Equity crowdfunding term sheet

At Seedrs, we hold ourselves, our startups and our investors to very high standards because we want every company that raises funding on Seedrs to be set up with the best chances for success in the future. Achieving success for a startup often means being able to go on and raise follow-on funding from large angel syndicates or venture capital firms and eventually go on to a successful merger, acquisition, private equity investment or IPO.

Seedrs Term Sheet May

The new plain English equity crowdfunding term sheet from Seedrs contains a summary of the key legal terms.

We’ve always set our legal standards at the level needed to be compatible with the rest of the startup funding ecosystem. This means putting in place very specific investor protections, contractual agreements and making sure that all the paperwork is in order.

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Guest user – Investing in consumer confidence

Big deals. They get the merchant bankers excited, and with memories of the financial crisis slowly fading, big deals have been back on the radar. Big deals show that the economy is on the mend. Confidence is back in the boardroom and the evening news is less about austerity measures and more about $100bn mergers. This is also good news for startups, who are right at the coal face of the economic recovery and will benefit considerably from optimistic headlines. Consumers watching the news (with a chicken jalfrezi straight out the microwave) are going to start thinking about adding a notch back onto the belt of the household budget. Confidence is a powerful commercial aphrodisiac, forget oysters and champagne, consumer confidence is where it’s at.

Seedrs guest investor programmeSo where is all the money going to go? Retail. We are all secretly lazy, which is why we all seem to like the fact that we can now lie on the sofa and buy stuff. We also love stuff. Which is why in Britain we spend more money on useless tat than any other country in the developed world. Consider the spate of recent IPOs from companies that sell everything from tumble dryers to packs of dog food. And they deliver. Bargain.

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Marketing internship

Seedrs is growing quickly and we’d like to invite a recent graduate who is interested in breaking into startup marketing to join us. We’re offering a paid internship with a six month term so that you can get real experience and a solid taste of life inside a fast growing startup.

Marketing internship

You’ll get involved in all aspects of marketing Seedrs to startups and investors.

Seedrs is disrupting early stage startup finance by making it easier than ever before for startups to raise capital from their own communities and for investors to build a diversified portfolio of startups. Our marketing team builds communication with investors, startups and also helps startups communicate with their own community of potential investors. We take a holistic view of marketing so our branding, communication, public relations, growth hacking and even product design are all run together as a single team.

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Guest user – Investing in products you could see yourself using

This week we have a new guest investor. Sam has looked at the currently live startup campaigns on Seedrs and decided what to invest in. In this article he shares with us what he chose and why.

Sam Macrory

Sam Macrory is a Seedrs user and has shared the story of how he chose two recent investments.

Sam Macrory, previously Political Editor of House magazine, became the Editor of Total Politics in May 2013. He also blogs at http://www.sammacrory.com and tweets at @SamMacrory.

I can honestly say I’ve never been more tired…

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Insights on startup survival from a Guardian discussion panel

The Guardian recently ran an interactive question and answer session about surviving your first year as an entrepreneur. The session was sponsored by Nominet who run the Nominet Internet Awards. The panel was facilitated by Matthew Caines the editor of the Guardian’s Culture Professionals Network.  The session covered some fascinating topics like the difference between the corporate world and life in a startup. I’ve chosen a couple of the key conversations and insights to quote below. Check out the discussion page itself to see the rest of the comments and questions.

Joe Scarboro London

Joe Scarboro of the 3beards (Photo by Makeshift).

Why did you want to become an entrepreneur?

Joe Scarboro: Doing and creating something meaningful is the key, as well as being the master of your own destiny. I’d always had that feeling of wanting to do my own thing, at every job I’ve had I always felt that I’d be doing things a bit differently if I were in the driving seat!

Jeff Lynn: I wanted to create value, full stop. I didn’t want to look back on my life and feel that all I had done was push paper around for 40 years. I was determined to do something that had (or at least tried to have) a lasting impact. The specific idea only came later.

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Welcoming the new FCA crowdfunding rules

In March the FCA enacted a new set of equity crowdfunding rules. It may come as a surprise to some, but equity crowdfunding has been regulated in Britain since 2000, long before crowdfunding even existed as a concept.

FCA Equity Crowdfunding Rules

The Financial Services and Markets Act requires firms that arrange transactions in investments, including shares, to be authorised by the appropriate regulator and adhere to a strict set of regulations. That was true regardless of whether those transactions were arranged online or offline, and it applied just as much to novel platforms as to old-fashioned investment firms.

