One thing I do like about CC in comparison even though its a very simple ting is the CH links and the BS and PL highlights they have on the company page which I think brings value. Of course we can all click to CH and look at filings but their presentation even though simple to do adds a fair bit of value when scanning possible investments quickly for ones to look more into
Hi Alex,
Lots of great questions here. In the interest of trying to get to as many folks as possible, Iāll give reasonably short answers to each (in the same order as yours).
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Yes, loads. One of the things I love about early-stage investment is how unexpected it can be. The number of companies Iāve seen through the years where I didnāt quite get it or see the vision at first, but then I saw them execute and it all became clear, is too long to list. Of course there are also those that have gone in the other direction, but thatās all part of this asset class!
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A few themes Iāve seen in successful companies (none that are earth-shatteringly new) are a clearly articulated vision, a problem that actually needs solving (rather than a solution in search of a problem), ruthless execution, and honest and transparent founders.
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As for the future for crowdfunding and the future for Seedrs, the short answer is that I think we have the potential to be the go-to marketplace for private company investment globally. Still a ways to go to get there, but thatās where weāre heading!
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We will roll out EU expansion as soon as the new EU regulation comes into force. It is slated to be adopted (after many years of work) within the next few weeks and then will come into force 12 months after that.
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Certainly one of the most impactful books Iāve read was āFrom Wall Street to Main Streetā, the biography of Charles Merrill (founder of Merrill Lynch). I have long said that what Merrill did for public market investing ā bringing it from an elite game to a widely-accepted way for the mass affluent to build capital ā is what weāre trying to do for private investing.
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Yes, an app is coming very soon!
Cheers,
Jeff
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Good point/suggestion. Weāve recently integrated with CityFALCON as a first step toward providing more third-party information about our companies, but the point about CH integration is a very valid one and something weāre looking at.
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Thanks, Iāll keep an eye out on that expanding. Would love to add it holfolio.com once its available!
Hi sb87!
We were of course very sorry to see what happened to WIM. They were very supportive shareholders of ours, and we always found them a collaborative and sophisticated group of people to work with.
We did suffer a short-term impact from the whole thing, and it was one of the main reasons we decided not to go to market for a full Series B last year (as there was uncertainty around what would happen to their holding in us and whether it would create an overhang). But the fund through which they invested in us ā Woodford Patient Capital Trust ā has now been handed over to Schroders (under the name Schroders UK Public Private Trust, or SUPP), and they have made clear they intend to continue to be a supportive investors. So year, weāre through the other side of it, but I think it is fair to say it was a challenging period for everyone.
Cheers,
Jeff
WIM were clearly supportive of the early stage sector, do you think the demise may also have an impact on companies getting a decent 2nd or 3rd round done as one of the go to cornerstone investors has now gone. I am assuming that Schroders of course are managing the maintaining and exiting rather than looking to place a lot more going forward.
Hi hongkonggooner,
The Fintech Bridge was very much meant to be an initial exploration of Hong Kong and Asian markets generally. We donāt have immediate plans to enter Asia, and for now weāre very much focused on our European expansion following implementation of the new EU regulation. But we do see a huge amount of potential in Hong Kong, and we hope that down the road we will be able to do something there.
As for regulation, our view is that crowdfunding cannot work if it is limited to high net worth investors. The whole basis of crowdfunding is that customers, friends and ordinary investors can invest alongside the rich, and if you take them out, you just have the old, clubby, inefficient angel game. My view is that the UK balance is the right one: investor screening is not about how much money you have but about your ability to demonstrate that you understand the risks of what youāre investing in. In my mind that is the best, and probably only, way for crowdfunding to flourish while still protecting investors.
Cheers,
Jeff
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Sorry not talking Seedrs itself here, but early stage companies in general
Yes , I think for it to be called Crowd in Hk is a bit of a spin when you need 1m USD liquid for a seat at the table . Early capital is hard to find in HK , but if rules stay as they are I dont see a good business currently for someone like Seedrs etc here
I think WIMās downfall probably does have an impact on life sciences investing, as they were such a dominant force in that sector. But they werenāt all that big a player in other private tech companies (to my knowledge they only had three fintechs in the portfolio, of which we were one), so I donāt think their withdrawal from the market will have a material impact outside of life sciences. And very few of Seedrsā portfolio companies are in life sciences, so we donāt see the absence of WIM as impacting follow-on rounds for our companies.
As for Schroders, I do think itās their intention to deploy capital into new investments, but I donāt know where their priorities lie.
Agreed! But I think regulation will evolve worldwide ā with the new EU rules coming in, and even the U.S. (which has had one of the least friendly regimes) showing signs of loosening up, I have to believe HK will follow suitā¦
Thanks , i had not put the life science sector affected by this, very good point as thats a special risk appetite investor for that stuff and not easy to replace
We actually do extensive health monitoring of our portfolio companies, including regular direct check-ins with them as well as monitoring external sources (such as social media as you say). I donāt think we have been nearly as good about communicating this as we should have been: we probably made the mistake of just sort of assuming that everyone would know how much we were doing behind the scenes, when in reality I think a lot of people have the same question that you do. We need to be much more transparent and clear about what we do (and also what we donāt do ā for example, we very explicitly arenāt turnaround specialists, and so when a business is in trouble, we can do a lot to protect shareholder interests but canāt suddenly take operational responsibility for the company).
