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Equity Crowdfunding - (Venture Capital)

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
Ramage
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Equity Crowdfunding - (Venture Capital)

#11551

Postby Ramage » December 3rd, 2016, 5:53 pm

Hi All

Starting a topic to share thoughts and experience of equity crowdfunding.

Links to previous discussions on Motley Fool:

http://boards.fool.co.uk/investing-with-seedrs-13046448.aspx?sort=whole#13148448
http://boards.fool.co.uk/seed-enterprise-investment-scheme-seis-12642799.aspx?sort=whole#13191967
http://boards.fool.co.uk/taking-crowdfunding-very-seriously-13371702.aspx?sort=whole#13371702

FCA consultation has closed but no sign of any output yet - await with interest.
First UK IPO of a crowdfunded company - Freeagent (accounting package for micro/small businesses) ticker FREE raised funds on Seedrs last year. Floated at a lower valuation than crowdfunding round, investors have gained liquidity and are ahead on paper with EIS relief (but cannot sell for 18 months).
Seedrs have updated their portfolio report to include all companies funded up to 30 Sept 2016. Altfi have updated their "Where are they Now" report.
Conclusions are generally positive and paper valuations across funded companies demonstrate a good return.

Ramage
Disclosure: I hold shares in Seedrs platform and FREE. I have looked at but not used other equity crowdfunding platforms.

timbo003
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Re: Equity Crowdfunding - (Venture Capital)

#11676

Postby timbo003 » December 4th, 2016, 9:30 am

First UK IPO of a crowdfunded company - Freeagent (accounting package for micro/small businesses) ticker FREE raised funds on Seedrs last year.


There has been one other crowd funded IPO that preceded Freeagent, that I am aware of (albeit I don't think it was EIS qualifying) and that was Mill Residential REIT:
http://www.investegate.co.uk/Index.aspx ... &words=MRR


Disclosure: I hold shares in Seedrs platform and FREE. I have looked at but not used other equity crowdfunding platforms


Good luck with your investment in Freeagent Ramage. I was given the opportunity to participate in the IPO and I subsequently put myself down to subscribe for a few EIS qualifying shares, although I stipulated that I didn't want to be partially filled if I was only going to get a small % of the amount I requested, I also stipulated that I did not want any non-EIS shares which were also being offered at the same time. I ended up with zero shares and I was told that the EIS share offer was very oversubscribed and the non-EIS offer was under-subscribed (the shares now trade at slightly under the IPO price of 85p).

SpecialSaver2
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Joined: November 23rd, 2016, 4:24 am

Re: Equity Crowdfunding - (Venture Capital)

#13100

Postby SpecialSaver2 » December 7th, 2016, 7:54 pm

Timbo is right and I will add that investors lost money on Mill Residential REIT when it went out of business:

https://www.syndicateroom.com/about-us/ ... ntial-reit

It was not eligible for EIS relief.

I will declare that I own shares in seedrs and Syndicate Room.

SS2

Ramage
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Re: Equity Crowdfunding - (Venture Capital)

#13987

Postby Ramage » December 10th, 2016, 5:41 pm

Timbo – yes I had forgotten about that one from Syndicate Room – Lesson for me is to view even Seedrs’ PR with a healthy scepticism.

SS2 – interested to note the REIT is closing down

Wonder if any of the AIM VCTs invested in FREE, perhaps Amati with the Edinburgh connection.

FCA have published interim feedback on their call for input on post-implementation review of crowdfunding rules:

[url]https://www.fca.org.uk/publications/feedback-statements/fs16-13-interim-feedback-post-implementation-review-crowdfunding-rules
[/url]
I found the insight into thinking on due diligence requirements, assessment of investors as HNW or sophisticated and conflicts of interests the most informative. Let’s wait and see what the new rules cover.

Suspect comment at 4.21 relates at least in part to

http://fantasyequitycrowdfunding.blogspot.co.uk/

Rob Brown has obviously struck a nerve. Bloomberg interviewed him:

https://www.bloomberg.com/news/articles/2016-11-07/you-too-can-invest-in-a-startup-likely-to-go-bust

It disappoints me that investors feel the need to share information provided by companies with such blog writers. If this continues I can see companies becoming even more reticent to share commercial information with their crowd.

Ramage

Ramage
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Re: Equity Crowdfunding - (Venture Capital)

#18672

Postby Ramage » December 29th, 2016, 5:14 pm

The Telegraph reported a potential profitable IPO of a crowdfunded company, planned for next year.

http://www.telegraph.co.uk/business/2016/12/10/silkfred-fashions-100m-stock-market-listing/

SilkFred Ltd raised £145K in 2013 on Crowdcube for around 24% of the company. If the company floats for £100M then assuming £50M of new money gives a pre-money valuation of £50M. There has been some dilution and Crowdcube investors now hold around 11% of the company. This gives a 38x return in four years – thats even better than the British Smaller Companies VCT investment in Go Outdoors.

