Earlier this week, investment platforms Crowdcube and Seedrs announced that they have agreed on terms for a merger, in a move that will accelerate plans to create the world’s largest private equity marketplace and further democratise investment.
On completion, Jeff Kelisky, Seedrs’ CEO, will serve as CEO of the combined company, and Darren Westlake, Crowdcube’s CEO and co-founder, will serve as Executive Chairman. The management team will include key leaders from both businesses. The combined company aims to deliver new innovations and products that will make it significantly easier, more affordable and valuable for ambitious businesses to raise growth finance, and investors will have an even greater selection of investment opportunities with richer investment tools.
Darren Westlake, CEO and co-founder of Crowdcube, commented: “Equity crowdfunding has redefined how many ambitious businesses raise investment and engage with their customers. Today’s agreement is an incredibly exciting milestone that will benefit high growth businesses, their investors who believe in their vision and the wider entrepreneurial ecosystem that supports them. Together with Seedrs, we can accelerate plans to further expand in the UK and overseas, launch innovative new products and improve our customers’ experience.”
Jeff Kelisky, CEO of Seedrs, said: “We are both fintech pioneers that have challenged the landscape of capital raising in Europe, building marketplaces for private equity investment. We believe that you need to be a player of greater scale to serve companies and the investors who support them. Now is the right time to bring our strengths together, in order to meet our common mission to deliver a step-change in the accessibility and efficiency within private company investing. This will not only create value for ambitious companies and their investors, but also for the economies and communities that they serve. As we look to the future, we’ll be well-positioned to build on our combined strengths and create a powerful global private equity marketplace that will transform the ecosystem of equity finance globally.”
The two leading investment platforms play a key role in Europe’s fast-growing equity funding ecosystem, both through their success of primary raises through crowdfunding and the scaling of their secondary offerings and wider marketplace initiatives. Since 2011, £2 billion has been invested in campaigns on Crowdcube and Seedrs. Together they have helped more than 1,500 companies secure investment, including Brewdog, Revolut, Perkbox. In the last 6 months, they have seen significant milestones reached such as Crowdcube’s campaigns with what3words and Moneybox, two of the most popular equity crowdfunding campaigns ever, and over £1million of private company shares traded in a single month on the Seedrs secondary market.
Innovate Finance was one of the first to send their congratulations, CEO Charlotte Crosswell said, “Innovate Finance congratulates our members Crowdcube and Seedrs. Both are Fintech pioneers that have brought competition and increased access to the private equity market in Europe. This is a natural evolution of a maturing UK Fintech market, as well as a validation of the companies’ technology and quality of the platforms they have built, and we wish them well for the months ahead.”
The UK Crowdfunding Association (UKCFA) also celebrated the news, adding that this was a moment in crowdfunding history. A spokesperson said: “The merger of Crowdcube and Seedrs creates a real powerhouse of start-up and growth finance for SMEs. A decade ago, Seedrs and Crowdcube pioneered this important sector, starting a revolution in finance which has been taken up around the world, and this merger gives the UK a powerful player to maintain that leadership position for the decades to come.”
However, not all believe that the merger is unexpected. Andy Moseby, Corporate Partner at Kemp Little commented: “It’s been described as a merger, but the disclosed terms show this as Crowdcube buying Seedrs in what looks to be a purely equity deal, with the shareholders of Seedrs receiving 40% of the combined business and the shareholders of Crowdcube retaining 60%. This reflects the market valuation of the two, with Crowdcube clearly the dominant party.
“Earlier this year, Seedrs reported a 20% drop in activity through the platform compared to the average across the previous three years, seeing reduced investor appetite. We hope the merger will help reinvigorate investment in the UK start-up community which, post-COVID, has struggled to access non-Governmental funding. The ecosystem is crying out for innovative new funding methods; merely combining the platforms of Crowdcube and Seedrs together may not be enough to see a new boom in fundraising for UK start-ups.”
Luke Davis, CEO and Founder of EIS specialist VC firm, IW Capital, agrees that the timing is key. He said, “For thousands of businesses that will start-up over the next year or so, they will have to navigate a post-pandemic economy; one never seen before in recent times. With many existing businesses taking on debt to see them through lockdown, start-up capital in the form of private equity has never been more attractive.
“However, crowdfunding is not always the best option for scaling businesses and business leaders need to be made aware of all the options, even just within the private equity space. Each business is different and requires a slightly different approach, and VC private equity can help tailor a solution of most businesses looking to grow.”
The completion of the merger is still subject to approval by, among others, the UK Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA) and shareholders of the two companies as well as the sanction of the Court. The transaction is expected to be completed in late 2020/early 2021.