Seedrs Comments on Challenging Private Securities Market

Seedrs has been a bit quieter following its acquisition by Republic but in recent days, the company has posted a comment on platform activity without providing and metrics.

Published by Seedrs CEO and Republic EVP Jeff Kelisky, he noted the challenging economic environment that is impacting everyone.

Zelisky states:

“It is clear that some of the obstacles we navigated in 2022 remain. Rising inflation, volatile public markets, the war in Ukraine, and an international energy crisis continue to drive the UK and other countries towards the possibility of recession. 

This turbulence has been reflected in private markets. As the economic downturn weighs on valuations, venture capital funding of startups has dropped by more than 50% year to date. Globally, VC firms invested $76bn into start-ups in the first three months of 2023, which is less than half the $162bn they committed in the same period a year ago…”

Zelisky notes that many firms are forced to pursue a down round or cut costs, or simply tough it out.

In spite of the economic gloom, he remains “bullishly optimistic” for private securities markets going forward.

While not providing any recent details on platform activity, Seedrs contrasts the fact that around 90% of all startups fail, but on their platform – 74% of all firms that have raised capital online have either provided an exit, such as an acquisition or IPO or are still in business – a pretty impressive statistic. As many people know, professional venture capitalists hope to see one out of ten of their investments make it big, with the rest going bust or bouncing along.

Beauhurst, a UK data firm that tracks the private securities market, published a report earlier this year reporting that “investment activity declined overall, with £19.7b invested into private UK companies during the year, across 2,722 announced equity rounds.” The number of deals dropped by 7%, and the amount invested declined by 16% versus 2021.

At the same time, the median valuation sank to “£47.0m at the growth stage (-26%) and to £23.5m at the established stage (-16%).” At the same time, “median valuations at the seed and venture stages increased during 2022, to £2.91m (+22%) and £9.49m (+24%), respectively.” So a bit of a mixed bag.

As for most active investors in 2022, Seedrs was in first place, with compatriot Crowdcube in second – so a solid showing for online capital formation platforms.

During Q1 2023, Beauhurst shares that overall, the number of deals declined by 14% versus Q4 2022, with the amount invested sinking by 35.5% to £2.38 billion as market activity remains tepid.

So we are not out of the woods quite yet, but once inflation retreats and, correspondingly, interest rates decline, private markets should experience a resurgence. The question, of course, is how soon this will happen.


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