Funderbeam CEO Kaidi Ruusalepp Shares Insight into Pan-European Online Capital Formation and Secondary Trading

Funderbeam is a global funding and trading platform for private companies that reports over €30 million in funding raised and more than 60,000 trades on their secondary marketplace.  The Fintech notes that it holds multiple financial licenses including authorised and regulated by the Estonian Financial Supervision Authority in the EU, by the Financial Conduct Authority in the UK, and licensed as a Recognised Market Operator and as a Capital Markets Services entity by the Monetary Authority of Singapore. Funderbeam seeks to be a streamlined marketplace for both primary issuance as well as secondary transactions that incorporates tools that help issuers manage investors at an affordable cost. Funderbeam has established multiple offices including locations in London, Singapore, Copenhagen, Zagreb, and Tallinn.

Recently, Crowdfund Insider connected with founder and CEO Kaidi Ruusalepp, a former member of the management board of NASDAQ OMX. Our discussion is shared below.

You claim that Funderbeam has more UK trading volume in private firms than Seedrs. Can you quantify this for us?

Kaidi Ruusalepp: We are not comparable as Seedrs doesn´t have secondary trading with auto-matching and provides a bulletin board solution instead. Additionally, Funderbeam is a global marketplace for private companies and does not segregate its trading volumes between geographies. Funderbeam’s total trading volume in 2021 is €4.85M up to date during the first 2.5 months, that corresponds to about €2M per month.

You also operate as a primary issuer of securities. How robust is this sector of your business?

Kaidi Ruusalepp: Primary issue of shares or, in other words, funding of startups and other private companies is one part of our business. It played a more robust role in the early years, but listing and trading is our main differentiator. Also, we have experienced that when companies do their secondaries starting from C+ rounds, they still need some additional capital and always ask for fundraising. We have had several companies that raised funds in the pre-seed stage and have been growing with us being now one of the most active trading companies.

Funderbeam’s role is finding the right balance of interests between founders and investors. We’ve always acknowledged our position to look at both sides. The existence of attractive investment opportunities is the cornerstone of our marketplace. The founder must always have the liberty to be on top of its cap table and choose its investors. That’s precisely why a company can determine capital allocation terms, including the option to guarantee that all investors with indications in the private phase can get as much securities as indicated.

Simultaneously, we want to avoid overloading our marketplace with companies that cannot viably explain their track record or fundraising plans. If the information about the track record or future plans are immature, we pinpoint the shortcomings and either ask the founder to return to us later or deny their request to raise capital on Funderbeam.

Up till now, 2% of initial requests have been approved and have reached the fundraising stage on Funderbeam. Our filtering procedures have proved effective, as 90% of companies have reached their fundraising target on Funderbeam.

What are your investor requirements? Do you work with institutional money?

Kaidi Ruusalepp: Funderbeam has onboarded investors from 128 countries worldwide. We have focused more on Europe and Singapore (as a base to cover the Asia-Pacific region). We have private individuals and corporate entities and also Institutional investors such as VC funds or family offices.

As a regulated business, we will need to verify our clients before being able to offer our investing or trading services. All our clients, independent of their type, will be required to provide information for the purposes of customer due diligence and, where relevant, in order to assess the appropriateness of the services to be provided.

Do you anticipate significant growth following the pan-European crowdfunding rule improvement?

Kaidi Ruusalepp: European Crowdfunding Regulation is aimed to provide pan-European access to crowdfunding platforms. It will significantly change the fundraising environment setting a harmonized EUR 5 million threshold for raising and providing some elementary investor protection rules.

It is debatable whether crowdfunding regulation will confuse or make clearer MiFID II financial instruments offering regime, that will be seen.

So yes we anticipate growth and tighter competition. Our advantage is the possibility to provide liquidity to fundraising through secondary trading, that provides investors essential benefit not to be locked in into relatively unforeseen time.

Which platforms do you work with now to provide liquidity?

Kaidi Ruusalepp: Funderbeam has something unique – a properly working and regulated secondary marketplace in Europe and Asia. So all service providers that serve private companies – cap table management providers, funding platforms, angel investor platforms, and similar – are welcome to set a link with us and extend their value proposition. To keep doing what they do and add secondary trading of private shares in additions.

Funderbeam also works with angel groups and VC’s to provide top-ups to their fundings. And our differentiator and the main strength is that all the investments will be liquid.

How is Funderbeam performing during the ongoing COVID health crisis?

Kaidi Ruusalepp:  Against our concerns about one year ago, when the pandemic hit the world and the first lockdown wave was applied, the investors have instead become more active and are interested in diversifying their portfolio by private company shares. They either join the initial funding round or buy shares from the secondary market. Funderbeam’s trading volumes have grown 10x since February 2020 (YOY comparison).

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