Equity Crowdfunding Comes of Age SEEDRS Announces First-Ever Portfolio Results
Equity Crowdfunding Comes of Age: SEEDRS Announces First-Ever Portfolio Results, With and Overall 14.44% IRR (annualised rate of return)
Seedrs has today published its first Portfolio Update, looking at the characteristics and performance of the 253 deals funded on Seedrs platform between its launch in July 2012 and the end of 2015.
Their landmark analysis shows for the first time that, on a fair value basis, equity crowdfunding through Seedrs has produced better annualised rates of return (IRRs) than most other asset classes.
The platform-wide IRR has increased from 14.44% to 41.87% when impacts of SEIS and EIS tax reliefs are taken into account.
Investors with portfolios of 20 or more investments have outperformed the market on average, with average IRRs of 15.01% (43.39% when tax-adjusted).
Valuation process confirmed by Ernst & Young LLP (EY) as conforming to the industry-standard International Private Equity Valuation (IPEV) Guidelines.
Seedrs, Europe’s No. 1 equity crowdfunding platform, has today published an in-depth, ground-breaking analysis of the deals funded on its platform.Its Portfolio Update looks at the characteristics and performance of the 253 deals funded on the Seedrs platform between its launch in July 2012 and the end of 2015. In addition to revealing useful information about the types of deals funded through Seedrs, the Portfolio Update shows that Seedrs investments have, on a fair value basis, outperformed most other asset classes. Highlights include the following:Deal Characteristics
Roughly 40% of Seedrs’s deals have been for digital businesses, and 20% for non-digital. The remaining 40% have been hybrid digital/non-digital models.
Nearly 60% of its deals have been for B2C businesses, with 30% for B2B ones and the remaining 10% for businesses with both B2C and B2B models.
Of Seedrs’s 15 sectors, the three most popular in terms of number of funded deals have been Food & Beverage (11% of deals), Finance & Payments (11%) and Travel, Leisure & Sport (10%).
The platform-wide internal rate of return (IRR), which means the annualised performance of all 253 deals in terms of share price appreciation (net of fees), as of 31 July 2016 was 14.44% on a non-tax-adjusted basis. When the impacts of tax reliefs and liabilities are taken into account, this goes up to 41.87%.
Investors who have built portfolios of 20 or more investments have, on average, outperformed the overall market. They have achieved an average 15.01% nontax- adjusted IRR (tax-adjusted: 43.39%).
Businesses with hybrid digital/non-digital elements to their models have performed better than pure digital and pure non-digital businesses on average, achieving a non-tax-adjusted IRR of 16.88% (tax-adjusted: 42.78%).
Businesses with both B2B and B2C models have outperformed pure B2B and B2C businesses on average, with an 18.27% non-tax-adjusted IRR (tax-adjusted: 41.74%).
The three best performing sectors to date have been Food & Beverage, with a 22.77% non-tax-adjusted IRR (tax-adjusted: 49.73%); Home & Personal, with a 17.79% non-tax-adjusted IRR (tax-adjusted: 57.76%); and Finance & Payments, with a 16.91% non-tax-adjusted IRR (tax-adjusted: 43.20%).
Ernst & Young LLP (EY) reviewed the procedures and processes used by Seedrs for determining the estimates of fair value used to calculate the investment performance numbers, and EY considers that they are in line with the industry guidance set forth in the International Private Equity Valuation (IPEV) Guidelines.
It is worth observing that Seedrs was able to obtain much of the information required to make these fair value determinations, in a robust and verifiable way, by exercising the information rights it holds in its capacity as nominee for each investment. One of the benefits to investors in Seedrs acting as nominee—and entering into subscription and/or shareholders agreements with each investee company—is that the platform has reliable access to ongoing information about the performance of the investments. Platforms and networks that do not have the comprehensive information rights granted in these agreements do not have access to the same level of information.
Jeff Lynn, CEO and Co-founder of Seedrs comments: “The release of this Portfolio Update is momentous for Seedrs. I co-founded the business in 2009 because I am a strong believer that a portfolio of early-stage investments can produce great returns for investors large and small. Now, for the first time, we have the data to prove it. The Seedrs portfolio has achieved an IRR in excess of nearly every other asset class, and that’s even without taking into account the impact of tax reliefs. As importantly, our active investors have shown that, on average, they can beat the market, using Seedrs to build portfolios of outperformers. It is difficult to overstate the importance of this data: it is a game-changer for us and for the many investors from all over Europe (and, soon, the United States) who allocate capital through our platform.”
Seedrs investor Robin Vaudrey, Head of CEE Region at the European Investment Fund (EIF) in Luxembourg, says: “My work at the EIF, the largest investor into European venture capital, has brought me close to the cutting edge of European technology and innovation, but until I came across Seedrs the opportunity to personally invest in such exciting new ventures did not exist given the traditional barriers to investing in private companies. I find the investment propositions attractive even without any additional tax incentives, as I am resident on the Continent and not a UK taxpayer. I find the level of professionalism of most other investors, the fundraising entrepreneurs, and the Seedrs platform itself, to be very high. I’m particularly pleased Seedrs uses private equity industry best practice for valuations.”
Seedrs investor Julian Sutton, a financial consultant based in London, says: “Seedrs offers me an exciting opportunity to build a diverse investment portfolio in a previously inaccessible asset class. So far, as you would expect, some businesses have not succeeded, but many are showing strong paper returns. Short term I can claim up to 50% tax relief from eligible campaigns, long term I hope for significant gains.”
Gray Stern, Co-Founder of Seedrs alumnus Landbay, says: “Seedrs has enabled us to raise funds quickly and efficiently in line with our growth trajectory, at the same time giving us exposure to a new and valuable network of customers vested in our success. We look forward to continuing to offer our shares via the platform as we move towards our goal of becoming a leading UK mortgage lender. It’s a big vision, and not without risk, and Seedrs has given investors who believe in our ability to execute a chance to be involved from the very beginning.”
Steven Renwick, CEO and Co-Founder of Seedrs alumnus Satago, says: “Without my Seedrs investors, Satago would simply not exist today. To date I have delivered substantial appreciation on paper for our investors, and my intention is to continue to drive this higher by the time investors’ gains are realised.”
Seedrs has now funded more than 380 deals since launch in July 2012,* with more than £150 million invested on the platform to date. According to Beauhurst, a leading third-party source of objective deep data on UK startups and scale ups, Seedrs is the UK’s most active investor in private companies.