2,524 crowdsourcing and crowdfunding sites
Crowdfunding for equity is a hot topic right now. Much of the discussion centers around the JOBS Act, which is currently under deliberation by the U.S. Securities and Exchange Commission (SEC). Across the pond, however, equity-based crowdfunding has already taken off.
Last week, we spoke with Alysia Wanczyk, marketing director for the U.K.-based crowdfunding platform Seedrs, to learn about the company's progress and plans for the future. The first part of that discussion is available below; the second part can be read here.
Eric Blattberg, Crowdsourcing.org: Could you provide a brief introduction to the platform for our readers?
Alysia Wanczyk, Seedrs: Seedrs started in 2009. Our cofounders met while studying at Oxford in the UK. One is Jeff Lynn, our CEO. His background was in securities law, [first] in the U.S. and then in the U.K. And the other cofounder, Carlos Silva, was an ethical financial services hacker, so he's very well versed on security and finance. It was really Carlos Silva’s idea to open up investing to the masses. So with his and Jeff's background, they thought, “Actually, yeah, let's give this a go.” So they started embarking on the Seedrs journey.
They spent about 18 months preparing for Financial Services Authority (FSA) authorization. They wanted to open up investing in private companies to the masses, and when you're opening up securities, you need to be regulated. So they underwent that in 2009, and then once they submitted the application, it took another 13 months to receive authorization. So in May of 2012, we became the first crowdfunding platform in the world to receive regulatory approval. Essentially, in July of last year we launched to the UK, allowing anyone to invest as little as £10 into the seed stage startups on our site, and allow those seed stage entrepreneurs to raise up to £150,000 of capital from their friends, family, another independent investors.
Not to get too off track, but what does being an 'ethical financial services hacker' entail?
Well Carlos [Silva] tries not to talk too much about it, but essentially he found flaws in financial institutions' websites and then let them know, so that he could set up meetings with them to fix them. So he didn't do it for evil, he did it for good.
Well that’s good! (laughs) So what benefits does being FSA-certified offer Seedrs and its investors?
The authorization itself offers some credence and prestige to what we’re doing; it shows that we’re legitimate platform. We very much took the approach when launching that our main focus of driving growth was going to be investors, and so to build up the relationship of trust and credibility with them, we had to be authorized.
[The authorization] was very hard to get, but we’d very much love to see more and more platforms become authorized to really help develop the marketplace. And actually, while there's so much going on in the U.S. with the JOBS Act, the U.K. is really forward thinking and ahead of the curve on equity crowdfunding. There's us and there are a few other platforms coming up with FSA authorization, and we think that's great for developing the marketplace. The securities regulations in the U.K. are flexible enough to make authorization easier than it is in the U.S.
Right, I think Crowdcube was just authorized...
They have some slightly different and fewer authorizations than we do, but we welcome them into being authorized. It's only going to help make the marketplace more viable.
So since launch, how much has been invested through the platform, how many businesses have been funded, how many users does Seedrs have, etc.? I'd love to hear a quick rundown of the stats.
We've got about 12,000 users now, and that's made up of investors, entrepreneurs, and both. The majority of our users are either investors or both, and then probably about a third are just entrepreneurs. We've had 15 — about to be 16 — startups reach their target, and I believe that ends up being about £625,000 [invested through Seedrs so far].
So do you see a lot of overlap between investors and entrepreneurs on Seedrs?
Well, we get investors who see this as a great way to grow their money and participate in startups as an asset class, but then we also get people who are very entrepreneurial. Perhaps they start their own successful business and they want to give back, so they see themselves as both [investor and entrepreneur]. Or perhaps they have a really successful endeavor but have another kind of idea in the back of their mind, but they wouldn't mind throwing to the crowd to see if they could get the traction that comes with crowd investment.
And same with entrepreneurs; they'll come on to do a listing, and then they'll have a poke around and go, "Well that's actually a really clever idea, I might invest £20, £50, £100 in that startup as well." I think particularly in London, but throughout the U.K., there's this great sense of entrepreneurial spirit and excitement, which makes [investing and operating a business] not mutually exclusive, which is great.
You mentioned £20, £50, £100 — what is the actual average investment size? I'm sure there's a pretty wide range, but it'd be interesting to know how much the average Seedrs user wants to invest.
Well our smallest investment so far has been £10, for people who are just giving it a go and testing the waters, or maybe people who are building up a really large portfolio of really small investments. But we also have experienced angel professors coming onto the platform, who are investing £30,000 and £50,000. I think our largest single investment so far has been £51,000. Obviously our average changes every day, but I think that figure is currently about £1,200.
So what was the most recent company to reach its goal?
That would be Swogo, last week. They're great. They came on to raise their first round with us back in July or August and raised £17,500, which obviously isn't a lot of money, but as young tech entrepreneurs, that was just enough to get them off the ground. That money allowed them to enter beta testing and launch quickly, they got great traction, and ended up winning the NACUE Varsity Pitch, which is a prestigious competition for young entrepreneurs. From there, they launched in the U.K., launched in Europe, and were then able to come back and say, "We need a bit more now to scale up and grow even further." During that same week, they got accepted into Startupbootcamp Amsterdam. Swogo is a great group of young entrepreneurs who are the epitome of emergent British talent.
The second part of our discussion with Seedrs continues here. Also be on the lookout for our recent chat with Swogo, in which company cofounder and CEO Anthony Ng Monica offers the entrepreneur’s perspective on crowdfunding for equity.