It’s been a good year for equity crowdfunding platform Seedrs. The British firm, launched by Jeff Lynn and Carlos Silva in 2012, already had locations in London, Lisbon and New York City before it branched into two more of Europe’s startup hubs: Amsterdam and Berlin.
Seedrs’ 2016 numbers were good too. 45,000 individual investments were made, from 65 countries, amounting to a total $107m. That represented almost 50% of its entire funds raised over the past four-and-a-half years.
Rounds are also increasing. In November Perkbox, a customer engagement brand, raised £4.35m ($5.46m) to become Seedrs’ largest single investment round to date. And in November FreeAgent floated on the stock exchange, as Seedrs’ claimed its first IPO.
That reflects a general shift towards the alternative finance market, which in Europe is dominated by the UK. Its domestic crowdfund industry is now worth over £3.2bn ($4.01bn), dozens of rounds regularly topping the $1m mark. No longer is crowdfunding a niche way of growing a business.
Seedrs’ German team is, meanwhile, more modest: it is only two strong, and they work out of WeWork’s trendy coworking space in Berlin’s trendy Hackescher Markt. When Red Herring met the pair, on a frozen Friday evening, entrepreneurs and startup founders hovered all round, making calls and shaking hands.
It’s a splenetic atmosphere. But, as DACH (Germany, Austria and Switzerland) regional manager Kyrill Zlobenko explains, it doesn’t necessarily represent the attitudes of German investors. “The UK has been the pioneer for crowdfunding in the European region,” he says. “And I think that if I ranked people’s perception and the maturity level of crowdfunding, the UK would be maybe still a year ahead of Germany. Here it’s a bit more conservative.
“What I’ve realized from working a couple of years in Germany…is that German people, especially German entrepreneurs, are probably the best in the world at building processes, and executing those processes efficiently,” adds Zlobenko, a Ukrainian who worked in Sweden, Italy and Munich before Berlin.
“If you look at Rocket’s model, which has changed over the years, they basically took viable concepts from the US, and said, “We’re going to execute it here with local people – fast and effective.” They succeeded with that model.”
Zlobenko’s partner at Seedrs, Beatrice Werdin, is a Hamburg native who worked in mobile advertising before arriving in the Hauptstadt. She agrees that German investors and entrepreneurs are more “modest” than their British counterparts. But she doesn’t see it as a problem.
They don’t think globally at the beginning, but they take something, grow it well and expand it when they’re ready,” says Werdin. “And the German economy speaks for itself. Both the investors and entrepreneurs are savvy in their approaches.”
Equity crowdfunding is not the newest phenomenon in tech. But it is certainly gaining pace. Rather than rely on one or more big-money investors, Seedrs and other platforms, such as Crowdcube, CircleUp and others, allows smaller investment in return for shares in a company. Seedrs’ average investment, for example, is £1,902 ($2,386). Regardless of nationality, it allows thousands more people to participate in a company’s growth.
“(Lynn and Silva) Thought it would be fantastic to tap into a massive market of investors that, really, was already there: people who aren’t hardcore VCs but still have the knowledge, expertise and money to invest and who are interested in tech businesses,” says Zlobenko.
Werdin adds that Seedrs has a “lifecycle model”, which means that, for an upfront fee, entrepreneurs will be helped along every step of the way–with access to a strong network of alumni and mentors, and the ability to work out of any of Seedrs’ existing offices.
“We are really with our funded companies for the long-term and our support doesn’t stop with the investment,” says Werdin. “It is about helping them to develop sustainable, scalable businesses that can ultimately provide value to their shareholders, their customers and the wider economy.”
In Amsterdam it is more difficult to convince startups to use the platform, says Zlobenko, as there–and across the ‘Benelux’ region (Belgium, the Netherlands and Luxembourg)–crowdfunding, as a concept, is confined mostly to two brands: Kickstarter and Indiegogo.
“Here in Germany that model already exists, so we don’t really need to start the conversation by explaining equity crowdfunding,” he adds.
Right now Zlobenko and Werdin are in “listening mode”, gathering information and speaking to entrepreneurs. It’s a great chance to learn more about the market, and meet new people trying to break into industries as diverse as ice cream and female health.
“I don’t think there is a particular “sweet spot” of what we’re looking at in businesses,” says Zlobenko, when asked if there is a particularly good time to bring on a company. “If you start speaking with an entrepreneur and she says that we need to launch a campaign in three months, we can definitely do that. But sometimes we say there are a couple of steps you need to make in order to make the campaign potentially two, maybe three times more successful.
“And that might just be getting a letter of intent with a big customer, or consolidating existing customers or users,” he adds, “so that you can easily reach out to them to spread the message about your campaign. We work will all kinds of businesses: from those that started three months ago looking to raise $100,000, to some of the record-breaking campaigns we had late last year with businesses valued at $65m.”
Judging by Seedrs’ successful 2016, you wouldn’t bet against Werdin and Zlobenko finding some fascinating platforms for the company this year. Being amid one of Europe’s fastest-paced scenes, dubbed ‘Silicon Allee’, doesn’t hurt either.