Campaigns Director at Seedrs Frank Webster Chats to Startacus

by Startacus Admin

Since its launch in 2012, Seedrs has grown to become a major investment facilitator for an incredible range of startups, and has been instrumental in establishing equity crowdfunding as a mainstream source of funding for early stage and scaling startups alike.

It’s fair to say that they know startups inside and out, which is why we are so pleased that they have chosen to be major sponsor of upSTART Belfast, an international pitch battle for Tech Startups which is being hosted by Startacus at Digital DNA on June 8th.  

Frank Webster is the campaign director at Seedrs, and will be sitting on the judging panel of upSTART Belfast, to help decide which of the 25+ tech Startups will win the £50K package of prizes.

We took the opportunity to pick his ample brain about some of the finer point of equity crowdfunding- what entrepreneurs need to know, what trends are upcoming in the industry, and how startups can help to ensure maximum success from their campaign.  

Hi Frank, so aside from the technology needed to make it happen, what other factors would you say have made possible the rise of crowdfunding to one of the most important funding routes for startups?

Equity crowdfunding has become an inclusive, accessible, and rewarding way of raising money for startups and growth-focused businesses from a wide variety of sectors, and its success has been fuelled by a number of circumstances.

Before equity crowdfunding, seed-stage businesses looking to raise capital for growth - along with the many other businesses falling outside the remit of VC and angel funding – often found themselves in no-man’s land. Many relied on funding from their immediate network, but that only really works when you have friends and family who can afford the risk.

On the other side of the market, there were plenty of people interested in early-stage businesses, but had no way to invest in the asset class. If you wanted to invest in a startup as an individual, you had to be an angel investor (a wealthy individual who can normally invest a large amount of money), and had to be able to certify that you earned over £100,000 per year. At Seedrs, we think investment should be democratised, and ‘the crowd’ to invest £20, £500 or £1,000 in businesses that interest them. We launched in 2012, and are now the top seed stage investor in the UK. Equity crowdfunding is no longer just seen as ‘alternative investment’; it is fast becoming normalised.

Since Seedrs launched, more than 350 businesses of all sizes have used the platform as an efficient source of untapped capital and ordinary members of the public, across the whole of Europe, have used the platform to invest with ease in exciting growth-stage companies. This group of people can consist of customers, friends, family, colleagues, ex-colleagues, industry specialists; essentially anyone who may have an interest in the entrepreneur. This is in addition to a large and active base of investors who are looking for interesting companies to invest in as part of building a diversified portfolio of high risk, growth-focused investments. Why wouldn’t an entrepreneur want to raise capital this way? And why wouldn’t a retail investor want to take advantage of low-cost access to an exciting previously classified asset class?

What impact if any, would you say the rapid growth of crowdfunding platforms like Seedrs, and the general shift towards non-traditional finance options has had on the culture of the UK startup ecosystem?

For the entrepreneur, in addition to access to capital, ‘the shift’ is the marketing opportunity and the chance to engage with a huge prospective consumer base with a vested interest in your businesses success, rather than traditionally a single VC or angel investor (or perhaps combine all three). Equity crowdfunding gives the entrepreneur unprecedented access to a group of hundreds (and in some cases thousands) of existing and prospective customers, partners and advocates who can become shareholders in the company. Additionally, within the crowd of investors the entrepreneur may find mentors, lawyers, bankers, marketers, techies, customers, users, beta testers and so on. As advocates for your brand you can access their skills, networks and business ideas as proactively as you desire to help you on your path to growth.

Equity crowdfunding gives investors the opportunity to engage with exciting startups, giving them an unprecedented opportunity to back what could become ‘the next big thing’ but was previously in the domain of VCs or the very wealthy. It makes the early stage investment asset class accessible to ordinary people from as little as £10, giving investors class A shares, voting rights and pre-emption rights (at least when they invest on Seedrs). With investors engaged with the businesses they back, the whole ecosystem becomes a virtuous cycle, where the success of both investor and entrepreneur is aligned.

What trends can you describe in relation to the industries and sectors, which are using Seedrs as a route to securing capital over the past year or so?

There are two answers – one relates to trends in the type of businesses using Seedrs, and the other relates to what Seedrs is seeing off the back of those raises.

Seedrs is accessible for all types of businesses, we don’t want to dictate which sectors are ‘worthy’ of pitching for capital to the crowd. It’s not our job to be a gatekeeper. Instead we aim to provide access to a wide variety of businesses from seed, scale, and growth stage, with compelling campaigns that the investor can make a decision whether or not to back. As a result, we see a huge range of businesses work with us, from challenger banks and P2P lenders, to beauty services and beer brands.

