If you’re an entrepreneur, you’ve most probably heard of Seedrs. As the leading equity crowdfunding platform and the most active funder of private companies in the UK, Seedrs is also big news across the whole of Europe, with many a European startup boosting their funds through the platform.
Equity crowdfunding is indeed a more democratic way for startups to raise funding, eliminating the need for founders to make the (sometimes) restrictive agreements that can arise from agreements with more traditionally-minded venture capital firms. Moreover, equity crowdfunding can be especially effective if your product or service is one that could appeal to the masses, helping to build a community of loyal fans before you have even launched.
However, since the coronavirus pandemic hit, founders across the whole of Europe have been doubting whether this is the right time to launch a campaign, and how to manage the new circumstances. Luckily, we caught up with the Executive Chairman and co-founder of Seedrs, Jeff Lynn, to talk about the beginnings of Seedrs, long-term startup investment trends, and tips on setting up a campaign in the ‘new normal’.
Let’s start at the beginning! Could you tell us the story behind Seedrs?
Seedrs was born out of a business school project of all things. My co-founder, Carlos Silva, and I were both at Oxford doing our MBAs, and we both had a strong interest in the world of entrepreneurship and startups. Part of the MBA course involved getting together in teams to create a business plan for a hypothetical business, and Carlos approached me with an idea he had been thinking about. He had seen some of the early innovations in peer-to-peer lending (this was 2008/2009), and he was interested in whether it would possible to apply the same sort of online marketplace dynamics to investing the equity of startups. I thought it was a fascinating idea, and while I had no clue whether it would work, it seemed like a great thing to work on as part of the MBA course. So we got a team together and set to work.
As we built out the project, I was starting to see just what a powerful idea this was, and I thought that if properly executed it could become something very big. There was clearly a huge amount of unmet demand for early-stage capital from the emerging generation of entrepreneurs, but what we were also coming to understand was just how much untapped supply of capital there was sitting with investors who would want (but couldn’t get) access to startups as an asset class. Our platform idea seemed the perfect way to match that demand and supply.
I got the sense that Carlos was thinking the same thing, so one day we went to lunch and sort of looked at each other and said “so, should we give it a try?” And that was that. We decided not to look for “proper” jobs and instead see if we could make a go of Seedrs. Neither of us had any idea of the slog in front of us: it would be over three years after that lunch until we received regulatory approval—this was back before financial regulators understood and embraced fintech—and it was a tough path both navigating the regulatory process and raising money for a business that seemed perpetually pre-launch. But eventually we got there, and on 6 July 2012 we opened to investors with 18 businesses seeking capital on the platform. The rest, as they say, is history.
Do you have any stats about how many Seedrs campaigns are run and closed on the platform each year, and how this has changed over the years?
To date, Seedrs has funded over 1,100 deals and seen over nearly £1 billion (around €1.1 billion) invested on the platform. Our yearly campaign stats from 2017-2019 stats are listed below:
- 2017 stats: 168 deals funded and over £125 million (around €137.3 million) was invested into campaigns on Seedrs. Investors from 58 different countries made 46,700+ investments
- 2018 stats: 186 deals funded and over £195 million (around €214.3 million) was invested into campaigns on Seedrs. Investors from 60 different countries made 72,500+ investments
- 2019 stats: 250 deals funded and over £283 million (around €311 million) was invested into campaigns on Seedrs. Investors from 78 different countries made 93,700+ investments.
What big trends/changes have you seen over the last 8 years?
The most significant change we’ve seen has been the increasing popularity of Seedrs with later-stage businesses. When Carlos and I were first thinking through the concept, we thought this was fundamentally a seed-stage opportunity (hence the business name we chose!). It’s not that we felt that everything was fine and dandy in the venture capital world, but we did think that once a business got to the size where it could attract meaningful institutional capital, there was less room for a marketplace like ours to play. To our surprise and delight, that didn’t prove true, and once we had built up a bit of a reputation for doing seed deals, we found more and more late-stage businesses coming to us—either because they preferred what we offered to what institutions offered or, more frequently, because they wanted to raise through us (and get the benefits of a wide investor base and high profile) alongside other forms of capital.
The other big change—and one that we certainly did think about and hope would happen—has been the increasing normalisation of our type of platform within the startup equity space. When we first launched, raising a round through us was, not surprisingly, seen as an outlier thing for a business to do. Over time, as more and more businesses saw the advantages of it, we started seeing entrepreneurs who built into their plans from day one the idea of raising some of their money through Seedrs. We’re now the most active investor in private companies in the UK—and doing increasing numbers of deals in Europe as well—and I think that’s a reflection of how “normal” it is now seen to be to raise capital through us.
