SeedInvest Shares Several Exits from Crowdfunded Companies

On August 2nd, 2022, the SEC’s Small Business Capital Formation Advisory Committee (SBCFAC) met to discuss secondary trading of crowdfunded securities. While most industry insiders believe that providing liquidity via a trading platform for private securities issued under certain exemptions makes a lot of sense, the Committee decided to nudge the issue forward by recommending the Commission pre-empt state laws when it comes to trading securities issued under Reg A+ Tier 2. While the Committee will prepare a formal letter providing its guidance, there is no mandate for the SEC to pursue the common sense recommendation.

During the meeting, several panelists shared their perspective regarding investment crowdfunding and the growing ecosystem. One of these panelists was Ryan Feit, CEO and co-founder of SeedInvest – now owned by Circle.

SeedInvest is a full stack capital raising platform helping firms raise money under Reg CF, Reg A+ as well as Reg D. It is also partnering with one of the largest securities crowdfunding platforms in Europe – Crowdcube.

Feit shared during the meeting that SeedInvest has raised over $465 million to date from more than 275 securities offerings. Since Reg CF was improved by the SEC in 2021 more firms are interested in the exemption and Reg A+ continues to be adopted by more issuers, including those more established.

While not all private firms will generate significant returns for investors, Feit highlighted for companies that raised early funding on SeedInvest and then went on to provide gains for early investors. The firms referenced include:

Heliogen: Raised $1.6 million on SeedInvest in 2017 as part of Seed Round at a $20 million pre-money valuation. The deal was a “side by side” Reg CF – Reg D offering with almost 1000 investors participating in the funding round. In 2021, Heliogen went public at a $2 billion valuation.

Knighscope: This company raised capital multiple times on SeedInvest via Reg D and Reg A+. The company floated shares in an IPO on the Nasdaq in 2022, generating a 55% to 33% implied IRR for investors.

Trust Stamp: More than 2,700 investors backed this company in a Reg A+ offering that raised $6.5 million. Trust Stamp returned an implied IRR of around 90%.

Shelf.io: This company raised $475,000 in a Reg D offering in 2016 and then went on to raise $52 million in a Series B round that provided an opportunity for SeedInvest investors to exit with an approximate IRR of 95%.

PetDesk: Another firm that raised money under Reg D in 2016 and then went on to be acquired by another entity in a private transaction. Investors earned around 75% IRR.

As previously mentioned, not all issuers will provide significant returns – and past performance is never a guarantee of future returns; clearly, some companies are delivering for platform investors.

As was previously reported, Feit believes two main hurdles exist: Diversification which can be alleviated via fund structures, and secondary trading of crowdfunded securities.

While it is probably a stretch for this Commission to provide the relief necessary to enable secondary markets, Congress may enact legislation in the coming months that compels the regulator to do just that.

 

 

 

 

 


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