LFP130 – Equity Crowdfunding – Past, Present and Future Innovations w/Jeff Lynn Exec Chairman Seedrs

Ten years ago Jeff and his co-founder came up with the idea for Equity Crowdfunding and seven years ago Seedrs became the UK’s (world’s?) first regulated Equity Crowdfunder. In this episode we revisit the origins of the concept, what it was thought to be then and how it has evolved with the person who can surely lay claim to be the father of UK equity crowdfunding.

As often everything takes time to evolve and build out. But ten years in much has been achieved – and not only much for Seedrs but importantly for the hundreds of companies who have raised vital capital on the platform. In the world of the now much forgotten “supply-side reforms” there is arguably nothing better that can be done for SmallCos than to have such an effective conduit to raising funds.

One thing that has taken time to evolve is for the rest of the world to catch-up with the UK’s lead. However as we shall hear there are promises that Equity Crowdfunding will finally become a Thing across Europe so plenty of exciting times ahead as well as behind.

These topics and much more are discussed in the show:

  • kitchens over the Fintech revolution
  • don’t mention the wars
  • was the American Revolution a good idea?
  • the diminution in calibre of politician around the world; Jeff’s experience of US politics in the ’90s
  • is there is a conservative party in the UK?
  • Jeff and his co-founders original thoughts in 2019 about the market gap
  • on one side there were plenty of excellent entrepreneurs who lacked wealthy family, friends and networks of Angels
  • on the other hand there were plenty of investors wishing to get exposure to this asset class but not in the position to write the usual £25/50k tickets
  • over time Seedrs have found a greater “post-institutional funding round” demand for their services compared to their original assumption of only “pre-” demand
  • the importance of Zopa as a model (and Kiva microfinance)
  • by 2009 (a) one was after the 2008 GFC but also (b) an increasing cultural willingness to transact and do business online
  • the original paradigms for market – caveat emptor to managed market – spectrum
  • the importance of Seedrs being lawyers in terms of adding investor protection to this mix (via their nominee structure)
  • “if it was unregulated we weren’t going to get any customers”
  • Seedrs work with the regulator to come up with a regulatory model – the first in the world – balancing freedom and management of markets
  • Seedrs reject 95-97% of all businesses that apply to the platform – heavy curation
  • curation = “we are saying this business is what it says on the tin, we’ve done a full review of the disclosures and everything checks out and the investment structure is going to ensure that if this business is successful you will participate”
  • the need also to curate investors – to ensure that they are able to assess investments for themselves (as obviously Seedrs can only vouch for the current bona fides not future performance)
  • when businesses fail who complains more – sophisticated or less sophisticated investors?
  • the problem of lack of time for everyone and how this impacts Seedrs business model
  • more recent innovations:
    • Seedrs EIS100 fund – aims, mechanisms and how it works
    • Seedrs autoinvest – how that works in terms of allowing you to set investment parameters
    • liquidity and Seedrs nascent secondary market
  • 7-10yrs is the sort of timescale for these kind of investments – it’s long term investment
  • the origin of the secondary market in terms of investors spontaneous transactions via the bulletin board
  • “it has turned out to be successful beyond all expectations”
  • by the start of the year 6,000 transactions had taken place – now doing ~1,000 transactions a month
  • share transactions are limited but restrictions are gradually being lifted
  • how the prices are set
  • investigations of market-set pricing
  • global changes in crowdfunding – the US got bogged down and it hasn’t taken off; Europe has taken a long time but a pan-European regime is finally starting to almost roll-out
  • a quick tour d’horizon of Berlin, France, Lisbon, Amsterdam, Ireland, Hong Kong, Singapore
  • Seedrs desire to be a global business
  • will Seedrs over time become a private company “stockmarket”? Raising funds, secondary market…
  • “trend is that more and more and more of the value created by companies is when they are in their private phase”
  • anyone in Europe can invest via Seedrs
  • shout-outs
  • the last two years has seen very rapid progress after a long slow burn to get established securely and as part of the furniture – deal volumes are over twenty raises a month right now

And much much more 🙂

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