Why equity crowdfunding a listed company is kind of a big deal

Public Company Crowdfunding

Equity crowdfunding is evolving quickly. Naturally, equity crowdfunding fills the funding gap that exists for many early-stage businesses that are too risky for banks, too early for angels and too small for venture capitalists. But now, later-stage companies are catching on to the power of professionally managed crowdfunding platforms (like Seedrs). What we are starting to realise is that equity crowdfunding works really well for certain types of business, regardless of what stage they are at.

This month, publicly-listed, award winning English winemaker and craft brewer Chapel Down (listed on ISDX) launched a £1.6M crowdfunding campaign on Seedrs. In less than three weeks, they overfunded to almost £4M, from around 1,400 investors – which makes this the largest equity crowdfunding campaign ever. This was the first time a public company – anywhere in the world – campaigned for investment via equity crowdfunding. This is an excitingly innovative approach to raising growth capital, especially when most companies at their stage, with their positive financial traction, traditionally reach out to institutions and large individual investors in The City. This is part of the continuing evolution in crowdfunding.

So, why does campaigning on Seedrs make so much sense for larger, listed companies?:

Companies need investment to grow
Regardless of stage, businesses often need capital investment for growth. Publicly listed companies are no different and look to raise money from institutions and retail investors alike. But when they do this the company is not actually raising money through the exchange. Instead, the brokers and placers are the distribution channels through which the institutional and retail investors are accessed. Seedrs, in the case of Chapel Down, is a new type of distribution channel through which Chapel Down as a publicly listed company can access retail investors who might not otherwise have been able to be reached.

Raising investment takes time
When raising investment traditionally through brokers, it can be immensely time consuming and inefficient. Roadshows, sales calls, meetings, emails – it can be draining on the resources of a company. Seedrs provides a very quick, efficient and online process for the publicly listed company to reach out to these investors, and for these investors to quickly and easily subscribe for publicly listed shares.

It’s more than just funding
Inviting customers to invest in your business is a great way to build long-term brand engagement and resonance among people who are already bought in on a transactional level. By inviting them the chance to invest and be a part of your future, you’re inviting them to have a deeper, longer-term relationship with your business. Because these customer-investors will be literally bought into the business, they’ll have a vested interest in helping with user research and feedback, buy your brand instead of competitors, becoming brand evangelists, and keeping in touch.

Combine online and offline investors
Quoted companies likely have previous investors who will have pre-emption rights and may want to follow on their investment. Or, they could have interest among outside institutions. Bringing these offline investors online (through a placing or new share offer), along with a crowd of customers and potential customers, is dramatically more efficient. All investors, regardless of size, can be offered the same transparent terms and same (ordinary) shares; shareholder documentation is standardised; and the ongoing relationship between the business and its investors is more effectively managed through a post-investment investor relations web portal.

Offer more than investment
Many UK businesses may qualify to offer advantageous tax reliefs to investors, including EIS, that wouldn’t be applicable for shares purchased on an exchange. Investors need to hold shares for a minimum period of time to qualify for the reliefs (three years in the case of EIS), but many investors find the tax reliefs highly appealing for longer-term investments and prefer to have access to investments that qualify. Crowdfunding through a platform also makes it possible to offer investors additional perks like free samples, invitations to AGMs, early-access to future products, tours and more. These additional rewards aren’t easy to manage on an exchange.

Business crowdfunding has evolved from raising equity for startups, to crowdfunded funds, to crowd equity convertibles and now crowdinvesting in publicly-listed companies. Our internal legal team and professional processes mean we can continue to offer new, exciting ways for people to invest in businesses of all stages, sizes and types.

London tech investors talk about Future Ad Labs

The Seedrs team recently had the chance to catch up with a few of the investors in Future Ad Labs. They’re an impressive mix of entrepreneurs, investors and advertising professionals. We asked them to tell us a little more about Future Ad Labs, their early investment into the company and why they’ve participated in the recent equity convertible round on Seedrs.

Richard Fearn

Richard is an early stage investor and mentor at Techstars and Seedcamp. He is one of the founders of the Friday Club, which is a popular event that brings together startups with advertising professionals. He gave us a quick insight into why he invested £50,000 in the most recent Future Ad Labs campaign.

Scott Button

Scott is the founder and CEO of Unruly Media. He talked to us about his experience in digital marketing and advertising and how he sees Future Ad Labs fitting into this landscape.

Russell Buckley

Russell Buckley was the VP Global Alliances of advertising technology startup AdMob, which sold to Google in 2010 for $750m. He is an active angel investor and a partner at Ballpark Ventures. Russell was an early investor in Future Ad Labs and has been a great source of industry knowledge and connections. We caught up with him at White Bear Yard to talk about his views on the Future Ad Labs convertible campaign and the impact of technology on advertising, media and marketing.