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Hey Adam,
I think regulation has been a big part of it. Although this is a bit broad brush, I often like to say the the UK is the only market that has both of the following characteristics: (1) itās big and (2) it has a well-balanced regulatory regime. No one else has both of those ā you have big markets like the U.S., France and Germany that have not had particularly good regimes; or you have decent regulatory regimes in small countries (such as Finland). So the UK has had a significant advantage in the space, although with the forthcoming EU regulation ā which will be a well-balanced regulatory regime across the entirety of the EU ā thatās going to changeā¦
On your second question, I definitely think that having had other players in the market, especially in early days, was very helpful in establishing the category. We learned a lot from each otherās successes and mistakes, and I think we all contributed to raising the profile of the category. Iām less sure that thatās still the case, but it certainly was at the beginning.
Cheers,
Jeff
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Hey saf,
Thanks for the questions.
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I believe that all of that information is now set out in our Tax Statements, which you can download from your Portfolio page. If you think anything is missing, drop an email to support@seedrs.com, and we will see if we can change it.
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We employ and extensive due diligence process, and you can see the details at: https://learn-cdn.seedrs.com/wp-content/uploads/2018/06/28113510/S16_dd_charter_mar2017_v1_lr_2.pdf
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The issue of information in pre-emption rounds in a tricky one. In the āofflineā world, when a company raises additional capital, the information made available to earlier investors is usually very minimal ā generally theyāre just told about the investment round and asked whether they want to pre-empt. It is therefore difficult to persuade our portfolio companies to do a whole lot more than that for crowd investors. But to the more general point, we are constantly working to ensure that better information is provided on an ongoing basis to investors in a given business, both from the company itself and from third-party sources that we bring in.
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In terms of showing past projections vs. actuals, this is actually something we think should be investor-led. If we tell a company that is raising a subsequent round that they should disclose their past projections, we will usually get pushback as being too prescriptive. But if investors say to them that theyāll only consider investing if the past projections are made available, then itās the companyās choice whether or not to risk losing the investment.
Cheers,
Jeff
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Thanks to everyone for having me as part of this and for your good questions. I have to run to a meeting now but follow-up on unanswered questions (or anything more that comes in) later today!
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Yes thats very true. I donāt think anyone expects a knight in shining armour and 100% thats not the role of the nominee , but my concern is that in a lot of cases due to companies failing to keep up with say quarterly updates the wisdom and network of the crowd cannot help improve a situation as they are blind.
Unfortunately , and I might have been unlucky with my dozen or so the communication has tailed off dramatically.
Also its worth saying this is also the case with some ātraditionalā angel investments so not ECF specific. Once money is in the bag, a lot of things seem to slip
thanks very much , this type of session is very useful i think
Thanks Jeff
Yeah itās in the PDF but not in the CSV Export in the Portfolio. Having it in the CSV would make it easier to use the information. Iāll pop it in a email.
Stepping back a bit, as investors we cannot even easily obtain past projections.
It also feels like there should be a way to feedback directly on a campaign using standardised responses for not investing e.g. lack of information, poor engagement. Similarly one could be added for investing. It could be a effective way to surface crowd sentiment towards a campaign. It could also be useful information Seedrs can later use to nudge companies.
One thing that I would love to Seedrs look at and something that I think would make them a āmarket leaderā would be to implement a system where companies raising are obliged to use say Xero/Quickbooks etc where there is a monthly feed to the Nominee.
I see many benefits to this
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the companies have to keep up top date books (i think many fail as they dont keep books until end of year and are Bank Statement managed)
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Early warning system of problems
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Seedrs could benchmark key KPI against peers especially working capital types like debtors days etc
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If there are signs of debt issues etc then Seedrs could intro to factors , or other professional service firms they have relationships with and could bring Seedrs itself a referral income stream
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The founder would have better tools to actually manage the business as I do have concerns that many founders do not really run timely books. With the use of the current easy to use software there is no excuse for that really, especially when you have investors money
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Founders may say its to much confidential info given out, I would say for most ECF companies they would be over valuing their importance and secret sauce and that the benefits of having a 3rd eye would outweigh the secrecy
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If Seedrs went for something like this I would see their funded companies as lower risk and be looking to move more allocation there than others . As an incentive you could take 100 BP off the fee for those that sign up to it .
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On a subsequent round or a insti type round having a decent set of book might add some to the valuation and make any DD a lot cleaner
I have seen a investor group use this type of stick and it has worked very well at this group https://hq.hatcher.com/ where they are also using an AI element to look at info they get each month
I know that this would be way more than the nominee has as responsibility and you need to be careful on what you are perceived to be doing and expectations, but something like this could help a lot I think bringing discipline to founders, reducing risk, making Seedrs a go to choice for risk managed investments and also bring several potential affiliate/referral/partner revenue streams to Seedrs.
As an investor if you saw potential problems as you saw timely data and acted by intros or referring and helped solve the problem I would not have any issue with Seedrs taking referral fees. I donāt know if that would trouble the boys at FCA though