SyndicateRoom pioneered the “investor-led” crowdfunding model in the UK. The brainchild of Gonçalo de Vasconcelos whilst studying for his Cambridge MBA, the company had an initial focus on the companies in the surrounding silicone fen. As it’s profile has grown, so has the list of the companies it serves. To date, over £45 million has been raised on the platform.
Gonçalo came to the UK from his native Portugal for a role in banking and never left. SyndicateRoom is a crowdfunding platform where the crowd invests alongside traditional investors, on the same terms. His model has seen solid growth and now boasts many big successes, with more poised for great things over the coming years. I talked to Gonçalo on a cold Cambridge afternoon to discuss his platform and expectations for the future of SyndicateRoom.
Gonçalo de Vasconcelos: I was working in London, and I came to Cambridge for an MBA at the Judge Business School. The idea was to return to London but halfway through the MBA, I had the Idea for SyndicateRoom. I realised that Cambridge is a great place to live and there is no lack of clever people, or investors. It just made sense to be in Cambridge
Joe: How do different hubs compare? What makes Cambridge better than Oxford?
Gonçalo: Cambridge has some really cool stuff . It has the advantage of an extra generation of successful entrepreneurs. You have the first generation; eg Hermann Hauser, investing into new companies like with Jonathan Miller being the founder. He’s is on the board of SyndicateRoom.
With SyndicateRoom you are in a sort of third generation entrepreneurial environment. Each one of these successful entrepreneurs generates another group of successful entrepreneurs. Cambridge is a great place to be.
Gonçalo: At the beginning it was just me. Crowdfunding barely existed. The concept of allowing the crowds to invest alongside typical investors like SR was new nobody knew if it would work. It was me in the living room trying to work out if investors, investing online. But that started changing. We got some investment, started proving the concept, but it was very early days. And it grew from there.
You need some stamina, to be pretty strong. The highs are really high and the lows are really low and all of that is in one morning sometimes. You need to be of a certain personality. these days it is very trendy and I absolutely love it but there is nothing wrong with not being an entrepreneur, you can be more suited to a steady job. It’s certainly exciting. I have yet to meet an entrepreneur who hasn’t had those huge highs and huge lows, even when they fail.
Gonçalo: Britain is not very good at talking about failure. Americans are great. One of the first things Americans do at pitches is to say; “My name is John, this is my third company, the other two failed.” In the UK, John would not mention the other two companies. It is this idea that failure is something to be embarrassed about or afraid of and it isn’t. You should be embarrassed of not trying. Fail, fail fast, and learn.
Joe: Why does venture capitalism work in America?
Gonçalo: It’s the risk appetite and that people are much happier to talk about failure, much happier to take risk, and therefore, more likely to succeed. The situation in Britain is changing very, very rapidly. In fintech however, Britain is teaching the rest of the world. The rest of the world is watching. It is changing very rapidly.
Gonçalo: It’s a combo of factors. London is strong in f/s and technology. Also, the FCA had a big role in it, being pro-innovation. Compared to the US, where crowdfunding has just been approved by the SEC. But even then it’s not real CF. They’re still trying to get their heads around innovation in financial services.
The UK is the best place in the world for equity crowdfunding. It is the most developed place. Maybe there is a causal behaviour between what is good in the US and what is bad, vs over here. VC in the US is so good compared to here, whereas here the need for ECF higher. There is a greater need for cash for investment. The other side is the enterprise investment scheme.
Joe: Looking at the financial storm clouds for the year ahead, should ECF investors be worried?
Gonçalo: The area we operate in is different. If I was in oil and gas I would be concerned. But when there is a financial crisis, you see innovation. That’s why Fintech took off in 2008. Because the entrepreneurs got there first. I’m not concerned because ECF has a very weak correlation with the markets because it is an early stage investment. That means it is potentially a good place to put your money because if we are heading to a perfect storm then you don’t want your money in the stock exchange. Investors rush into gold but commodities are getting rather a big hit too. You need uncorrelated assets in your portfolio. ECF is incredibly uncorrelated. Plus investing in ECF takes 3-5 years to come to fruition, so if there is a crisis now it may be resolved by the you are time seeing returns. So it might be a good time to invest in equity crowdfunding.
…We fund companies that are finding a cure to cancer. We fund companies helping patients every day. We are funding companies that are helping 3rd world countries get access to cam. Anything that has strong IP is what our members are interested in.
Of the top ten crowdfunded deals in life sciences in Europe, the top 7 are all ours. We are miles ahead of any other platform. B2B, attracts the crowd, even though cf is expected to be b2c. Crowdfunding can be so much more.
Joe: Who is the crowd?
Gonçalo: They are a diverse group of people but they all love innovation. They love to be in the know. A big part of them are angel investors. They may invest 200k in one company and then smaller amounts in other ones. We have a lot of financial services professionals. Members of VC funds. We have also have a lot of doctors lawyers accountants. They tend to have very comfortable lifestyles, salaries and they tend to be very well informed.
Joe: Are there any outliers?
Gonçalo: We have a lot of retired people, partially because they have time to do their due diligence. There is a much bigger percentage of women investors online too. If you go to any angel network offline you would be lucky to see any women there. I Think that a lot of investment clubs have a very man focussed. It all reinforces itself. You go there and it is all middle aged white men and for a woman to join is not as comfortable. Online it doesn’t matter. When we have syndicate room events offline, there is a much larger portion of women. But I don’t know if women are more risk averse. Our women are very significant well-informed investors. But I don’t know why.
Fintech investors are more likely women. What’s interesting is that the percentage of women employees. It is much higher than in f/s. Much more than in the City. Fintech has far more. It is meritocratic and comes with a lack of legacy. With Fintech you are starting from scratch.
Joe: Why pensioner interest?
Gonçalo: Pensioners are building a portfolio of investments. It’s part of their overall portfolio, but it is high risk, high return. They will have x amount in a pension, x amount in equity crowdfunding.
Pension funds will start to invest in equity crowdfunding, particularly longer term funds, as it can generate a huge return. It’s the same thing as the pensioners but with much bigger numbers.
The professional investors validate the process. You know there is an experienced investor involved. With other platforms the company sets the investment terms. It is just not stable.The professional invests with professional investment terms and negotiates whatever level they are happy with.
It is more likely for the crowd to take a punt than the professional investor, particularly with lower amounts. We have an investment limit of £1000 specifically for that reason because it makes you care. With £10 you don’t really care.
We have people who have put £1000 in many, many deals but they are selective.
Gonçalo: Litepoint has been doing absolutely amazing things. e-go built something that has never existed before. That’s really cool to see. The UK as far as entrepreneurship goes it is an absolutely amazing country
Joe: What makes a good tech hub?
Gonçalo: The whole ecosystem, it all has to work. That entrepreneurial spirit. The crisis in Portugal made everyone an entrepreneur. You need investment. You need to have very good language skills..
Joe Whitwell is Tech headhunter at Hamden Executive Search. Working out of London, Joe partners with start-ups and larger companies primarily in Education, and Fintech. His writing tends to focus on his perspective of the industry as well as interviews with the people he meets day-to-day.