Equity Crowdfunding is one of the key areas in which the UK has a great lead and so we have a special, longer than usual, episode. I am delighted to be joined on the show today by Karen Kerrigan Legal and Finance Director at Seedrs (who were the first equity crowdfunders to be FCA authorised in the UK). Karen is also a lawyer and a Director at the UK Crowdfunding Association and so an ideal person to take us on a deep dive into the scene.
I first met Karen at a breakout group in the London Financial News Fintech day last autumn. I was impressed by her passion for ensuring that all categories of investor – private thru to VC always get equal treatment. If you are unsure of the precise meaning in this context of things like pre-emption rights, tag-along and consent rights check out Karen’s great blog article in re: protecting small investors in equity crowdfunding rounds.
We have a wide-ranging conversation on a whole host of topics:
- the perennial vocab problem (the UK crowdfunding association includes all types of alternate finance; the FCA used the word in that context recently; but many others (notably p2p folk) associate crowdfunding with the equity not debt platforms);
- the competition at the Trade Association level for territory;
- the origins of equity crowdfunding ~2009;
- the many possible meanings and models when crowdfunders say for example that they are “expanding to Europe”;
- regulation by the FCA – how long it used to take and plans to facilitate this process going forwards; principle-based regulation and how the meaning of that has changed over time; the review in 2016;
- market pressures leading over time to equity crowdfunders and stock exchange convergence in approach and fee levels;
- case studies of recent Seedrs fund raises for Chapel Down and Oppo – how it works, the motivation for doing and the wide range of reasons and benefits all the way through to marketing and brand awareness/customer loyalty;
- the need to come to the platform with your tribe/network in place already in order to generate the social proof necessary to create momentum around the raise;
- qualifying as an investor – either one needs to be a high-net worth individual or in the UK if one can prove that one understands the risk of investing (in the US right now only the first category can invest – “Jobs Act Title Three” awaited to broaden that out);
- the big dangers of different types of equity share (eg “B” shares) in terms of investor protection and the role of Seedrs (and one or two other equity crowdfunders) nominee structure in terms of providing investor protection going forwards;
- EIS/SEIS recap;
- the risks/challenges for equity crowdfunding over the next few years; the FCA’s current focus on the up-front aspect of crowdfunding right now and less on the downstream journey; the equity crowdfunding triangle;
- Seedrs US acquisition of Junction Investments and how that fits into the mix;
- Seedrs dual pricing structure – pay on way in and way out/pay on success;
- Platforms vetting of company applications, some run mini-incubators to prepare their companies for pitching; approaches to valuations.
And as if all that isn’t enough for a 45 minute chat we maange to squeeze in modern pentathlon; tetrathlon (I didn’t even know that existed); lacrosse (and whether mixed lacrosse plays by the male or female rules); ice hockey; kite surfing and kite buggying 🙂