Beauhurst recently posted a comment about the successfully equity crowdfunding raise of easyProperty on Crowdcube. After Private Equity Guru Jon Moulton” questioned the valuation of the not yet live platform quoted at £67 million it appears that research firm Beauhurst dug a bit further to do a comparison.
“… it’s notable that in return for their £1.4m, Crowdcube investors pick up just 2.12% of the company’s equity. That gives a pre-money valuation of a touch under £60m: not bad for for a company that’s yet to even launch fully. By comparison Beauhurst’s data on comparable deals (£5m-£10m total fundraising) shows an average pre-money valuation of around £20m.The market is certainly big and it’s not inconceivable that easyProperty could get the £1bn+ valuation they’re aiming for – and that would be a pretty healthy 15x return for these investors, barring any further dilution. There’s certainly some value to the Stelios name and “easy” brand being attached of course – just see the level of publicity for a start. But a name isn’t a guarantee of success.”
easyProperty clearly benefited by the association with Sir Stelios Haji-Ionnou – a well known billionaire and philanthropist. Proximity to success is a way to generate investor interest as one always hopes the success will continue. Ironically Sir Stelios stated that he was not a shareholder in the company – just licensing the brand – and his nemesis, Jon Moulton, actually was holding shares.
“… it’s got us wondering if the rise in equity crowdfunding is being driven not by the “ease” of raising money this way but by the desire of growing companies to get a better deal. There’s definitely something good for a business owner knowing that they can set deal terms in advance of the raise rather than having to negotiate down the line.”
Another occasionally critique is the benefit of tax subsidies on valuations. With downside risk limited by both SEIS and EIS schemes, investors are clearly willing to shoulder more “risk”. This obviously would have an impact on valuations. But then this also leads to the question as to the benefit of innovation encouraged, jobs created and funding found for young companies. Greater allocation to capital towards entrepreneurs encourages more of the same. That hopefully is not be a bad thing.
Beauhurst closes with the thought;
“If easyProperty goes according to plan it will be heralded as an excellent example of the democratisation of equity investment through crowdfunding. But if things don’t go perfectly, investors may well wish they’d stuck out for a bigger stake…”
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