Thomas Davies is Chief Investment Officer at Seedrs and was a key panel guest at our latest Crowdfinders Live event. In this edition of A View from the Shapers, Changers & Money Makers, we asked Thomas for more insider insights into the world of equity crowdfunding and how he thinks the industry will evolve in the next few years.
1. How do you expect crowdfunding to develop over the next five years?
The industry continues to grow at over 300% per year while both the number and types of businesses choosing to use equity crowdfunding continues to expand substantially. More widespread education of the products available, the demystification of these products, and the realisation by consumers that they can get a better, more interesting experience than using traditional finance providers are all contributing to this accelerated growth.
Seedrs is now the most active seed-stage equity investor in the UK, with £130 million invested on the platform since its launch in July 2012. But this is just pocket change compared to where the industry will be in the future. We have always believed that, at scale, equity crowdfunding will see as much as £5 billion invested in the UK each year and £100 billion invested worldwide. We are confident those numbers can be achieved by 2025.
2. Do you foresee any challenges that will need addressing in the crowdfunding space?
While the equity crowdfunding space has grown at a phenomenal pace over the past few years, it is still a new and immature market that needs protecting. One of the largest potential threats to the industry would be a high-profile failure on a high-profile platform because said platform failed to sufficiently protect its customers; investors failing to receive the returns they were due or entrepreneurs not being able to raise further finance or even sell their company because of poor deal structuring by the crowdfunding platform. Since the very inception of Seedrs we have put the best interests of our investors and entrepreneurs at the heart of everything we do, and we hope that other platforms start to follow suit.
As the UK’s number one equity crowdfunding platform, our main concern is not whether a business fails because it was a commercial failure (start-ups are inherently risky and we encourage diversification to combat this), but rather the investors do not make a return when the company becomes a huge success. While this asset class is high risk, significant returns can be made. But in order to make these returns, investors must not only diversify their portfolio, but ensure that the platform that they are using is affording them sufficient protections to mitigate the chances of their returns being diminished by unscrupulous professional investors further down the road.
3. What have been some of the most eye-catching investments facilitated on the Seedrs platform over the past year? What do these tell us about current trends in the market?
I couldn’t possibly name just one, because we have seen so many success stories in the 350-plus deals we have funded since Seedrs launched in 2012.
But a few standout rounds on Seedrs in the last year included:
- UK challenger bank Tandem, which raised £2.2 million from 1,715 investors
- The UK’s fastest growing P2P lender Landbay, which recently announced a partnership with Zoopla and raised £1.6 million from 407 investors
- Healthy eating high street brand, Tossed, which raised £1.34 million from 661 investors
- Award-winning cloud accounting software, FreeAgent, which raised £1.21 million from over 700 investors
- FinTech50 2015 member, annual travel ticket subscription service CommuterClub, which raised £1.2 million from 174 investors
- Guilt-free ice cream company Oppo, which raised £650,011 from 666 investors
It has been very exciting to see companies ranging from tech start-ups and consumer product makers to restaurants and theatre productions all use Seedrs to raise capital and build a community as they pursue growth.
4. What does Seedrs have planned for the future?
The Seedrs team is ambitious; our focus is to grow the business significantly and continue to build a sustainable asset class. This means recognising the potential not just in our home UK market but internationally. The aim is to have a significant presence in Europe and the US, and in time maybe even further afield.
5. And finally, aside from London, what entrepreneurial hotspots have you noticed emerging across the rest of the UK?
Bristol, Cambridge, Oxford, Brighton; these locations are close enough to London to be able to access the capital’s resources easily, and they are among the only cities outside of London that have a fair level of economic activity.
To find out more about Seedrs, visit: https://www.seedrs.com/
Or follow Thomas on Twitter: @tomseedrs