If you weren’t convinced that there was pent up demand for a crowdfunding platform in the UK where anybody can play the role of Dave McClure (I jest, a little), then think again. Seedrs, which makes it easy to invest in startups and has much coveted regulatory approval, has announced that just one month after launch, three companies have already secured their target funding.
PR-driven bragging aside, however, Seedrs is also sharing some interesting numbers exclusive to TechCrunch today. Numbers that shed a little more light on how equity-based crowdfunding might play out in the UK and perhaps further afield. But first, let’s dig into the three startups that have been funded by the platform.
London-based Digital Spin, which aims to make CAPTCHAs that are “engaging, simple and secure” — yes, CAPTCHAs! — has raised £60,000 for a 15% equity share of the company at a post-money valuation of £400k. Breaking that down further, Seedrs tells us that this amounts to 70 investors, with the average investment per investor being £857.14 or a median investment of £200. Investments ranged from £10 – £8,000.
PlayBrighter, a Wales-based startup that makes games “to help teachers teach, and to help pupils learn”, has raised £30,000 for 8% equity at a post-money valuation of £375k. 22 investors participated, with an average investment amount per investor of £1,363.63, and a median investment of £100.00. The investments ranged from £10 – £26,480. However, of note, Seedrs tell us that a single angel investor took up ~90% of this round (see below).
Lastly, Satago, based in Oxford, with its crowd-sourced data offering that aims to show how late or early business customers pay their bills, has raised £30,000 for 14% equity at a post-money valuation of £214,286. The number of investors were 61, with an average investment amount per investor of £491.80, and median investment of £130.00. Investments ranged from £10 – £5,000.
Zooming out a bit further, Seedrs says it’s amassed roughly 3,000 members, of which only 1,372 are authorised to invest. That’s because members also consist of entrepreneurs (who are presumably looking at Seedrs as a source of funding), while others have not yet taken the investment authorisation questionnaire.
Interestingly, the average number of investments per investor is 3.3, so they aren’t necessarily signing up just to take a punt on one particular startup.
In total to date, funds invested/deposited are £222,000. “This means that beyond the £120,000 invested in the three deals above, a further £102,000 has been invested in other deals that haven’t yet closed or has been deposited but not yet allocated”, explains Seedrs.
Beyond the three deals that have closed, 26 are currently on the platform seeking capital, while there are a further 63 waiting for review.
I asked Jeff Lynn, co-founder and CEO of Seedrs, what they’ve learned so far. He says that there has been “far more appetite” from high-net-worth investors than they expected.
“Many people are investing well in excess of £1,000 per transaction, and we’ve seen several investments in excess of £5,000 from traditional angels. We have always referred to ourselves as a platform for investing in startups rather than merely a crowdfunding platform, and I think this behaviour reflects that distinction: the crowd element is important, and there have been lots of investments of £100 or less, but we’re also finding that the simplicity and straightforwardness of the platform means larger investors are attracted as well.”
That’s a pretty important takeaway and potentially makes Seedrs less about the crowd and more a place for deal flow discovery, maybe, with the platform just removing more of the friction involved even for seasoned angels. It’s early days, of course, but that’s one angle worth watching out for.
Related to this, Lynn says that investors have been making a lot of use of the Q&A feature tied to each listing.
“Several larger investors have reached out directly to the entrepreneurs and met or had calls with them before making an investment.”
Less surprising is that deals tend to reach a tipping point before funding really takes off. “Once a deal gets ‘hot’, it tends to move pretty quickly”, says Lynn. “The three deals that closed represented very different types of startups, but in each case they drew some early attention and then snowballed toward closing from there.”
Furthermore, Lynn says that “investors clearly prefer deals with reasonable valuations”. Of the three deals that have closed, all had post-money valuations of £400,000 or less and “were among the lowest valuations available on the platform”.
In other words, the early signs on Seedrs point to not overvaluing your startup at what is, by its very nature, likely at the idea-stage only.