The direction those businesses take after they fund is pretty similar irrespective of sector. Some will fail (early stage investments are high-risk), and there are some exciting successes – partnerships with household brands, further funding rounds, and – in the future - IPOs and exits. However for the businesses which have used Seedrs for seed stage funding, we are seeing really exciting growth - the future is certainly bright. Yet this is still an immature sector – we only went live in July 2012, and you cannot feasibly expect to see returns on investments in this asset class for 5-7 years.

All the signs for the future are positive - equity crowdfunding is here to stay. The industry continues to grow at more than 300% per year, and we are confident that £100 billion will be invested into the asset class by 2025. Equity crowdfunding is fast becoming mainstream. In 2015 alone, £64 million was invested on Seedrs platform through more than 38,000 investments.

Are there certain industries / sectors which are better suited to equity crowdfunding rather than traditional funding, and why might this be the case?

Nearly all businesses and sectors are suitable for equity crowdfunding.

At Seedrs we have funded everything from beauty and food brands to challenger banks and peer-to-peer lenders, as well as the first auction company for livestock! More than 350 deals from every imaginable sector have funded, and more than £130 million has been invested on the platform. Generally B2C companies are more attracted to this type of crowdfunding, as by default they may have customer or user networks they can leverage during a raise, but many B2B companies have done exceptionally well over the last 3 years. Seedrs is the UK’s leading Tech, Business and Finance Investor according to a recent report by third-party research company Beauhurst.

To show the wide variety of businesses that have recently funded on Seedrs here are a few successful campaigns: Landbay (PropTech): £2.6M, Coinsilium (Blockchain investment company): £1.1M, Curious Brew (craft beer): £1.7M, Tossed (healthy food on the go): £1.2M, FreeAgent (accounting software): £1M, Assetz Capital (P2P lender): £3.2M, Pod Point (electric car charging points): £1.4M, Seedrs (we did a raise using our own platform!): £2.58M, Chapel Down (wine): £3.95M.

Can you make some predictions of industries which you think are going to experience high-growth from a grassroots / startup level in the coming years?   

It’s a tough call. I’m very interested in VR as a sector that’s gaining momentum (particularly when it starts to have a major impact outside gaming). FinTech is a major sector in the UK early stage scene, and there’s a lot of buzz around insurance-tech, and artificial intelligence.

Amongst investors on Seedrs, we’ve seen a huge variety of businesses raise funding, and we’re hopeful that within the next few years investors should start to see the fruits of their investments, if they have followed advice and built diverse growth-investment portfolios, lessening the risk by backing multiple businesses from a wide variety of sectors.

If there were just 3 pieces of advice that you could give to a startup creating a campaign for equity crowdfunding what would they be?  

1) Do you have time to dedicate to your campaign? Equity crowdfunding is not a walk in the park. It takes a lot of time and effort prior to, during and post raise, so just pitching on a platform like Seedrs doesn’t mean you will be successful in raising capital. You are putting your business out there very publicly; so being sure you are confident in your target is key and coming to the raise with a support network of your own is critical

2) Are you willing to give up equity in exchange for capital? This is how equity crowdfunding works. Make sure you fully understand the difference between equity, rewards and debt-based crowdfunding before launching a campaign.

3) Make sure you select your equity crowdfunding platform carefully. Not all platforms are created equal, and there are structural differences between each one.

At Seedrs we use a nominee structure to manage the large group of small investors whilst still allowing them to have the same rights a larger investor would (voting and pre-emption rights). For entrepreneurs it means only one legal shareholder (Seedrs) appears on their cap table, even if hundreds or thousands have invested in their campaign. Seedrs also holds investor money, which means entrepreneurs, can access working capital very quickly after they reach their funding target without having to chase hundreds of individuals.

Why has Seedrs been keen to get on board with the upSTART Pitch battle and what in particular will you be looking out for from the pitching Startups?

Entrepreneurial talent can be found everywhere, but it’s one of the inefficiencies of offline fundraising that investors tend to be limited by geography. Seedrs wants to help change that, so I spent a lot of time on the road. I’ve spent quite a lot of time in Northern Ireland in the past few years, and have been really impressed by the entrepreneurial culture that is very clearly thriving – and Belfast is a really great, exciting city, so it’s always a pleasure to visit. The chance to come and build our network here is always one I’m going to take up. We’re a technology business, but you can’t beat making personal connections, so I’m looking forward to meeting as many people as I can in the short time I have.

When it comes to watching pitches, any investor will tell you that the teams can make or break an investment opportunity. Great ideas in big markets will always get investors excited. Passion and fluency is a given. But pitching is partly a sales job – it’s all about engaging the audience (and the judging panel). Finally, a personal bugbear of mine: never use notes when pitching. It makes it look like you don’t know your own business well enough.

Seedrs are a proud sponsor of upSTART - The Start Up Event at Digital DNA Belfast where startup companies pitch for a £50,000 prize! upStart Belfast has been created to reward one digital/tech startup with an amazing package of prizes that gives them professional advice and support as they develop their business. Cheers Seedrs!

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Published on: 7th June 2016