When we were building Seedrs, we thought that rule was quite clear, and as a result we waited to launch until we had authorisation from the Financial Services Authority (now called the Financial Conduct Authority, or FCA).

New UK equity crowdfunding rules

Unfortunately for the industry, one platform ignored these rules and launched without authorisation, before eventually being compelled to seek approval. Shortly afterwards, the FCA decided that, in order to avoid a repeat of this type of behaviour, it would adopt rules specific to equity crowdfunding.

After a consultation process, the new equity crowdfunding rules were enacted in March 2014. Seedrs welcomes the new rules, as we believe they provide clarity to investors and platforms alike. Proportionate regulation helps markets thrive, and we believe the rules the FCA adopted strike an effective balance—and certainly one that is better than what many other countries are currently proposing.

Who is eligible to invest through crowdfunding?

As it happens, the new rules do not apply to Seedrs directly, as we have chosen from the beginning to be regulated as a” fund manager” rather than as a mere arranger. This is because, beyond simply introducing investors to startups, we act as their nominee, enforcing shareholder protections and helping to ensure that they earn returns from successful businesses—something that many other crowdfunding platforms don’t do. We’ve long advocated for the importance of a nominee structure.

Importantly, the exact same investors are eligible to invest through Seedrs as are eligible to invest through the platforms that come under the new rules.

In both cases, investment is open to any investor who can demonstrate that he or she has the experience and knowledge required to understand the investments being offered. Under the new crowdfunding rules, this is called an “appropriateness test”, whereas under the Seedrs structure it is called an “elective professional client categorisation”, but the standard of the test is the same.

Crowdfunding Regulations

Seedrs combines true crowdfunding with professional grade investor protections.

One difference that does result from our regulatory categorisation is that investors who use Seedrs are not subject to the much-maligned “10% requirement”, which restricts investors to investing no more than 10% of their net assets in crowdfunding investments per year. That said, we encourage all investors to build diversified portfolios and only allocate what they believe to be a reasonable proportion of their capital to early-stage investments.

Regulation will continue to be an important part of the crowdfunding discussion, and as the industry grows, there will likely be further modifications of the rules. We look forward to engaging in this process: having been the first regulated equity crowdfunding platform in the world, we believe that complying with applicable law is essential. We are pleased that the clarity provided by the new rules will help to ensure that others do so as well.

Heartbleed security update

The web has been taken by storm by a new security issue that affected more than half a million widely trusted websites. The Heartbleed bug is a new vulnerability that allows attackers to access confidential information, like passwords, web site certificates or personal data, from web servers with SSL support.

Heartbleed security

The Seedrs platform was not directly affected by the recent Heartbleed security issue.

Seedrs has not been affected by this issue. We take security extremely seriously (I was a security auditor and security advisor for major financial institution before starting Seedrs) and the way our systems are implemented limits our exposure to these kinds of issues. Even so, we are always on top of new vulnerabilities and immediately tested all of our servers, and we have confirmed that we are not vulnerable to this issue.

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Guest user – Choosing my first startups to invest in online

This article first appeared on Mark Hepburn’s blog Hepburn Says. Mark is a client relationship manager at a well known asset management firm based in London.

Mark Hepburn Investment

Mark Hepburn is a guest author. His articles appear first on the blog Hepburn Says.

The IPO market is getting a little bit squeaky. King Digital, the maker of the game Candy Crush, listed on the New York Stock Exchange recently with an initial valuation of more than $7bn. The stock then fell. Quite a bit. But still, $7bn for company that gets most of its revenues from Candy Crush, a game that has commuters staring blankly into their smartphones trying to make lines of sweets disappear. And that’s it. A game that has apparently been downloaded by 93m people who seemingly have nothing better to do on the way home. I don’t know what that says about modern society but you have to feel for the likes of Hemingway and Dickens. The valuation of the business today, however, is of little concern to those who put up the initial cash to make the game, as they are probably down Saville Row trying on velvet and barking at the tailor to make their paunch disappear. They are now properly minted, further stoking my coals for seed investing. The weekly email from Seedrs then had me reaching for the lighter fuel to further stoke said coals. Time to choose my first startups to invest in online.
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Five steps to a great equity crowdfunding video

A great equity crowdfunding campaign deserves a great video to tell your story. Your video is your best chance to convey your excitement and passion for the business and to get potential investors as excited as you are – it can’t be rushed and deserves at least as much care and attention as the rest of your fundraising efforts.

