Invest Online In Startups Via Equity Crowdfunding

Are you looking for the best startups in which to invest and want to screen as many projects in Europe as possible? The crowdfunding model might be a good opportunity for you as an individual or business angel. We asked Tom Davies, CIO at Seedrs, a European crowdfunding platform, to explain how this model works and the best practices, as well as give us examples of success-stories and tell us about the recent opening of a Benelux office and the nomination of a dedicated business development manager for Luxembourg.

(Image Credit: Alex Wong)
What is Seedrs and the purpose of the platform?

Seedrs is a leading European equity crowdfunding platform and was the first regulated and authorized platform of its kind in the world at launch in July 2012. We operate out of the UK under the FCA, but have recently launched a representative office covering Benelux and will soon be launching stateside out of New York under the JOBS Act Title II for accredited investors. Seedrs allows all types of investors across 48 countries to invest as little or as much as they like (from £10) in businesses they believe in and share in their future success. And it allows ambitious businesses in all sectors to raise capital and build community through an efficient, online process.

How much funding can a startup raise on your platform? Any examples?

Startups and growth-focused businesses can raise anywhere from 50,000 to 5 million euros. Seedrs has funded more than 380 deals since it launched and over £150 million has been invested in campaigns on the platform. Prior to launching the new office, Seedrs had already funded one Belgian company, Maily, which is an email platform for young children that is also backed by prominent venture capital firms Seedcamp and Faber Ventures. We are really excited about working with entrepreneurs in Luxembourg, Amsterdam and others in Belgium in the coming months.

Success Stories:

  1. Maily – In May 2014, Maily became the first business to receive venture capital investment alongside crowd investment, raising a total of almost £300,000 on Seedrs.
  2. Adludio – In July 2014, Seedrs launched the world’s first convertible equity crowdfunding campaign, featuring Adludio (then known as Future Ad Labs).
  3. Chapel Down– In September 2014, Seedrs launched the world’s first equity crowdfunding campaign for a publicly traded company—Chapel Down.
  4. Venrex – In September 2015, Venrex was the first Venture Capital fund to be raised on a crowdfunding platform, raising £1.5m
  5. Tandem – In June 2016, Tandem, an innovative challenger bank recently raised more than £2 million on Seedrs, a million of which was funded in less than one minute.
Some of the key deals that have been funded in the last 12 months include: Landbay at £2.6m, Coinsilium at £1.1m, Curious Brew at £1.7m, Tossed at £1.2m, FreeAgent at £1m, Assetz Capital at £3.2m, Pod Point at £1.4m, Seedrs at £2.58m

Since its launch, Seedrs has trebled its turnover between 2013-14, and again in 2014-2015.

Seedrs was recently named the most active investor in private companies in the UK in a report from independent research firm Beauhurst. The report, The Deal 2015/16, also showed that the platform has over 52 percent market share within the UK equity crowdfunding space.

Why did you decide to open a Benelux office?

Seedrs has long accepted investors and entrepreneurs from across Europe, and it has an office in Lisbon for software development. But in launching its Amsterdam representative office covering Benelux, Seedrs is putting a commercial team on the ground outside the UK for the first time and it was, quite simply, the right time to do so.

It has been in the pipeline for some time; back in October 2015 we announced a partnership with leading Benelux bank ING and in July this year Seedrs was granted an EU-wide Financial Services Passport by the UK Financial Conduct Authority which allows Seedrs to provide services anywhere in the European Union.

We have always had a pan-European vision for Seedrs, and the launch of our Benelux office brings that vision one step closer to reality.

What do you expect for the Luxembourg market?

We have been very impressed by what we have seen of the early-stage ecosystem in the Benelux more widely and we made our first step into the region last year when we partnered there with ING. Now we are looking forward to Seedrs becoming a key player in providing finance to startup and growth companies across the three countries, and Luxembourg is undoubtedly one of Europe’s leading fintech hubs. You only need look at the number of future unicorns like Mangopay, Cashcloud and Wikio Group that are all based out of Luxembourg, never mind the reality that all of the big players including Amazon, AOL, Skype have European HQ’s there for a reason. It is a no brainer for Seedrs to want to be part of the revolution. Luxembourg is focusing on innovation, at all levels: from the scientific research, modernized universities, and indeed a fast growing startup community. We are hopeful that Seedrs will work with some innovative biotech, drone, robotics and IoT entrepreneurs.

Thierry Zois, who will be based out of the new office, is a Luxembourg local and is really excited to be focusing on uncovering inspiring entrepreneurs in his hometown. The launch of the Benelux representative office marks the beginning of on-the-ground expansion in Europe, and Seedrs intends to open further offices in the near future.

How to succeed in a crowdfunding campaign (on your platform)?

There are a few questions a company should ask itself before launching an equity crowdfunding campaign. The first is: Do you have sufficient time to dedicate to your campaign? Equity crowdfunding is not a walk in the park. It takes a lot of time and effort prior to, during and post raising capital, so just pitching on a platform like Seedrs doesn’t mean you will be successful in raising capital. You are putting your business out there very publicly, so being sure you are confident in your target is key and heading into the campaign with a support network of your own is critical. Are you willing to give up equity in exchange for capital? This is how equity crowdfunding works. Make sure you fully understand the difference between equity, rewards and debt-based crowdfunding before launching a campaign. Make sure you select your equity crowdfunding platform carefully. Not all platforms are created equal and there are structural differences between each one.

4 Seedrs’ assets

  1. At Seedrs we use a nominee structure to manage the large group of small investors while still allowing them to have the same rights a larger investor would (e.g. voting, information and pre-emption rights).
  2. For entrepreneurs it means only one legal shareholder (Seedrs) appears on their cap table, even if hundreds or thousands have invested in their campaign.
  3. Some platforms get around this by offering small investors a sub-class of shares without voting and pre-emption rights. In addition to this being bad for investors, it can cause difficulties for entrepreneurs if they exit the business.
  4. Seedrs also holds investors money, which means that entrepreneurs can access working capital very quickly after they reach their funding target without having to chase hundreds of individuals.

Once you have chosen your platform and dedicated a great deal of team time to managing all elements of the campaign pre, during and post launch, it’s crucial to draft a refined and inspiring pitch about your concept or business, with an engaging video to sit alongside. These need to be submitted for approval by Seedrs investment team who carry out in-depth due diligence ensuring all claims are fair, clear and not misleading. You also need to ensure that you are supporting your campaign launch with digital marketing and PR activity targeted at existing networks as well as new ones. Finally, once the campaign is live, you need to be on hand to answer any questions from investors in a timely manner. These are the core ingredients to the path to success.

This article was first published in SILICON

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