UK equity crowdfunding firms Crowdcube and Seedrs to merge

Two of the UK’s largest equity crowdfunding platforms, Crowdcube and Seedrs, are to merge, in a move that will accelerate their plans to create the world’s largest private equity marketplace. By joining forces, thousands of ambitious fast-growth businesses and millions of investors will be able to benefit from the expertise, services and returns offered by Crowdcube’s and Seedrs’ investment platforms.

The UK-based companies, both of which are loss-making, said in a statement on 5 October that the pair are still working on discussions about the combination of their technological platforms, as well as on plans for their teams and brands.

The pair have made unfriendly rivals in the past, criticising one another over the safety of their platforms for retail investors as the crowdfunding market grew more competitive.

The decision to combine the firms is seen by some as a defensive move. Nick Levine, a former Crowdcube staff member and head of strategy at fintech startup Soldo, said: “It is commonly known that nearly all startups considering raising would play Crowdcube / Seedrs off against one another to try and negotiate the lowest fees, in what is already a very low margin business.

“A Crowdcube/Seedrs merger will undermine the ability of would-be crowdfunders being able to drive down fees for listing on the platform.”

Oliver Kicks, an associate at London-based venture firm RLC Ventures, said he was “slightly concerned with consolidating the market as it leaves fewer choices for entrepreneurs”, which could “eventually result in them accepting worse terms/higher fees”.

But he added: “On the other hand, it will offer a great pool of liquidity to investors by strengthening the secondaries market further (which has really begun to take off).”

The companies described the deal as a “merger” but said it would be “structured as an acquisition by Crowdcube”. The latter company will acquire all of the outstanding share capital of Seedrs, giving existing shareholders in Crowdcube ownership of 60% of the combined business, while the remaining 40% will go to Seedrs’ investors.

Seedrs chief executive Jeff Kelisky will become chief executive of the combined business, while Crowdcube chief Darren Westlake will become executive chair.

Subject to regulatory approval, the companies said they expect the transaction to close at the end of this year or in early 2021.

Crowdcube has raised approximately £30.7m to date from investors, including Draper Esprit and Channel 4, while Seedrs has raised £28.2m, according to data from Crunchbase.

The platforms have hosted fundraising rounds for a number of Europe’s most prominent technology startups, including digital banks Revolut and Monzo, brewery Brewdog and Aviva-owned fund manager Wealthify.

Almost £2bn has been invested in companies across the two platforms, with participation from hundreds of thousands of investors.

Westlake and Kelisky said the deal will help the Europe-focused businesses expand overseas, with plans to go global in due course.

“We are both fintech pioneers that have challenged the landscape of capital raising in Europe, building marketplaces for private equity investment,” said Kelisky.

“We believe that you need to be a player of greater scale to serve companies and the investors who support them. Now is the right time to bring our strengths together, in order to meet our common mission to deliver a step change in the accessibility and efficiency within private company investing.”

Source: Private Equity News

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