At Seedrs, we review hundreds of campaigns every month and have a few dozen live at any one time. As an equity crowdfunding platform, we also see the data and analytics behind who is investing in what and how potential investors behave when they look at a campaign page. We’ve learned several things about what does and doesn’t work for crowdfunding videos. Continue reading

Guest user – Confessions of a first time angel

This year we’re inviting a few journalists and interesting characters to try out Seedrs and write about their experiences here on our blog. Authors are given £100 to invest in a startup of their choosing. We publish their articles without comment or endorsement. The authors are not providing advice on which startups to invest in and nothing in their articles should be construed as financial advice. You can apply to be part of the programme and try out the Seedrs platform by providing a writing sample to marketing@seedrs.com

Mark Hepburn

Mark Hepburn is a first time Seedrs user and will be sharing his experiences. These articles appear first on his blog ‘Hepburn Says’.

Mark Hepburn is the first of our guest users. Mark is a client relationship manager at a well known asset management firm based in London. His articles appear first on his blog Hepburn Says where he also writes about investing, markets and the English middle order.
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Protecting small investors in equity crowdfunding rounds

People invest on Seedrs for many reasons. To support friends or family, because they love a particular business idea, or they just want to invest in a new asset class. But one thing that our investors have in common is that if the company they invest in is successful, they want to share in that success.

Investor Protection

In traditional forms of financing, large professional investors will agree terms with a company to prevent their investment from being diluted when the company issues more shares, and to ensure they benefit from share sale opportunities.  However, normally a small investor simply will not have the leverage to negotiate such terms.

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SHAREIGHT – A new Seedrs record

Over a 17-hour period from yesterday afternoon until early this morning, mobile shopping startup SHAREIGHT raised £350,000 from 95 investors. This was a remarkable achievement that shows just how powerful a well-executed equity crowdfunding campaign by a highly appealing business can be.

Shareight Seedrs

SHAREIGHT provides mobile curation for people to choose and recommend eight favourite items.

SHAREIGHT were able to galvanise such decisive support because they have spent considerable time building relationships with angel investors and the equity crowdfunding round fits into their overall capital raising journey.

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Crowdfunding Europe – Paris startup scene

Our European expansion this year is all about contributing to the European startup ecosystem, building community and using test visits to validate our ideas for global expansion. We’ve just been to Paris to connect with the local startup ecosystem. Our mission was very simple: understand the early-stage funding landscape in France and how equity crowdfunding is currently perceived. We also wanted to investigate the issues and concerns that French founders face when raising seed capital.

Numa Paris Startup Campus

NUMA coworking space

During this trip we based ourselves at  NUMA which has a similar atmosphere to London’s Google Campus. The vibe at the NUMA is very much the same as at Campus and the way it’s organised very much resonates with Campus’ vertically integrated structure.

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Five things to get sorted before you start crowdfunding

Some of the most important things that a startup can do to make their equity crowdfunding campaign successful happen before the campaign is even created. Equity crowdfunding is a great way to raise capital for an early stage business but it needs to be done properly. I’ve seen startups make all sorts of mistakes, so I wanted to share some of the most important lessons that we’ve learned.

Marketing for crowdfunding

The most important work for a crowdfunding round happens before the campaign goes live.

As the Chief Marketing Officer of Seedrs, I spend a lot of time speaking with entrepreneurs who are trying to raise funding. One of the most misunderstood, but important parts of our business is the nominee structure. The nominee structure is designed to take care of the back-office investment details so that the entrepreneur can focus on getting out there to connect with their investors.

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Crowdfunding Europe – TechChill Baltics and Mini Seedcamp in Latvia

We set out to Latvia to connect with the local ecosystem as a part of our new European outreach and community building efforts. In this series, we’ll be sharing our travels to the diverse local startup eco-systems around Europe.

We decided to pay a visit to the Latvian capital after a couple of great tips from our friends at TechHub about how the local ecosystem has been developing in the past couple of years. The timing couldn’t have been better as TechChill Baltics – an event covering the Nordic and CEE startup scene was happening then as well. Also, Seedcamp was organising one of their Mini Seedcamp events the day before TechChill.

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