The United Kingdom is home to the most robust investment crowdfunding ecosystem in the world. A determined group of innovative entrepreneurs and a collaborative regulatory environment have combined to foster a successful industry of online capital formation that most countries aspire to achieve. While there are multiple platforms listing securities offerings online, a handful of platforms have separated themselves from the pack. Seedrs is one of these platforms.
Seedrs was launched in 2012 just as crowdfunding emerged as a funding option for early-stage ventures. Since that time, Seedrs has facilitated growth capital for over 900 deals for companies based in the UK, continental Europe and elsewhere. A recent update from Seedrs shared that staff has grown from the two founders to 96 employees from 22 different countries with 4 different international offices.
Seedrs has continued to iterate and experiment as it trailblazes the world of online capital formation and other affiliated digital services. Of note is Seedrs Secondary Marketplace where investors in private securities may exit positions acquired via an investment on the platform. Typically, investing in early-stage firms is not for the impatient. The Seedrs Secondary Market provides a good exit path for these illiquid investments. While some other platforms have attempted to launch in-house secondary markets, Seedrs continues to stand out with a successful marketplace that continues to grow.
Recently, Crowdfund Insider caught up with Seedrs CEO Jeff Kelisky for an update on Seedrs and expectations for the coming year. Our discussion is shared below.
Congratulations on your most recent funding round. You are currently planning a “substantially larger priced round” in 2020. Will this be tied to expansion into other markets? Product offerings? Other?
Jeff Kelisky: Thank you! We were delighted with the enthusiasm of our users and supporters in the platform round, alongside the support from our existing institutional investors. We’re now, as you say, preparing for a larger round next year. There are a few things at play as we decide what that will look like, but the core initiatives in store for us in 2020 are based around expanding from our bread and butter equity crowdfunding rounds to becoming a full scale marketplace for investing in private companies.
You are part of the DIT Fintech Bridge to Hong Kong. What are Seedrs plans for Asia?
Jeff Kelisky: We’re very interested in the Asian market, and the Hong Kong Fintech Bridge was a great first step to us learning more about it and scoping out any opportunities for us there. With major potential changes to European regulation coming up, we currently see a huge opportunity for growth on the continent, and we don’t want to spread ourselves too thin. However, after our participation in Hong Kong Fintech Week in November, I can say that we’re actively looking at the Asian market, and will take advantage of opportunities when the right time comes.
Seedrs recently released a significant update to its Secondary Market while expanding trading ranges. How do you see this marketplace evolving over time? Would you consider crowdfunded/private securities issued from other platforms? What about expanding to more investors?
Jeff Kelisky: The Secondary Market has been revolutionary for Seedrs. We’ve made quite a few big changes to the product in its 2.5 years of life so far, and it’s definitely still just the beginning. We started by opening it out to all investors, not just current shareholders, and have recently improved the user experience by adding a load of new features like share price history and trending businesses. The next big milestone for the Secondary Market is to introduce ‘bidding’ and this will be soon.
I think another interesting avenue for us will be to look at the private markets beyond just companies that have previously done a crowd round with us. I think we’ll see more private companies looking to offer liquidity to their existing shareholders and employees, especially as we see more and more businesses staying private for longer. We’re certainly looking at how we can use our infrastructure to help with this and looking at a number of partnerships within the ecosystem as a whole.
Seedrs continues to facilitate online capital formation for more mature issuers as well as larger investors. Is this the key for long term growth? Is the current EUR 8 million cap (for prospectus) a significant hurdle for issuers on the platform?
Jeff Kelisky: You’re right – we’re definitely seeing plenty more larger and later-stage businesses raise capital on the platform.
I think the key to effective long term growth is to have a marketplace offering that lets everybody play, from seed-stage to pre-IPO. The key to success in this sector is having a trusted, innovative and scalable product that can execute deals efficiently regardless of the size or stage of a business. We were pleased to see the prospectus cap lift from €5 million to €8 million, and we’d like to see it lift further over time to encourage more of the bigger players in the market to utilise platforms like ours.
Seedrs continues to iterate adding more features. In the end, do you move beyond the future of venture capital to become a digital investment bank?
Jeff Kelisky: I wouldn’t say that we’re moving towards becoming an investment bank – but you’ll definitely see us add those features which deliver turnkey marketplace for investing in private businesses! There isn’t yet a precise name for what our end goal looks like right now, we just know it’s going to be an essential part of the global financial markets ecosystem.
Essentially, our vision is to build out a marketplace-led offering. Think about what Amazon did for eCommerce and what Netflix did for entertainment, that’s what we’re building, but in the context of venture capital, private equity and investing.
How much of a challenge is Brexit and a softening economy?
Jeff Kelisky: It’s a good question, but what we’ve tended to see over the years is the growth/startup ecosystem is reasonably uncorrelated with broader market forces.
One of the main things I’ll say is that economic downturns can bring about some of the greatest entrepreneurs. If you look at 2008 and the financial crash, you see companies like Zopa and Funding Circle as the result. Jeff Lynn and Carlos Silva began working on Seedrs back in 2008 and launched the business in 2012, so sometimes economic downturns can trigger the most entrepreneurial of minds, especially the more tenacious ones willing to launch a business and take those risks during uncertain times.
Seedrs has publicly stated that it expects to hit full-year profitability in 2021. Is that still in the cards? Will that unnecessarily inhibit platform growth?
Jeff Kelisky: We have modelled out a couple of versions of events over the coming years: if the European regulations change next year to open out the continent, then we will invest heavily in capitalising on that opportunity. If that doesn’t happen, then we will be on track to hit full-year profitability in 2021. There’s always a fine balance, for every growth business, to choose between striving for profitability or investing in growth. Over the past couple of years, in particular, we’ve focused on the latter.
Pursuing growth here in the UK, investing heavily in new technology and products like our Secondary Market and AutoInvest while starting to make tracks in the European market.
What about blockchain technology. Have you reviewed issuing digital securities?
Jeff Kelisky: We have looked closely at potential applications of blockchain technologies to our business, including potentially facilitating security token offerings (STOs) or similar. For the time being it has not been a priority, as the world of STOs has been and continues to morph. We think it will make sense to pursue, in time, but it is very much something we will do when we know we can deliver the level of trust and robustness that our customers have come to expect from Seedrs.
Expectations for platform volume in 2020?
Jeff Kelisky: We don’t make a practice of forecasting annual volumes, but we can say that we are expecting to significantly increase our growth over 2019.