What have been your biggest Seedrs success stories?
Our most well-known success story is probably Revolut, which raised £3.8 million (around €4.1 million) from 4,300 investors through us in 2017. Other notable fintech successes include FreeAgent and Transfergo. FreeAgent raised £1.21 million (around €1.3 million) from over 700 investors and IPO’d in Dec 2016 on AIM, becoming the first equity crowdfunded business to list on the public markets. It then went on to be acquired by RBS. Transfergo’s €11,297,362 raise is our largest overall round to date and saw five institutions participate alongside individual investors.
One of our quickest ever rounds was Urban (formerly Urban Massage), the on-demand and at home wellness app, who went from launching the campaign to receiving funds in the bank in under one month. They raised £3.5 million (around €3.8 million) from over 800 investors in August 2018. Leading employee perks company Perkbox also raised £4.3 million (around €4.7 million) on Seedrs in just two weeks in 2016.
Our most recent success stories have included AFC Wimbledon and allplants. AFC Wimbledon raised £2.4 million (around €2.6 million) from over 5,000 investors in one of the UK’s largest public funding rounds for a football club, and allplants raised £3.4 million (around €3.9 million) from 1,800 investors, becoming the UK’s largest ever vegan crowdfunding round.
Since coronavirus hit, many VC deals have slowed down or fallen through. Have you noticed a rise or a fall in campaigns as a result? What’s the feeling?
When the enormity of COVID-19 hit in mid-March, we saw an initial decrease in the number of entrepreneurs going forward with their campaigns, and in turn investment levels went down a good bit for a few weeks. But as everyone started settling into the new temporary reality, we quickly saw a sharp uptick back to normal levels, and by all measures we are significantly ahead of where we were this time last year.
That’s not to say there is no impact: the distribution of campaigns is shifting somewhat, as those businesses that are in sectors that are less affected by (or that even may benefit from) the crisis are the ones most likely to go forward and attract investment, while activity is quieter in sectors most negatively affected by the crisis. But on balance, we’re seeing strong funding and investment levels and are optimistic that it stays that way.
What medium-term changes do you foresee the pandemic having on the way funds are raised by startups in Europe, in the ‘new normal’?
One of the most notable outcomes of the pandemic, across the business world, is the increasing comfort with operating and transacting online. Whether it be Zoom calls instead of meetings or Amazon instead of the shops, the digitisation trend—which has already moved at phenomenal pace over the last 25 years—has clearly accelerated in 2020. And fundraising and investing is no exception: if anything, investing in startups and other private companies had been behind the times, with many people still doing deals in the offline, old-fashioned way, but I think what we’re seeing now, and will see much more in the future, is increasing levels of comfort making investments, seeking capital, interacting with portfolios and investors all through online platforms and channels.
Do you see any long-term changes or shifts on the horizon in the next 5 years?
I think the key long-term change will be internationalisation of startup investment. So far platforms like Seedrs have focused largely on domestic markets: regulatory fragmentation has made meaningful cross-border operation very challenging, and while Seedrs has nonetheless had a good deal of success with European campaigns, we’ve been limited in the extent to which we can really expand our business abroad. All that is about to change, with new regulations coming into force in the EU and US that will make cross-border fundraising and investing far easier. So five years from now, I think platforms like ours will be seeing significantly more business from outside our home markets than we do at home.
What advice would you give to startups thinking of setting up a campaign during the ‘new normal’?
The most important thing is to ensure that you have adjusted the focus of your business as needed to address changes in market demands. Investors are going to want to understand how you can provide your product or service to consumers who are likely to have different needs than before the pandemic, and how well you react to their behavioural changes. For example, moving forward, consumers may be more cost-conscious for a period, and they will almost certainly value businesses that enhance a sense of wellbeing and community and reduce anxiety. How can your business work to address those needs?
The other big piece of advice is to make use of the support that is available. We’re in an unprecedented period of business support from governments, and unlike the slow and bureaucratic processes that tend to beguile government support efforts in normal times, many of these are working quickly and efficiently. So make sure you are aware of what is out there and leverage it alongside the equity you raise.
We’ve recently launched a dedicated section on the Seedrs Academy to provide support to entrepreneurs in this period of change. This can offer clear advice on a range of topics including how to market your campaign, virtual pitching advice and the top things to consider when crowdfunding.
What’s on the cards for Seedrs for the rest of 2020 and 2021? Any exciting projects we should look forward to?
Lots! There is only so much we can say publicly, but look out for significant expansion of the Seedrs Secondary Market, integrations with some exciting partners, and new investment products to sit alongside our individual campaigns.