Nicola Horlick’s Glentham Capital Returns to Seedrs

In July 2013, famed fund manager Nicola Horlick made history by crowdfunding her new fund management company, Glentham Capital. She came to Seedrs seeking £150,000 of seed capital so that Glentham could begin work raising its first fund. Less than 24 hours after going live, Nicola had raised the full £150,000 from 135 investors.

Nicola Horlick

In the year since then, Glentham has made great progress. Appetite for its anchor film fund has been so strong that it has raised the target from $100 million to $250 million; it has also started to look at raising additional types of funds and becoming a broadly diversified fund manager.

To finance this expansion, Glentham is now raising its growth capital round, and rather than pursue institutional funding, Nicola has again chosen to invite the crowds to be part of her success.

Details of Seedrs round
Glentham’s new campaign is now live on Seedrs. The firm is seeking £450,000 at a £1.8 million pre-money valuation, representing 20% appreciation over the last round.

Unlike most Seedrs campaigns, Glentham will not accept overfunding. Investments will be allocated on a first-come, first-served basis, and once the £450,000 has been subscribed, further investments will not be accepted. You can see the full details of Gletham’s round by viewing its Gletham Capital Seedrs campaign.

Chance for investors to ask Nicola questions
For investors who would like to learn more about Glentham, the company will be holding an investor conference call at:

Monday, 14 July 2014 at 1.30 pm London time.

Interested prospective investors are welcome to join either by traditional dial-in or through your web browser:

The phone number for the call is:
+44 (20) 7048-4146

Then enter the conference participant pin:
186475#

Or visit the webinar page at:
https://seedrsweb.clickwebinar.com/Glentham

Nicola, who is Glentham’s Chairman and Chief Investment Officer, will be joined on the call by Pandora Edmiston, Glentham’s CEO.

The call will include a brief introduction from Pandora and an update from Nicola Horlick on progress to date with the company and their plans for growth. It will also include a chance for potential investors to ask questions of Nicola and Pandora.

Seedrs Opens Convertibles to the Crowds

Seedrs achieved another first today by launching the first ever convertible investment round on a crowdfunding platform. Future Ad Labs, one of the earliest campaigns to raise money on Seedrs nearly two years ago, has returned and will be the UK’s first startup to use the new form of funding.

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The convertible will allow investors to invest in Future Ad Labs today, with their investment converting into shares in the future at a discount on the future valuation. This means that Seedrs investors will receive more shares for their money than future investors.

Convertibles are very popular among startups and investors in Silicon Valley. They offer a way to raise and invest money now, while deferring the need to place a value on the company until some time in the future. This can be particularly useful when a startup is looking to raise large venture capital funding in the near future, but doesn’t want a valuation placed on their company now which may affect those negotiations.

Following the launch of convertibles, investors can now use Seedrs to invest in the equity of high-growth businesses in three different ways. In addition to straight equity campaigns, Seedrs pioneered the use of fund campaigns last autumn, and convertibles represent our third offering.

All three types of campaigns are about investing in real shares: we believe that when you invest in a business at its early, risky stages, you should get to participate in its upside—which is something that debt and rewards don’t allow.

Each type of campaign in Seedrs gives investors a different way to get equity exposure, from investing directly into a single business (straight equity), to investing in a pool of businesses (funds), to joining a future fundraising round at a discount (convertibles).
For more information on how our three types of campaigns work, and how they differ from each other, please see our new guide the types of campaign.

Future Ad Labs has been a major startup success story. The company has developed a portfolio of game-changing advertising solutions that replace frustrating experiences on the web with interactive advertising formats.

One of Future Ad Labs’s predecessor companies, Digital Spin, began life by raising £60,000 from 70 investors via Seedrs in July 2012.  After merging with Future Ad Labs, the business went on to receive a further $1 million investment from venture capital firms as well as other industry angel investors in 2013. Passion Capital led the investment round and other investors include Balderton Capital and Ballpark Ventures.

For more information about Future Ad Labs, please see their campaign.

NearDesk raises one of the largest-ever equity crowdfunding rounds

NearDesk has just closed one of the largest equity crowdfunding rounds in Europe, raising just over £1 million pounds from 364 investors. This brings the total number of investors in the company to over 500 people. The most recent funding round included participation from several large investors including Juno Capital and Renaissance Capital Partners.

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GIving customers a vested interest
NearDesk is an excellent example of a company for whom the influx of new customers, advocates and industry influencers from an equity crowdfunding round is just as important as the cash raised. Like recent Seedrs successes Blue Crow Media, LoyalZoo and Shareight, NearDesk used their funding round as an opportunity to engage with their customer base.

