AMA: Jeff Lynn, Co-founder of Seedrs

Investing and Markets 📈 Startups Crowdfunding 🔨
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This is an interesting idea, but it’s very tough in practice for a few reasons.

One is simply that imposing an accounting system on a company – which very likely already has its own system in place – is a very big ask, and it will put off many companies (particularly the best organised/most sophisticated ones) from using us. I can tell you that, at Seedrs, we have spent a vast amount of time and resource building out our accounting systems, and if a prospective investor wanted us to switch over or somehow modify it for their own information reporting needs, we would be very reluctant to engage. I think many companies will feel the same.

What we could do, of course, is insist on monthly or quarterly management accounts. This also creates a burden that would deter some companies, but it’s probably more manageable. The bigger issue is that, especially at the early stages of a business, financials only tell a very small part of the story. Often it would be far more relevant to look at things like user growth or leads, and it is different for every business. So what we’d be talking about here is a much more in-depth level of ongoing analysis of each business, and that really requires a different model, with different pricing – that’s the sort of thing that VCs charge 2-and-20 for.

So I think our main focus really has to be on improving the consistency of information we receive now. Many companies provide us exactly what we need to have a broad sense of their performance, and perhaps in some cases the bigger issue is that we/they aren’t then communicating that well enough to investors. But we are very conscious that some companies do not provide this information in as frequent or fulsome a manner as we would like, and that’s something we are constantly working to improve.

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So do you do a compatibility check? And if you do have you ever decided that a certain company is not the right fit even though other things check out?

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Agree its not something that a established company would look to do , to be honest looking more at the early stage who are probably 2 or 3 employees and using quickbooks or xero currently , or handing the accountant a box of papers at the end of the year. One thing I think that can blow up at early companies is that the company can be driven by the founder who is either a tech/dev or marketing/sales type or you have a combo of the two and no in house accounting function.

That makes sense early stage and probably even after raising up to say 500k as a FT accountant is not cheap. I just think some of these 2 , 3, 4 man companies that are tech/marketing and sales driven could make good use of a simple process for accounts and a bit of help to spot possible issues, main one being debt collection probably and runway management.

Also agree early stage the keys are CAC, churn, LTV and ROI on google/FB ad spend etc rather than the BS.

I think the burden is a bit fo a false one (i have heard it and used it myself …) , a company at any stage should really know what its debtors are , who to chase, what its bills are and runway. If not they are a ticking time bomb as working capital will get squeezed and runway will creep up on them

But yep , its not the nominees role for sure , but could be a added value service. It would also maybe help if there were more advisors who charged sensible amounts to help early stage on basic processes. Unfortunately many advisors have taken fast cash/equity and not been seen again, a Seedrs “verified” list with rates that are sensible might also be a Seedrs value add. Really thinking more about overall risk management and how Seedrs can make some fees along the way and improve chance of success for its companies

Same applies to most angel investments of course and not a factor just for ECF companies

A consistent standard template with 6 or 7 key numbers would be all that was needed really to help investors.

Key one for me is always runway on early stage as that is what kills most as it is in most cases tried to fix way way too late

thanks for all your inputs Jeff , very very helpful . I have generally been quite negative about my experiences on Seedrs and you are right most of that has been driven by not knowing what processes are and communication, or conflicting information. Things like this really help

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Didn’t you write ‘Mr Blue Sky’? #ask-me-anything

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So I learned a few things here that I suspected all along (and I couldn’t read all the corporate speak unfortunately): 1) your money is at risk, even more so when you’re investing in private early stage firms; 2) do your own homework, noone else will; 3) as with insurance claims, you do all the work if things go south but it’s probably too late; 4) noone forces us to invest in early stage companies - it’s actually our own fault if we do so we can’t complain :slight_smile:; 5) crowdfunding platforms are also businesses that have to protect own interests and shareholders/founders; 6) large VC investors get to see insider information that we can’t access - tough luck, get on with it.

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