Seedrs

Idea

Introduction

Seedrs is an online, cross-border platform for discovering and investing in great startups. We let people invest as little or as much as they like in startups they choose, and we let entrepreneurs raise capital from friends, family, their communities, angels and the crowds, all through a simple online process.

Seedrs sits in the fast-growing "equity crowdfunding" space, and since our launch in July 2012, we have become one of the leading platforms of our kind globally. But we are about more than just crowdfunding: our goal is to provide the architecture and infrastructure for the whole universe of private investments in early-stage businesses. This means that we seek not only to aggregate small "crowd" investments but also to (1) process and administer angel and group transactions, (2) fund accelerator and incubator cohorts and (3) create products and structures to give a wide range of investor types exposure to startups as an asset class.

Seedrs has now opened its doors to both investors and entrepreneurs throughout Europe, making us the first widely cross-border equity crowdfunding platform in the world. And we are only just getting started.

Intended impact

Opacity and transaction costs create a profound market failure for seed and early-stage capital in Europe. Seedrs changes that.

MARKET FAILURE

There are vast numbers of nascent and aspiring startups who need between £/€ 10K and £/€ 250K to take their first steps. This capital can be the toughest to access due to the lack of market transparency and the transaction costs of making small investments.

Meanwhile, investing in startups appeals to many people for many reasons, including not just financial returns but also the excitement factor of being a "Dragon" and the desire to support businesses started by friends, family and community members. However, the transaction costs of making investments mean only people with lots of time and money invest can off-line.

OUR SOLUTION

Seedrs solves this market failure by providing a simple, online platform that benefits entrepreneurs and investors in five ways:

1. Money. We give entrepreneurs access to capital from a wide range of investors, and we give investors the opportunity to invest however much they like and earn returns on dividend or exit.

2. Support. Entrepreneurs can get advice, support and connections from their wide base of investors, while investors can get involved in their investee companies or else be passive and watch them grow from afar.

3. Validation. Entrepreneurs get affirmation from lots of investors voting with their wallets; meanwhile, investors get the benefit of the wisdom of the crowds in selecting their investments.

4. Price. For entrepreneurs our commission is often less expensive than paying a lawyer just to document the deal, while the carry we charge to investors is significantly less than they would pay to a fund manager.

5. Simplicity. Because we hold and administer the shares of each investee company as nominee, entrepreneurs only need to face one legal shareholder, while investors know that a professional firm is enforcing their rights through the lifecycle of the investment.

The following video explain how our nominee structure works, compared to many other platforms. We suggest that you watch this video in full screen in order to be able to read the text.

Substantial accomplishments to date

Seedrs has accomplished a significant amount since its inception. Among our more notable achievements are:

METRICS

- 49 deals funded, with 600% annualised growth in investments
- 80% quarter-on-quarter revenue growth vs. 6% quarter-on-quarter cost growth
- Over 25,000 members

FIRSTS

We were the first equity crowdfunding platform in the world to:

- Receive regulatory approval
- Launch a crowdfunded "fund"
- Facilitate government investment into a startup
- Operate on a fully cross-border basis

ACCOLADES

- Won London Web Summit startup competition (February 2012)
- Named one of the Top 20 Startups for 2013 by startups.co.uk (December 2012)
- Included in the Accelerate 250 group of Britain's 250 fastest-growing companies (June 2013)
- Named to the Silicon Valley Comes to the UK 100 Club of businesses with the potential to generate £100 million in annual revenues in three to five years (November 2013)

Monetisation strategy

Seedrs earns money through two fees:

1. We charge startups a 7.5% commission on the funds they raise. This means that if a startup raises £50,000, they get £46,250, and we earn £3,750.

2. We charge investors a 7.5% carry on any profits they make. This means that if an investor buys shares for £1,000 and sells them for £5,000, we earn 7.5% of the £4,000 profit, being £300.

Use of proceeds

We intend to use the proceeds of this fundraising round for general working capital purposes as we continue to grow the business toward profitability. Our expenses have historically broken down roughly as follows, and we anticipate a similar division going forward:

- 40% team salaries
- 30% platform development
- 15% marketing
- 7.5% legal & professional
- 7.5% other

A NOTE ON THE APPLICATION OF OUR NOMINEE STRUCTURE IN THIS INVESTMENT

As discussed in the video in the "Intended Impact" section above, Seedrs uses a nominee structure, meaning that we remain the representative of the investor throughout any investment, and we enter into a subscription agreement with each investee company. A subscription agreement is always used by venture capitalists and angel investors when they make investments, as it provides vital post-investment protection for investors and radically simpler administration for entrepreneurs, especially when seeking further funding. We firmly believe that investors and entrepreneurs who use our platform deserve the same level of protection and simplicity.

In the case of our own campaign, we want to ensure that investors have just as much protection as they would do in any other investment, while at the same time ensuring that the structure does not preclude the company from raising further funds in the future. We will therefore use the same type of nominee structure as we use for all our deals, meaning that we will act as nominee over our own shares. To avoid any conflict of interest that this could create, however, we will set up a dedicated, independent non-executive committee, elected by the investors, to vote and take all other actions in connection with the Seedrs shares.

Additionally, Seedrs always gives startups and investors the option of agreeing that an investor hold his or her shares directly rather than through our nominee structure; this option is often used in the case of significantly larger investors. We are granting our investors the same option: if you invest £25,000 or more, you are welcome to hold your shares directly and be an individual party to our subscription agreement. We will contact all investors over this threshold to ask for their preference prior to completion of the transaction.

NO FEES

As an exception to our normal practice, we will not charge any investor any fees in connection with this investment. This means that, whether you hold your shares directly or through us as nominee, you will not pay any carry or other fee whatsoever. (This has not been reflected in the Investment, Management and Nominee Agreement you will sign in making an investment, as we use a standard template, but we confirm our waiver of fees to you here and will do so again, in writing, prior to completing the investment).