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Guest user – My first 3 months as an angel investor

With stock markets dizzy eyed at what the ECB might do next, broader investor sentiment remains a bit muted into what is traditionally a sketchy time of year. The basic reason is that there are lots of people out of the office. High days and holidays loom large after a winter burning logs and watching re-runs of Dad’s Army and that means that the market takes on a lethargic air. Yet the startup scene is not known for its buy-in to holiday season and the Seedrs platform continues to be crowded with some attractive looking ideas.

A few months into my life as an angel and there are a couple of things that I’ve picked up. I thought I’d take a moment to share a few of the key things that I’ve learned from my foray into angel investing.

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Choosing to Hold Shares Outside Our Nominee Structure

Today we are announcing a new Seedrs policy that codifies an informal practice we have developed over time:

If an investor invests £25,000 or more into a given campaign, and she wishes to hold her shares directly rather than through our nominee structure, she is welcome to do so provided that the company agrees and the investment terms are the same. Shares held outside the nominee structure will not be subject to our 7.5% carry.

This blog post lays out the rationale for this policy, the practicalities for making use of it and a few other important notes.

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Equity crowdfunding term sheet

At Seedrs, we hold ourselves, our startups and our investors to very high standards because we want every company that raises funding on Seedrs to be set up with the best chances for success in the future. Achieving success for a startup often means being able to go on and raise follow-on funding from large angel syndicates or venture capital firms and eventually go on to a successful merger, acquisition, private equity investment or IPO.

Seedrs Term Sheet May

The new plain english equity crowdfunding term sheet from Seedrs contains a summary of the key legal terms.

We’ve always set our legal standards at the level needed to be compatible with the rest of the startup funding ecosystem. This means putting in place very specific investor protections, contractual agreements and making sure that all the paperwork is in order.

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Guest user – Investing in consumer confidence

Big deals. They get the merchant bankers excited, and with memories of the financial crisis slowly fading, big deals have been back on the radar. Big deals show that the economy is on the mend. Confidence is back in the boardroom and the evening news is less about austerity measures and more about $100bn mergers. This is also good news for startups, who are right at the coal face of the economic recovery and will benefit considerably from optimistic headlines. Consumers watching the news (with a chicken jalfrezi straight out the microwave) are going to start thinking about adding a notch back onto the belt of the household budget. Confidence is a powerful commercial aphrodisiac, forget oysters and champagne, consumer confidence is where it’s at.

Seedrs guest investor programmeSo where is all the money going to go? Retail. We are all secretly lazy, which is why we all seem to like the fact that we can now lie on the sofa and buy stuff. We also love stuff. Which is why in Britain we spend more money on useless tat than any other country in the developed world. Consider the spate of recent IPOs from companies that sell everything from tumble dryers to packs of dog food. And they deliver. Bargain.

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Marketing internship

Seedrs is growing quickly and we’d like to invite a recent graduate who is interested in breaking into startup marketing to join us. We’re offering a paid internship with a six month term so that you can get real experience and a solid taste of life inside a fast growing startup.

Marketing internship

You’ll get involved in all aspects of marketing Seedrs to startups and investors.

Seedrs is disrupting early stage startup finance by making it easier than ever before for startups to raise capital from their own communities and for investors to build a diversified portfolio of startups. Our marketing team builds communication with investors, startups and also helps startups communicate with their own community of potential investors. We take a holistic view of marketing so our branding, communication, public relations, growth hacking and even product design are all run together as a single team.

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Guest user – Investing in products you could see yourself using

This week we have a new guest investor. Sam has looked at the currently live startup campaigns on Seedrs and decided what to invest in. In this article he shares with us what he chose and why.

Sam Macrory

Sam Macrory is a Seedrs user and has shared the story of how he chose two recent investments.

Sam Macrory, previously Political Editor of House magazine, became the Editor of Total Politics in May 2013. He also blogs at http://www.sammacrory.com and tweets at @SamMacrory.

I can honestly say I’ve never been more tired…

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Insights on startup survival from a Guardian discussion panel

The Guardian recently ran an interactive question and answer session about surviving your first year as an entrepreneur. The session was sponsored by Nominet who run the Nominet Internet Awards. The panel was facilitated by Matthew Caines the editor of the Guardian’s Culture Professionals Network.  The session covered some fascinating topics like the difference between the corporate world and life in a startup. I’ve chosen a couple of the key conversations and insights to quote below. Check out the discussion page itself to see the rest of the comments and questions.

Joe Scarboro London

Joe Scarboro of the 3beards (Photo by Makeshift).

Why did you want to become an entrepreneur?

Joe Scarboro: Doing and creating something meaningful is the key, as well as being the master of your own destiny. I’d always had that feeling of wanting to do my own thing, at every job I’ve had I always felt that I’d be doing things a bit differently if I were in the driving seat!

Jeff Lynn: I wanted to create value, full stop. I didn’t want to look back on my life and feel that all I had done was push paper around for 40 years. I was determined to do something that had (or at least tried to have) a lasting impact. The specific idea only came later.

