowds in selecting their investments.
4. Price. For businesses our commission is often less expensive than paying a lawyer just to document the deal, while the carry we charge to investors only on success is significantly less than they would pay to a fund manager.
5. Simplicity. Because we hold and administer the shares of each investee company as nominee, businesses only need to face one legal shareholder, while investors know that a professional firm is enforcing their rights through the lifecycle of the investment.
Substantial accomplishments to date
In the three years since launch, Seedrs has made itself one of the leaders of the equity crowdfunding space globally.
We have grown 15% month-on-month, and we are completing more transactions than any other equity crowdfunding platform in Europe.
We were the first equity crowdfunding platform in the world to:
- Receive regulatory approval
- Host crowdfunded funds
- Crowdfund a publicly traded company
- Open to investors and businesses across Europe
We have earned a number of significant accolades in the process, including:
- Winning London Web Summit startup competition (February 2012)
- Being named one of the top 20 UK startups for 2013 by startups.co.uk (December 2012)
- Being named to the Silicon Valley Comes to the UK 100 Club of businesses with the potential to generate £100 million in annual revenues (November 2013)
- Winning the Great British Startups Cup 2014 (July 2014)
- Being named by KPMG as one of the 50 best fintech innovators globally 2014 (December 2014)
Seedrs earns money through two fees:
1. We charge startups a commission of 7.5% on the funds they raise. This means that if a startup raises £50,000, they get £46,250, and we earn £3,750. We occasionally reduce this commission for large, high-profile deals.
2. We charge investors a carry of 7.5% on any profits they make. This means that if an investor buys shares for £1,000 and sells them for £5,000, we earn 7.5% of the £4,000 profit, being £300.
Use of proceeds
We intend to use the proceeds of this fundraising round to expand significantly our marketing and platform development activities as we deepen our presence in the UK, build on our initial growth in Europe and launch in the United States (planned for later this year).
Seedrs targets two markets, businesses and investors, as follows:
We are focused primarily on seed and early-stage businesses, although increasingly we are working with growth-stage businesses as well. Within this broad category, there are four subsets of firms:
1. Ultra-high-growth businesses, which is the small group of startups seeking to become the "next big thing".
2. Other high-growth businesses, which are the startups that the Global Entrepreneurship Monitor (GEM) defines as seeking to create 20 or more jobs within the next five years (but excluding ultra-high-growth ones).
3. Medium-growth businesses, which GEM defines as aiming for between six and 19 new jobs in the next five years.
4. Low-growth businesses, which are aiming for five or fewer new jobs in the next five years.
Seedrs targets the first three of these categories throughout the UK and Europe. We do not target low-growth businesses, because they are the one category of business that we do not see as equity-fundable.
Our core investor base is made up of two types of self-directed investor:
1. The mass affluent. These are individuals who are broadly in the 80th to 98th percentile of wealth and may include anyone from young professionals to small business owners, middle managers, civil servants, academics and others. These are people who have capital that they can (and want to) invest for growth but generally do not have enough to build a portfolio of traditional angel investments.
2. The cash-rich-but-time-poor. These are people who have the capital to build a portfolio of larger investments, but the reason they have that capital is that they work hard and don't have time to attend nightly pitching events and engage in the lengthy process of making investments off-line.
In addition to this core, we are increasingly attracting investment from advised investors and institutions, and this is an area of the business we intend to continue to grow significantly.
Characteristics of target market
Both sides of our market are vast in scale:
- On the entrepreneur side, we estimate that there are approximately 2 million seed and early-stage growth-focused businesses in the UK and Europe, and a further 1.5 million in the United States.
- On the investor side, we estimate that approximately £2.6 trillion of European retail investors' capital, and approximately £9.2 trillion of U.S. investors' capital, is currently held in shares, bonds and funds. We estimate that up to 5% of this capital could hypothetically be allocated to long-term, high-risk investments like early-stage businesses, making for a capital pool of £590 billion.
Our marketing strategies are evolving, and a key part of our recent recruitment of a CMO, and the planned use of proceeds from this fundraising round, are to build out our marketing efforts significantly.
We have historically been very effective at marketing through PR, events and relationships. Additionally, a large part of our marketing comes from our own users: our businesses bring their networks to Seedrs, and our investors refer their friends, creating a virtuous circle which is a major driver of growth.
Going forward, we plan to combine the successful techniques we have used in the past with increased emphasis on above-the-line techniques, improved used of social and content, and a heavily expanded business development operation.
We will win this market by being the best on two fronts: size and quality.
We are already the largest crowdfunding platform in Europe to focus solely on equity investments, and we believe that, on average, we have more investments being made through us than through any investment-based crowdfunding platform in the world. This, combined with our reach across Europe and, shortly, the United States, makes us a highly appealing platform for businesses seeking a wide investor base and for investors seeking expansive deal flow.
But success in this space is not just about size; it's also about quality. We are the platform that has gained a reputation for equity crowdfunding done properly. We think old-fashioned things like investor protection, fair treatment of customers and compliance with the law matter, and our users reward us for it. Investors who care about returns and businesses who care about growth know that Seedrs is the platform to use.
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