Crowdfunding outperformed private equity with investment into non-listed high growth companies in the UK in 2016, according to a report from research agency Beauhurst.
Seedrs, the Neil Woodford backed investment platform, has again been named top investor into private companies in the UK, with Crowdcube, another notable crowdfunding site coming in second.
Beauhurst says: “If there is a reason to be optimistic about prospects for equity finance, it lies with crowdfunding.”
Seedrs funded 134 deals in 2016, with Crowdcube behind on 124. In fact Seedrs confirmed that 2016 was the platform’s strongest year to date with more than GBP85 million invested into campaigns on the platform from 45,000 investments; over GBP20 million more than in 2015. This bucked the market trend of a slight decline in crowdfunding numbers referenced in the report, titled The Deal 2016.
The two platforms – Seedrs and Crowdcube – facilitate significantly more transactions than any other investors in the country, Beauhurst says, together responsible for 86 per cent of all crowdfunding activity and 21 per cent of all equity investment in the UK.
The report, which explores equity investment in the UK released data from January 2016 through to February 2017, also shows crowdfunding’s emergence as a real alternative at the later stages of a companies growth with a 10 per cent increase in growth stage crowdfunding. This data signifies increasing maturity in the market, with 80 per cent of these later stage companies crowdfunding for the first time.
One such business is Seedrs alumni Tandem, a UK challenger bank which raised GBP2.2 million from 1715 investors, marked as “one to watch” in 2017 by Beauhurst with over GBP52.3 million raised over eight fundraisings. The fintech business recently announced a GBP35 million investment from House of Fraser, which is partnering with the brand to develop an app-only banking service to customers.
The latter half of 2016 post referendum was Seedrs strongest period to date with GBP20 million invested into campaigns on the platform in October alone.
Some key raises on Seedrs during this period included employee perks company Perkbox, which raised GBP4.3 million in just two weeks, and travel Money platform WeSwap which overfunded to GBP2.4 million and had almost 3,000 investors in their campaign – the largest number of self-directed investors in crowdfunding history.
Seedrs noted an increasingly number of co-investments with VC firms, investing alongside the crowd, frequently on the same terms. Draper Esprit invested into Perkbox on Seedrs.
Simon Cook, CEO at Draper Esprit, says: "We are strong believers that VCs, angels and the crowd can work together to provide the right long term patient capital to the best entrepreneurs, empowering teams to build global companies that last."
A seriously strong year for crowdfunding platforms ended with an IPO on LSEG AIM from cloud accounting software, FreeAgent, which raised GBP1.21 million from over 700 investors on Seedrs, becoming the first equity crowdfunded business to list on the public market and is currently trading at 50 per cent up on their IPO price.
Jeff Lynn, CEO and co-founder at Seedrs, says: “2016 was a great year for crowdfunding, especially Seedrs. In late summer, we continued our European expansion, opening offices in Berlin and Amsterdam. In September we released our inaugural Portfolio Update to illustrate to our investors the performance of their early-stage investment portfolio.
“The ongoing success of many of our portfolio companies, like FreeAgent, is exactly why equity crowdfunding is instrumentally important to the future of the early stage investment and why sophisticated investors should be looking at this asset class as a part of their high growth investment portfolio in 2017.”