Seedrs offers more people the chance to invest in startups
Seedrs is now open for business! It is a revolutionary online platform that makes investing in startups simple and rewarding. Seedrs allows people beyond ‘the 1%’ to reap the benefits of investing in startups, using a properly regulated platform, while taking advantage of the uniquely generous Seed Enterprise Investment Scheme (SEIS) tax reliefs.
Seedrs has been under development for three years - during which time it has gained formal FSA authorisation, making it the first platform of its kind to receive regulatory approval anywhere in the world. Today Seedrs opens its doors to the investing public. It is revolutionary in that it makes it possible for a much wider cross section of Britain to invest in the country’s best new business ideas with the reassurance of full FSA approval and vital post-investment protection.
Investors who pass a short online test to prove they understand the risks involved in investing in startups will be able to invest between £10 and £150,000 per startup to build a diverse portfolio of shares in idea-stage businesses.
Seedrs provides a straightforward, transparent process for people to invest in the shares of startups they choose from those listed on the site, and for entrepreneurs to raise seed capital for their businesses from these people, whether they are friends, family or independent investors. Following completion of an investment, Seedrs holds and manages the shares on the investors’ behalf, which helps protect investors’ interests and minimise the administrative burden for the startups.
The significance of the Seedrs launch is magnified further by the uniquely generous tax breaks that are now available for UK taxpayers investing in eligible startups, as most businesses listed on Seedrs will be.
Jeff Lynn, co-founder and CEO of Seedrs said, “Our launch today is the culmination of a lot of hard work to build a service we are proud of and that we are confident will transform the ability of great new businesses to get off the ground in the UK, backed by enthusiastic investors keen to participate in their potential success.”
“As people in Britain look for more tangible and ‘real’ places to invest their money, beyond the conventional and poorly performing products they have been sold in the past by institutions that have let them down, the launch of Seedrs today is particularly timely.”
“By creating a properly regulated platform where people can enjoy the process of picking and choosing the businesses and people they want to invest in, we aim to breathe new life into the enthusiasm people in Britain feel for supporting the awesome pool of ideas and business talent this country has.”
In what Seedrs believes to be the most comprehensive study ever conducted of returns from investing in startups, the report by NESTA and the British Business Angels Association (BBAA) entitled “Siding with the Angels” highlighted the attractions of investing across a suitably diverse number of startup businesses, compared to other asset classes. The analysis showed that, over a 10-year period, investing in startup businesses in the UK outperformed gilts, UK property and even UK quoted shares, providing the highest annualised internal rate of return of 22% p.a.
However, the costs of the necessary legal documentation and other requirements to invest in a startup mean that the effective minimum for investing in just one business has traditionally been £10,000 or more. To create a sensibly diverse portfolio, this minimum limited investing in startups to the wealthiest 1% of the population. The Seedrs platform and the services it provides change those dynamics entirely, making it economically viable for people to invest as little as £10 per startup, while taking advantage of the extremely generous SEIS tax reliefs (which can give the investor up to 78% of his or her money back upfront).
From the entrepreneur’s point of view, Seedrs will provide a much-needed new source of idea-stage capital where previously they could only rely on help from wealthy friends and family – if they are lucky enough to have them. The unfortunate reality in Britain is that neither angel investors nor venture capitalists engage to any real extent in supporting idea-stage businesses, preferring instead to invest later when much larger sums can help an established revenue-generating business to grow more quickly.
By removing these two major and long-standing barriers to startup investment - and through a fully-regulated platform with all the necessary investor protections in place - Seedrs will deliver game-changing benefits to private investors and entrepreneurs, while providing desperately needed stimulus to Britain’s economic growth and jobs market.
Seedrs’s fees are simple, clear and fair. There are only two charges. The first is a fee of 7.5% of any amount that is actually raised by the entrepreneur through the platform, which is paid by deducting this fee from the amount raised before the balance is transferred to the company. There is no ‘pay to pitch’, and if the startup doesn’t succeed in raising the money it is looking for, then everyone walks away and no fees are paid by anyone.
The second charge is a 7.5% fee levied on any returns that investors receive above their original investment, whether through the proceeds of a sale, dividends or other payments from the startup to the investors. Any returns paid to the investor up to the amount of their original investment are paid free of any charge.
Seedrs opened its doors to entrepreneurs interested in applying to list on the site in late May. From today’s launch, a number of these are now live on the site and fully available for investment. Details of some of these first businesses are available on request.
Whether entrepreneur or investor, anyone in the UK can now check out Seedrs by visiting the site at seedrs.com. Entrepreneurs and investors must be at least 18 years of age.
Seedrs Limited is authorised and regulated by the Financial Services Authority.