Seedrs, a London-based equity crowdfunding platform, is in the process of getting authorisation to operate under the new EU regulation. Managing Director Kirsty Grant talked to Silicon Canals about how the new regulation would benefit the company.
“We’ve been operating in Europe since launch, really,” says Grant. “So for the last 11 years, we’ve raised for companies across 20 countries already. But what this regulation allows us to do is really go further in terms of marketing it in their home geographies, to their networks, and investors that are kind of in market.”
Seedrs’ fundraising currently happens mostly within the UK, where it is authorised by the country’s Financial Conduct Authority. Grant said obtaining the authorisation from the EU would allow the company to go “deeper” in the European market.
Grant explained that a unified crowdfunding directive enables Seedrs to access capital from across Europe. It also makes cross-border transactions simpler.
Listen to the full interview on Spotify!
The new crowdfunding directive entered application in late 2021, enabling platforms like Seedrs to provide their services EU-wide. These platforms have until November 10 to apply for the EU permit.
The reasoning behind this new regulation is that diverging licensing conditions have hampered crowdfunding platforms’ efforts to scale their services. As a result, small-scale startups have limited financing options and solo investors face higher uncertainty in cross-border investments.
Despite welcoming the regulatory development, Grant noted that there might be difficulties in settling deals due to each nation’s regulatory landscape. Because of that, Grant said Seedrs might not see an immediate growth impact after getting its EU licence.
“So you know, it’s not I don’t see it as a big bang single year, we capture the market, it will be slow burn, as we sort of, you know, focus on certain geographies and really make sure we understand that market and the needs of the founders in each of those markets,” says Grant.
Rocky ride to scale
Grant discussed Seedrs’ tough journey to scale up since its establishment over a decade ago. In late 2020, Seedrs and rival Crowdcube announced a plan to merge their platforms. The plan was eventually scrapped when UK authorities raised concerns about fair competition, to which Grant expressed her disagreement.
“Look, I don’t know that that was the best decision by the competition panel, I still don’t necessarily agree with that decision,” says Grant. “But in the end, you know, they did us a favour.”
New York-based investment platform Republic acquired Seedrs in a £86.5M (€99.95M) contract in 2021. Grant said her team was “far happier” with the future projections and global scale it could achieve with Republic, explaining that the parent company helps Seedrs achieve growth in an “organic way.”
Grant said Seedrs had done a number of co-fundraisings with Republic “across the pond.” Acquisition by Republic also enables Seedrs to enter the US market, which Grant described as difficult to enter from a regulation standpoint.
“I think the industry in the US had probably gotten big enough that it would be unlikely or take a lot of capital for us to have launched there on our own and as a partnership with Republic,” says Grant. “It’s, I think, the perfect fit, really, for us and we’re very happy with it.”
Drawing in more investors
According to Grant, Seedrs hopes to attract more investors with its offerings. Many investors have access to this asset class but opt not to because they have not considered it or do not have enough knowledge regarding the equity crowdfunding system.
“Now, that’s a big part of our job to make sure investors are aware and understand, you know,” says Grant. “I want it to be to the point where you know, any person where they, when they engage with a new company that they love….”
“Whether it’s a product or an app that helps them make their payments easier, or our fantastic wire brand, whatever it is. If they’re really passionate about it, they think I can go to Seedrs, and I can probably buy equity in this company.”
Seedrs provides opportunities for investors to own a stake in the startups they are interested in. This system creates a sense of belonging to the investors. Grant also pointed out that its crowdfunding system also gives startups opportunities to market their ventures to the wider public.
Founded in 2009, Seedrs has distributed more than £2B (€2.31B) to around 800 startups in 2,000 funding rounds. Grant said the company did repeated financing in startups with promising growth trajectories. She also pointed out that the Seedrs’ had helped deliver new solutions to various markets and create numerous job opportunities.