Syndicate Room’s latest raise, formally announced last night in front of a packed crowd at The Mermaid Theatre, begun at 9am today; a new report released by the firm suggests appetite for equities and IPOs is stronger than ever.
1 year ago Syndicate Room, the Crowdfunding platform with a unique investment model that allows online investors to follow a syndicate of lead investors into the funding rounds of promising early stage, high growth business, and now also invest in stock market IPOs, raised £1.2m at a pre-cash valuation of £7.2m in a little over 24 hours.
The round was led by AbCam founder and angel investor Jonathan Milner, who invested £250k of his own money, and was twice oversubscribed according to Syndicate Room’s founder and CEO Gonzalo De Vasconcelos, but the firm, thanks to the success of its business model, turned down the extra funds.
Last night at The Memaid Theatre, Blackfriars, De Vasoncelos and co-founder Tom Britton welcomed Milner, Nikhil Rahti, CEO of the London Stock Exchange, and Rupert Hume-Kendall, ex-Chairman of BAML, on stage to discuss the future of equity crowdfunding in the light of findings from a report commissioned by Syndicate Room, called “Bridging The Equity Divide”, and to announce the launch of a second round of fundraising – this time for £2.3 million at a valuation of £25m.
The round supports an aggressive plan for growth which involves doubling the firm’s workforce of 22 over the next 6 months, and the continued rolling out of its partnership with the LSE, of which Syndicate Room is now a member, helping online investors invest as little as £1,000 into the IPOs of LSE listed companies.
Journalist and broadcaster Julia Hartley Brewer kicked off proceedings with a hilarious tongue in cheek synopsis of some of the issues confronting the City of London today, from Boris Johnson’s singing, to George Osborne’s god complex via Pig-gate, encompassing Corbyn’s resemblance to a Geography teacher and the lamentable disappearance of what Nigel Farage once referred to as the PFL – “proper fucking lunch”, along the way.
Hartley Brewer was right to draw attention to the “eau de Wolf de Wall Street” cologne that permeated the theatre last night. City workers emphatically outnumbered hipsters, although both tribes were represented in numbers – more than 1,000 people signed up to the event.
But it is rare to see so many bankers at a crowdfunding event – and there are two major reasons for that; firstly, crowdfunding sites have not tended to raise the kind of sums that would attract the attention of a class of people used to dealing in big numbers, and secondly, startups have generally been regarded as too risky a proposition, despite a groundswell of positive press and the emergence of sectors, like FinTech, that are better understood by the bankers.
But, things are changing. Of the so-called “big three” crowdfunding platforms, Seedrs, Crowdcube, and Syndicate Room, Syndicate Room have made a more conscious effort to appeal to city workers as well as entrepreneurs. De Vasconcelos admits that Syndicate Room doesn’t have as many users as the other two platforms, but its members invest larger sums; although they may invest as little as £1,000, sums of £25,00 or more are not unusual.
Plus, unlike the others, Syndicate Room campaigns are investor led, by people with significant experience, such as Milner, who has made more than 40 early stage investments. Every startup raising equity has a lead investor and details of the size of their investment, and their experience, are available to see to anybody who has registered on Syndicate Room as a “Sophisticated Investor” (only self-certified Sophisticated Investors and High Net Worth Individuals can access the private market deals – anyone can access the public market deals).
Outside of the tightly knit tech startup scene, whose influencers include the likes of LastMinute.com founders Martha Lane Fox and Brent Hoberman, Michael Acton Smith, the founder of Mind Candy, and Venture Capital firms like Passion Capital, Balderton, and Playfair Capital, city-based investors are beginning to see the advantages of a diversified portfolio with just a little bit of risk.
Everyone knows the stat that 9 out 10 startup businesses fail, but the ones that succeed tend to achieve huge valuations – and following somebody who is “in the know” into a few deals could be a strategic, not to mention enthralling way of adding some calculated risk into an investment portfolio. Research produced by NESTA shows that, between 2000-2008, the annual IRR of business angels was 22% – more than double that of the stock market, and probably most common or garden investment funds.
Syndicate Room’s own “Bridging The Equity Divide” report reveals that, of the 3,000+ people surveyed, 53% felt that their net worth would increase if they invested in equities, and 40% would have invested in IPO’s had they known they were able to. 46% of those surveyed expressed an interest in investing in tech startups.
So the report demonstrates that the appetite is there, a view supported by Hume Kendall who said he felt the equity markets were currently as healthy as they had ever been since the “good old days” of the 1980’s, and encouraged by Rahti, excited by the prospect of having the public back IPOs in a way that has not happened before.
De Vasconcelos and Britton make an intriguing partnership, pitching themselves as a kind of Zuckerberg-lite, ambitious, driven, and disrupting traditional ways of doing things, whilst maintaining closer ties with a generation that, in the UK at least, holds nearly all of the purse strings. They are not trying to change too much too quickly, instead they are adding structure to an industry, crowdfunding, that has suffered from being seen as too risky, too flimsy or not regulated enough to warrant serious investment. They haven’t eliminated the risk because that is impossible, but they do have the ability to manage it better.
Last night was a world away from the “back my campaign with fifteen dollars, get a logo’ed rubber duckie” world of rewards based campaigns, whilst retaining some of the sense of adventure and credible risk of the world of startups. It’s a crowded marketplace, but Syndicate Room have managed to clearly differentiate itself and provide a level of sophistication and gravitas, from its base in Cambridge, that will make all the difference to certain types of investors, especially those still sat on the fence regarding crowdfunding and whether to make their first investment.
Syndicate Room’s latest fundraising began in earnest this morning at 9am – will it take just 33 hours to raise the target amount this time?