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Welcoming the new FCA crowdfunding rules

In March the FCA enacted a new set of equity crowdfunding rules. It may come as a surprise to some, but equity crowdfunding has been regulated in Britain since 2000, long before crowdfunding even existed as a concept.

FCA Equity Crowdfunding Rules

The Financial Services and Markets Act requires firms that arrange transactions in investments, including shares, to be authorised by the appropriate regulator and adhere to a strict set of regulations. That was true regardless of whether those transactions were arranged online or offline, and it applied just as much to novel platforms as to old-fashioned investment firms.

When we were building Seedrs, we thought that rule was quite clear, and as a result we waited to launch until we had authorisation from the Financial Services Authority (now called the Financial Conduct Authority, or FCA).

New UK equity crowdfunding rules

Unfortunately for the industry, one platform ignored these rules and launched without authorisation, before eventually being compelled to seek approval. Shortly afterwards, the FCA decided that, in order to avoid a repeat of this type of behaviour, it would adopt rules specific to equity crowdfunding.

After a consultation process, the new equity crowdfunding rules were enacted in March 2014. Seedrs welcomes the new rules, as we believe they provide clarity to investors and platforms alike. Proportionate regulation helps markets thrive, and we believe the rules the FCA adopted strike an effective balance—and certainly one that is better than what many other countries are currently proposing.

Who is eligible to invest through crowdfunding?

As it happens, the new rules do not apply to Seedrs directly, as we have chosen from the beginning to be regulated as a” fund manager” rather than as a mere arranger. This is because, beyond simply introducing investors to startups, we act as their nominee, enforcing shareholder protections and helping to ensure that they earn returns from successful businesses—something that many other crowdfunding platforms don’t do. We’ve long advocated for the importance of a nominee structure.

Importantly, the exact same investors are eligible to invest through Seedrs as are eligible to invest through the platforms that come under the new rules.

In both cases, investment is open to any investor who can demonstrate that he or she has the experience and knowledge required to understand the investments being offered. Under the new crowdfunding rules, this is called an “appropriateness test”, whereas under the Seedrs structure it is called an “elective professional client categorisation”, but the standard of the test is the same.

Crowdfunding Regulations

Seedrs combines true crowdfunding with professional grade investor protections.

One difference that does result from our regulatory categorisation is that investors who use Seedrs are not subject to the much-maligned “10% requirement”, which restricts investors to investing no more than 10% of their net assets in crowdfunding investments per year. That said, we encourage all investors to build diversified portfolios and only allocate what they believe to be a reasonable proportion of their capital to early-stage investments.

Regulation will continue to be an important part of the crowdfunding discussion, and as the industry grows, there will likely be further modifications of the rules. We look forward to engaging in this process: having been the first regulated equity crowdfunding platform in the world, we believe that complying with applicable law is essential. We are pleased that the clarity provided by the new rules will help to ensure that others do so as well.

Heartbleed security update

The web has been taken by storm by a new security issue that affected more than half a million widely trusted websites. The Heartbleed bug is a new vulnerability that allows attackers to access confidential information, like passwords, web site certificates or personal data, from web servers with SSL support.

Heartbleed security

The Seedrs platform was not directly affected by the recent Heartbleed security issue.

Seedrs has not been affected by this issue. We take security extremely seriously (I was a security auditor and security advisor for major financial institution before starting Seedrs) and the way our systems are implemented limits our exposure to these kinds of issues. Even so, we are always on top of new vulnerabilities and immediately tested all of our servers, and we have confirmed that we are not vulnerable to this issue.

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Guest user – Choosing my first startups to invest in online

This article first appeared on Mark Hepburn’s blog Hepburn Says. Mark is a client relationship manager at a well known asset management firm based in London.

Mark Hepburn Investment

Mark Hepburn is a guest author. His articles appear first on the blog Hepburn Says.

The IPO market is getting a little bit squeaky. King Digital, the maker of the game Candy Crush, listed on the New York Stock Exchange recently with an initial valuation of more than $7bn. The stock then fell. Quite a bit. But still, $7bn for company that gets most of its revenues from Candy Crush, a game that has commuters staring blankly into their smartphones trying to make lines of sweets disappear. And that’s it. A game that has apparently been downloaded by 93m people who seemingly have nothing better to do on the way home. I don’t know what that says about modern society but you have to feel for the likes of Hemingway and Dickens. The valuation of the business today, however, is of little concern to those who put up the initial cash to make the game, as they are probably down Saville Row trying on velvet and barking at the tailor to make their paunch disappear. They are now properly minted, further stoking my coals for seed investing. The weekly email from Seedrs then had me reaching for the lighter fuel to further stoke said coals. Time to choose my first startups to invest in online.
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