To launch a startup to help launch other startups in the middle of a recession, that’s no easy feat. That’s what Jeff Lynn and Carlos Silva sought to do in 2009 while they were peers and friends at Oxford’s Saïd Business School.
“Together, we came up up with the idea of a platform that would connect with investors directly,” said Ben Aronsten, Seedrs’ chief marketing officer. “Historically, this industry has been inefficient and somewhat chaotic and, of course, predominantly offline.”
Seedrs is an equity crowdfunding platform. While the majority of the active investors are based in the U.K., the business model aims to widen the scope for investors so that small businesses can scale quicker and easier. The mission is to allow everyday investors to invest what they can afford — anywhere from £10 on up — in early-stage businesses in the hopes to get a return on those investments.
The goal around Lynn and Silva’s mission was to get away from a small group funding only certain businesses.
“Historically, only certain investors — the wealthy and well-connected — were able to participate,” said Aronsten. “That only represented the top portion of the market. So [Lynn and Silva] thought, ‘What if we democratize early-stage investment? And allow everybody to invest if they want to, whether it’s £500 or £1,000 or more like £25,000 or £50,000.’”
After three years of development and getting officially authorized by the FCA, the business launched in 2012. Those three years were grueling, Aronsten said, and brought frustrations beyond foresight.
“We thought it would take 12 months, but it took three years,” said Aronsten. “It was that part of the journey that there were questions if this was actually going to happen and how it was going to work.”
And it did work. Seedrs became the first equity platform authorized by the FCA. Because of specific investment- and consumer-focused laws and regulations in the U.K., the platform has brought some extra responsibility. That parlays into how the funds are transferred in the “all-or-nothing” funding concept.
“Investors can come onto the platform and pledge the amount that they want to pledge. Then, Seedrs holds that money in escrow until after the deal is closed. Seedrs then takes due diligence steps on each campaign, and when everyone is happy, we release those funds to the business,” said Aronsten. “From a payments perspective, they pay with a debit card, bank transfer and other types of payment types.”
But with that, a bigger hurdle has persisted: Seedrs’ battle to maintain that it is not like other crowdfunding sites, like Kickstarter.
“A platform like Kickstarter is a rewards-space platform, and we worry that the term ‘crowdfunding’ gives off a ‘fun’ image than what we’re looking for,” said Aronsten.
In fact, he said, Seedrs has done especially well in the payments, technology and FinTech space. Many companies in the payments processing industry have used Seedrs to successfully launch their businesses.
“There’s definitely a takeaway, in regards to the payment infrastructure space, that B2C brands are sexy from a consumer and media view, but the B2B space has done very, very well on our platform,” said Aronsten.
How well? Aronsten said that last month was Seedrs’ biggest month.
“We had our largest month in October of this year with over £18 million in investment into campaigns on our platform. In total, we’ve had about £160 million invested into campaigns, and we’ve funded over 400 deals just over the last three to four years.”
In addition, Aronsten said the success comes with knowing that Seedrs has helped create jobs, while scaling businesses as well.
As for what’s next, Seedrs is looking to expand across the pond to the U.S. Cofounder Jeff Lynn is originally from the East Coast and has been trying to bring the business to North America. He’s presented to Congress a few times in hopes of achieving this and has received pushback in light of the Jobs Act.
And as for Brexit, Aronsten said that the issue is blaringly on the radar.
“While we haven’t seen any adverse issues as of yet, the pound has been weakening, and that relates to investment on the platform,” said Aronsten.
Seven years in the books, those two business school friends are proving that a startup can come from a startup.