A lot is changing for the better at the moment Seedrs. Constant change is the only constant. Here are the headlines:
1. Merger Seedrs & Crowdcube (merger) cancelled
2. Strong Seedrs Finance & New round of financing
PART 2 (follows until April 10th)
3. Growing startup pipeline
4. Largest "Secondary" campaign / runner-up Cheeky Panda
5. First co-invest campaign with VC Fund 'Passion Capital' via Seedrs
1. Seedrs & Crowdcube (merger) merger cancelled
In October 2020, Seedrs and Crowdcube announced that the two crowd investing platforms were planning a merger. To this end, it was suggested that Crowdcube shareholders should own 60% from the new company and Seedr's shareholders should own 40%. The competition authority (UK Competition and Markets Authority, CMA for short) has expressed concerns about this merger of the two largest UK platforms and thus prevented the merger. After the details of their review were published in March 2021, Crowdcube and Seedrs then announced that they would cancel the merger and continue to operate as separate platforms.
Personally, I'm very happy that the merger didn't come about. I also participated in Seedrs funding rounds as a startup and am therefore a Seedrs shareholder. I believe Seedrs is a strong platform with relatively good due diligence. Equal interests between Seedrs and investors are assured that Seedrs makes a lot of money when the investors are successful. This is ensured by the "carry" structure, through which Seedrs gets 7.5% from the profit of the investors when selling shares (via an exit or via the secondary market). Crowdcube, on the other hand, attracts very large financing rounds with media appeal and earns money directly when the investment is made. As a result, startup reporting on Crowdcube is almost non-existent and, in my opinion, Crowdcube doesn't care whether the startups are ultimately successful or the investors lose money. This also means that Crowdcube allows startup ratings that are more exaggerated and the investor gets a worse deal. As you can see, I'm not particularly convinced of Crowdcube. I also have individual and smaller investments via Crowdcube (e.g. in Freetrade, Chip, Mintos, Fullgreen). Had the merger gone through, I probably would have tried to sell my Seedrs stake as I'm not particularly fond of Crowdcube.
2. Strong Seedrs finances & new round of funding
I'm a little pissed off at this new point, now brought up by Seedrs: it was a double bottom game in connection with the merger, and it's a regularly used psychological trick in the startup business. When the desired merger of Seedrs and Crowdcube was announced, both platforms said it was the best way to ensure the survival of both companies. Crowdcube proclaimed that at least one of the two companies alone not survive (probably meaning Seedrs). Seedrs added that funding opportunities for startups have deteriorated significantly in recent months. In my opinion, all this was deliberately intended to give the impression that the merger would be the only option. Ultimately, the hidden suggestion was "Dear shareholders, agree to the merger or your investment is at serious risk". I've seen startups do this gun-to-the-chest style a few times before to provoke a certain desired outcome—an outcome that usually ends up making the shareholder far worse off than is actually necessary. From my point of view solely to maximize the financial result for the founders or other (new) large investors. But back to topic, strong Seedrs finances:
The merger has been canceled and Seedrs has an ace up its sleeve: Business has been very positive in the recent past and Seedrs is showing strength, so that a new funding round has now been agreed with institutional investors. Seedrs is thus in a position to pursue the previously paused growth activities again. This includes, among other things, the expansion plans into other EU countries, in which the management of Seedrs rightly sees great potential.
According to the latest Seedrs Shareholder Letter, 2020 sales are approximately GBP 5.2MM (+24% vs. 2019) and Q1 2021 sales are expected to be GBP 2MM. The operating loss was reduced to GBP 4.1MM in 2020 (from GBP 5.1MM in the previous year). For Q1 2021, Seedrs is expected to be close to breakeven.
For the upcoming financing round, Seedrs has secured the participation of the Future Fund and is raising a capital round of GBP 4.5MM in total, plus a proportionate participation opportunity for all previous Seedrs crowd investors.
Part 2 of this post will be published in the coming days. Stay tuned!