crowdfunding

Seedrs Review – My Experiences Since Joining

wiseclerk 2 Comments

Seedrs logo15 month ago I joined the British platform Seedrs and started to invest in startups I consider interesting. Since then I have built my small portfolio, holding equity stakes in more than a dozen mostly British companies. In this article I share my experiences in the process.

What is it about?

On Seedrs startups can pitch to raise money offering investors an equity stake in the company. This is called p2p equity or equity crowdfunding. The startup discloses information about their product, plans (e.g. intended impact, monetisation strategy, use of proceed) and achievements so far to registered users. There is further information about the market they operate in and the team is presented.
The equity share offered is stated (e.g. 5%). This and the amount to be raised (e.g. 75,000 GBP) define the valuation of the startup that the startup has applied (in this example 1,425,000 pre-money, so post-money, that is after completed funding the startup’s valuation would be 1,500,000 GBP and the 5% equity share of the new investors represent 5% of 1,500,000 = 75,000 GBP raised). Note that the valuation is based solely on what the startup deems appropriate. Of course if the startup aims to high it risks that there is not enough investor demand and the funding fails.

How to get started as an investor?
I just signed up online and submitted some documents to verify my identity. The process is pretty straightforward. Seedrs is open to international investors, so investors do not have to be UK residents.

After signing up, investors can browse the pitches that are currently raising money. A pitch is usually open for 60 days, but maybe closed early by the startup if the goal is reached earlier.

Seedrs Screenshot
Current screenshot showing some of the open pitches

Clicking on any one of the pitches reveals the detailed information. It also shows who has invested and how much. Investors can opt to show their bid as ‘Anonymous’ in order not to disclose thier name to the Seedrs community. When an investor likes a pitch bidding is possible through the “Invest” button. As long as the pitch is below 100% funding an investor can bid first, and pay later (within 7 days of the pitch completing 100% funding). Once the pitch reaches over 100% it is marked as “overfunding” and investors can only bid, if they have already deposited funds available in their account. Payment is possible via bank transfer or credit card.

What happens after the funding

Seedrs completes all the paperwork with the startup. As Seedrs acts as a nominee for investors the individual investor does not have to do anything. The nominee structure means that the startup does not have to deal with each of the many individual investors but rather only with Seedrs as Seedrs represents all of these investors. Seedrs charges the investors a fee of 7.5% on the profits the investors make (note that this is not a fee on the investment amount (example: an investor invests 200 GBP in a pitch. Should there be an exit later where the value of the investors shares is now 300 GBP then Seedrs charges 7.5% of the 100 GBP profit; therefore the investor would be paid back 292.50 GBP). Note that your investment will be illiquid until the exit; as there are restrictions on selling the shares. Continue reading →

Moving Mainstream – The European Alternative Finance Report

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university cambridgeThe new study ‘Moving Mainstream – The European Alternative Finance Report‘ is available now (free download). The study by the University of Cambridge and EY looks at the development of p2p lending, p2p equity, crowdfunding and other alternative finance offers in Europe and compares it to the development in the UK. The very comprehensive study combined survey results from 205 platforms in 27 European countries with 50 survey responses gathered from UK platforms as part of the Nesta Study.

P2P-Banking.com was one of the research partners in this study.

Here are the main findings from the executive summary:

Since the global financial crisis, alternative finance – which includes financial instruments and distributive channels that emerge outside of the traditional financial system – has thrived in the US, the UK and continental Europe. In particular, online alternative finance, from equity-based crowdfunding to peer-to-peer business lending, and from reward-based crowdfunding to debt-based securities, is supplying credit to SMEs, providing venture capital to start-ups, offering more diverse and transparent ways for consumers to invest or borrow money, fostering innovation, generating jobs and funding worthwhile social causes.

Key statistics moving mainstreamAlthough a number of studies, including those carried out by the University of Cambridge and its research partners, have documented the rise of crowdfunding and peer-to-peer lending in the UK, we actually know very little about the size, growth and diversity of various online platform-based alternative finance markets in key European countries. There is no independent, systematic and reliable research to scientifically benchmark the European alternative finance market, nor to inform policy-makers, brief regulators, update the press and educate the public. It is in this context that the University of Cambridge has partnered with EY and 14 leading national/regional industry associations to collect industry data directly from 255 leading platforms in Europe through a web-based questionnaire, capturing an estimated 85-90% of the European online alternative finance market.