Whether it is just PR smoke, we will find out next year.

Ramage

dougal60
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Re: Equity Crowdfunding - (Venture Capital)

#18696

Postby dougal60 » December 29th, 2016, 7:00 pm

I had a quick look at Silkfred's filing at Companies House.
The latest Accounts are up to 31 December 2015 filed in late September 2016 in time.
They are in "small company " format so very brief to think of values.
It looks like they have raised £1.7M from shareholders including over £1m raised in 2015. Plus two further fundraisings in 2016.
The P&L Account shows accumulated deficit (losses) of £1.035M of which £607000 was added to the deficit in 2015.
They could have had a great year in 2016 but to be valued at £100M in a few months time would be going some, but looking at Boohoo not impossible?.

Ramage
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Re: Equity Crowdfunding - (Venture Capital)

#27956

Postby Ramage » January 31st, 2017, 7:14 pm

Rob Brown is promising to publish a report on progress of funded companies after the end of March. Register with him if you would like a copy.

SilkFred – Thanks to dougal60 for that data. Companies house have just published updated articles of association which explicitly refer to an IPO – perhaps its not just PR smoke.

Freeagent – bid price now 134p, so as a Seedrs investor now in the black before EIS rebate. Perhaps I should have tucked a few in my ISA!

Some thoughts on diversification / backing winners:

My approach is to make lots of relatively small investments and then back the companies that demonstrate traction with larger investments in follow-on rounds. This has the advantage of giving me access to ‘private’ follow on rounds. I know I do not have the skill / luck to pick the winners at the earliest stage, so choose to diversify. This looks to be what VCTs do. My portfolio is now heavily weighted to the top 10 investments, fortunately only one failure so far from this group. Overall still in the black with around average IRR.

Or is it better to back a few (or multiple) companies and never follow-on? Has anyone seen research on these approaches for private equity? I would guess returns will be dominated by a few big winners (and how much and how early they were backed), fingers crossed.

I am hopeful of maintaining a positive return but accept the tail risk of losing the lot!

Ramage

Ramage
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Re: Equity Crowdfunding - (Venture Capital)

#32460

Postby Ramage » February 17th, 2017, 5:05 pm

Exit

Altfi report a takeover of one of the first companies to raise funds on Seedrs:

http://www.altfi.com/article/2687_oxygen_snaps_up_satago_in_fintech_on_fintech_acquisition

It funded in 2012 (before I started using Seedrs). I believe its subsequent rounds were 'private' to existing shareholders only. Terms of takeover not disclosed, but I suspect its a good multiple to the 2012 raise.

Ramage

Ramage
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Re: Equity Crowdfunding - (Venture Capital)

#42236

Postby Ramage » March 29th, 2017, 10:45 pm

Apologies but Satago may not have been the exit I believed:

http://fantasyequitycrowdfunding.blogspot.co.uk/2017/02/latest-beauhurst-report-is-debunked-as.html

Came across this blog, writes about Seedrs and also Crowdcube campaigns. The writer has some interesting ideas and data – comments on Den funding pledges and actuals if correct is enlightening.

http://www.crowdpunter.com/

Still nothing from the FCA, wonder what form the new rules are going to take.

Ramage
(Still hold shares in Seedrs and have not used other equity crowdfunding platforms).

Ramage
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Re: Equity Crowdfunding - (Venture Capital)

#139639

Postby Ramage » May 17th, 2018, 5:25 pm

To update some of the discussion points:

FREE is being taken over by RBS at 120p per share. This represents a gain for Seedrs investors but results in loss of EIS relief (within 3 years). I am pleased to have a positive exit and not overly bothered by loss of EIS. My view is that decisions should be made in the best interests of the company and not on tax consequences of investors. There has been some grumping about loss of EIS but think investors are now seeing sense.

This is my second positive exit. The first being purchase of Wealthify by Aviva at a small profit, again leading to loss of EIS.

Overall my Seedrs portfolio has a reported IRR of around 10% and 23% on tax advantaged basis. Now hold 100+ companies with around 50% of value in the top 10. This performance is better than my VCTs and fees are significantly lower. I hold some Amati which did really well last year, but not enough to bring performance up. Its still early days but hopeful of staying in the black and just maybe one of my bigger holdings will do really well.

I sold some shares through the secondary market and realised tax free gains. The realised gains are still smaller than losses due to failures so far.

New crowdfunding rules are included in the FCA business plan for 2018/19 and planned for publication this calendar year. Sounds as if they will be focussed at loan crowdfunding but hopefully they also start to deal with poor practices in the equity space where they exist.

https://www.fca.org.uk/publications/corporate-documents/our-business-plan-2018-19

Ramage


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