Recently, Seedrs announced that as it expands services further into Europe, it has established a European HQ in Dublin, Ireland.
Seedrs, when combined with parent company Republic, is the largest investment crowdfunding marketplace in the world. Seedrs states on its website that it has enabled over £2.6 billion ($3.245 billion) in online capital formation.
The establishment of a physical location in Ireland was driven by ECSPR, or European Crowdfunding Services Provider regulation. These relatively new rules allow a platform to raise capital across all EU Member states. The caveat is that a platform must be approved by a relevant authority in a member state- in this case, Ireland.
Seedrs joins a growing number of EU-approved platforms that will be providing access to capital for private firms – up to €5 million per issuer.
CI recently connected with Randal MacDonald, the Managing Director of Seedrs’ new EU-regulated platform. Prior to joining Seedrs, McDonald was CEO of Europe at Lumon and VP of Sales EU Merchant Services at JP Morgan. Our discussion is shared below.
Why did Seedrs decide on Ireland for ECSPR approval? Did you consider other jurisdictions?
Randal MacDonald: Although it offers us significant opportunities moving forward, this new regulation is extremely complex. As a result, we wanted to ensure that we became licensed in a pro-business market with effective regulators where we could guarantee thoughtfulness in implementation. Ireland was the obvious choice to achieve this, and we’re looking forward to increasing our support for European startups and investors from our European HQ in Dublin.
Seedrs mentioned there will be an initial focus on the Nordic region as well as Spain and the Netherlands. Can you expand on this decision?
Randal MacDonald: Seedrs has played a significant role in the European startup ecosystem for over a decade, and in that time, we’ve supported companies from more than 20 countries across the continent. With that knowledge and understanding of the commercial environment, we feel that, firstly, these markets initially provide access to the best quality deals to bring to the platform. Secondly, they are a good product fit for our offering at this stage. Our ultimate ambition is to have a sizable footprint in each European country.
There are over 60 ECSPR-approved providers now. How will Seedrs differentiate its services? Can we anticipate cross listings on Republic/Seedrs/Seedrs EU? Will you be using Reg D in the US (or another exemption)?
Randal MacDonald: Our European license approval under the new regulation means we, as a group, have become the only global provider of equity crowdfunding services. As a result, Republic is now the only place a business can raise in the US, UK, and EU simultaneously. We anticipate our first global raise in early 2024 and this is something that no global platform can offer.
On top of this, a primary differentiator from our peers in the market is our scale. Seedrs was the most active private investing platform in Europe in H1. According to official Beauhurst data, we helped 113 UK operational businesses to raise £162 million. And when taking into account all campaigns across Europe in the first half of this year, our platform supported 129 companies in raising £201 million.
Finally, a key point of differentiation is Seedrs’ suite of innovative products that benefit all agents in the startup ecosystem. These include our Secondary Market and our VC Fund Product, which broadens access to VC Funds and allows eligible investors to participate without meeting the sizable minimum threshold required.
In time, we hope to introduce these products to the EU platform and these will be core differentiated offerings.
As you mentioned, Seedrs operates a secondary marketplace for securities issued on the platform. Will this be expanded to include issuers in the EU?
Randal MacDonald: In short, not yet – but it’s certainly an ambition for the future. Our Secondary Market – the world’s first and still the largest by trade volume – is a point of real differentiation for our investors. Since its launch in 2017, the Seeds Secondary Market has gone from strength to strength with £22.7 million worth of shares traded in six years, with a peak of 17,000 shares worth £8.1 million in 2021.
Venture markets have been choppy in the past year. What are your expectations for 2024?
Randal MacDonald: It is clear that obstacles remain – inflation, volatile public markets, the war in Ukraine, and the crisis in the Middle East continue to drive European countries toward the possibility of recession. And although the current economic downturn is likely to last into 2024, we wouldn’t be launching a Europe-regulated platform if we weren’t confident in the short and long-term health of the European startup ecosystem.
What are your expectations for the EU marketplace and potential for growth?
Randal MacDonald: Europe is a hotbed of innovation. The European startup ecosystem now represents $3 trillion in enterprise value, and venture capital investment into European startups reached $101 billion in 2022. Europe’s share of global venture capital increased from ~5% two decades ago to 20% in 2022, and, at the early stage, Europe now raises a third of global Seed funding. We believe that Seedrs has a real opportunity to build on its existing role in the ecosystem, helping the businesses that are shaping the world of tomorrow to gain growth critical funding.