The first pan-European study of its kind, this benchmarking research reveals that the European alternative finance market as a whole grew by 144% last year – from €1,211m in 2013 to €2,957m in 2014. Excluding the UK, the alternative finance market for the rest of Europe increased from €137m in 2012 to €338m in 2013 and reached €620m in 2014, with an average growth rate of 115% over the three years. There are a number of ways to measure performance across the various markets. In terms of total volume by individual countries in 2014, France has the second-largest online alternative finance industry with €154m, following the UK, which is an undisputed leader with a sizeable €2,337m (or £1.78bn). Germany has the third-largest online alternative finance market in Europe overall with €140m, followed by Sweden (€107m), the Netherlands (€78m) and Spain (€62m). However, if ranked on volume per capita, Estonia takes second place in Europe after the UK (€36 per capita), with €22m in total and €16 per capita.

In terms of the alternative finance models, excluding the UK, peer-to-peer consumer lending is the largest market segment in Europe, with €274.62m in 2014; reward-based crowdfunding recorded €120.33m, followed by peer-to-peer business lending (€93.1m) and equity-based crowdfunding (€82.56m). The average growth rates are also high across Europe: peer-to-peer business lending grew by 272% between 2012 and 2014, reward-based crowdfunding grew by 127%, equity-based crowdfunding grew by 116% and peer-to-peer consumer lending grew by 113% in the same period.

Collectively, the European alternative finance market, excluding the UK, is estimated to have provided €385m worth of early-stage, growth and working capital financing to nearly 10,000 European start-ups and SMEs during the last three years, of which €201.43m was funded in 2014 alone. Based on the average growth rates between 2012 and 2014, excluding the UK, the European online alternative finance market is likely to exceed €1,300m in 2015. Including the UK, the overall European alternative industry is on track to grow beyond €7,000m in 2015 if the market fundamentals remain sound and growth continues apace.

Continue reading →

P2P Lending Marketplace is Raising 2M GBP via Seedrs

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Assetz LogoP2P Lending Marketplace AssetzCapital is raising 2 million GBP via a convertible note on Seedrs from the crowd.

Assetz Capital is one of the established, medium sized UK p2p lending marketplaces. Since inception they originated over 60 million GBP in loan volume. I covered Assetz Capital in when I visited them last year. How a convertible note pitch differs from a ‘normal’ equity pitch on Seedrs is described in this document.

Minimum investment is 10 GBP. The valuation cap for this convertible is 60 million GBP and the discount rate is 10% provided that the convertible shares are issued within 12 months. In the event that the convertible shares are issued after 12 months, the discount rate shall increase by a rate of 0.8% per calendar month for a further 11 months, increasing to 20% in the 24th month. The discount rate will then be capped at 20% thereafter. Continue reading →

Two UK Crowdfunding Platforms Currently Raising Money From The Crowd at Seedrs – Crowdlords & Trillion Fund

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At the moment there is not only one but two open pitches from UK crowdfunding/fintech startups  raising money in exchange for equity at Seedrs.
I invested small amounts in both of them and will become a shareholder when the pitches successfully close.

Crowdlords

Crowdlords is a pre-launch two-sided, residential buy-to let crowdfunding platform that wants to bring together landlords and investors.

Landlords who are fully vetted, would identify the properties and be required to invest a minimum amount themselves – the balance is sourced from Investors. Each property would be held in a Special Purpose Vehicle (SPV) with the shareholdings in each SPV split between the Landlord and the Investors.

Investors would be able to select from a range of properties and investments. Investors would gain returns from ongoing underlying rental income and a proportionate share of sale proceeds when the property is sold. Investors could invest fairly modest sums with a minimum investment of 1,000 GBP.

Crowdlords is pitching for 90,000 GBP offering 10% equity (810,000 GBP pre-money valuation). The pitch is currntly 83% filled.

Trillion Fund

Trillion Fund is a crowdfunding platform that raises money for environmental and social projects from ordinary people who want better returns.

Trillion focuses on loan based crowdfunding in green energy and social investment, and earns a percentage of funds raised, paid by borrowers, and an annual percentage of funds lent, paid by the lenders.

Using profit as motivation Trillion aims to re-engage consumers with their money and help them make a profit and make a difference. Trillion effectively operates a two sided network, bringing together people with money and those who need it.

Trillion claims that the recent merger with Buzzbnk has made it one of the largest social crowdfunding business in the UK.

The pitch seeks to raise 500,000 GBP in exchange for 7.7% equity (6M GBP pre-money valuation). The pitch just started and is currently 2.7% filled. Continue reading →

Extreme Crowdinvesting Experiment – How I invested in a Startup that had no Idea

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Roughly a year ago I came across an idea that sounded extreme. There was a crowdfunding pitch for a startup that had no team and no idea. What? Well the idea was that the startup once founded would use the ‘Design Thinking’ method to develop the idea and the business model in the first months after funding and company foundation. The pitch was for 100,000 CHF. It had a strange appeal to me, so I invested a small amount. The pitch did fully fun and 4 applicants – students of the university of St. Gallen, Switzerland – were recruited as founders and off they went. The founders are not paid a salary but compensated in shares for their work.

Soon the appropriately named ‘ Design Thinking Startup AG’ was incorporated.

One year of development

As investor I received nearly weekly updates newsletter-style on what the team was currently up to. Through 38 of these reports I was fascinated by successes, drawbacks, ideas and lots of work done. Initially the team sought idea and coaching, used the Design Thinking method to identify problems (needfinding) and did market research. Finally around week 11 one of the ideas substantiated into the idea that was developed.

In between there were events for investors and shareholder meetings approving the decisions proposed by the team.

Then a prototype was built, a development company contracted, the team moved office to Zurich and a second funding round was raised (again through crowdinvesting). During the last weeks the product was presented, tested and finalized in a closed beta.

The result

Last Friday Stablish.me went live. Stablish.me has set itself the goal to redefine the résumé. Further, the company aims to replace it through it’s social endorsement network in the
long term. Continue reading →

How My Appbackr Experience Failed My Expectations

wiseclerk 10 Comments

Appbackr is a marketplace where everyone can crowdinvest in IPhone apps and Android apps. The way it works is that investors prefund future sales of apps. The investor buys the copies at a lower wholesale prices and makes a profit later, when the copies actually sell in the app store. I described the concept in more detail in my article ‘Experimenting with Appbackr – Promising and Trecherous‘. In the 6 month that have passed since that review, my experience turned worse.

There are two major problems with Appbackr

  1. Even when Apps achieved the sales of the copies the investors have pre- purchased, then it still frequently happens that the investors do not get payed on time. The information given in the dashboard (see screenshot) is useless, because the given dates lapse without payment or notice. On March 24th, the payout schedule said I would be paid 53 US$ for sales of the SOS Friends Alert App – the date passed, no payment arrived, no information was given.
    Even worse the interface is no help at all in keeping track – it just pretends the payment arrived (for the SOS Friends Alert app the status is ‘Completed’ saying 57 US$ earned 12 US$ profit, while in reality I did not receive any payments for this app so far. The backrs are left to manually keep track on their own.
  2. Appbackr has no means to enforce agreements with developers. Two concept apps I funded (Boogie Monster and Glass Ceiling) are 6 and 4 months past announced launch date – again no notice, nothing happening. Vy Nguyen, Manager Finance at Appbackr answered my complaints in January saying: ‘appbackr will try its best to enforce the contracts facilitated on its marketplace, but as the actual contract is between the Developer and Buyer, we can only negotiate on your behalf. Similar to other marketplaces, the main communications should be between the Developers and Buyers, with appbackr’s role being to facilitate that communication.
    Our goal in making payment details available in the myappbackr dashboard was to help backrs of multiple apps reconcile their monthly payments from appbackr, track down exactly which payments, if any, have been delayed, and contact the developer directly as necessary. We do have a late payment notification in place, but it is only set to go out to backrs when the payment is delayed for longer than 1 month.’. That sounds pretty weak to me.

Furthermore Appbackr is taking steps in the wrong direction. They removed (without explanation) the statistics tab which I predominately used to screen and select IPhone apps on the marketplace to invest in. Continue reading →