UK-based equity crowdfunding platform Seedrs is to be acquired by US private investment rival Republic, subject to regulatory approval.
What’s the background to the sale of Seedrs?
The deal with Republic comes almost nine months after Seedrs was forced to abandon plans to sell out to its principal competitor Crowdcube following objections from the UK’s Competition and Markets Authority, the CMA. Who felt that the combination of the two largest players in the UK crowdfunding market would be anti-competitive.
Republic has a platform that allows investors to put money into fast-growing startups in sectors such as gaming, cryptocurrencies and real estate, and in the past, it has partnered with major Venture Capital investors such as Andreesen Horowitz, Union Square Ventures, Kleiner Perkins and Ycombinator.
Republic recently raised $150.00 million of its own through a Series B round led by Valor Equity partners.
Why has Seedrs chosen to sell?
The crowdfunding market in the UK is growing but it has yet to achieve critical mass.
Seedrs, which launched and became regulated in 2012, has raised almost £1.50 billion over the last decade. Yet despite innovations such as creating a secondary marketplace for shares of businesses, that have raised money through the Seedrs platform, the sector hasn’t scaled.
Seedrs management believes that having the “ firepower “ of a much larger group behind them will allow it to grow the business once more.
It’s perhaps no coincidence that Crowdcube chose the same day to announce that it will be raising £2m to fund its own expansion.
Commenting on the deal, Seedrs CEO Jeff Kelisky, who will remain in charge following the acquisition, said that:
“I am excited to say that Seedrs will not only continue to serve the exciting UK and European businesses and investors, but with Republic’s firepower behind us, we will continue to redefine the segment by leading on innovation, customer service, supporting diversity, and trust.”
Why is Republic buying Seedrs?
Republic is paying $100.0 million to acquire Seedrs and has its eye on expansion into Europe, which will be guided by current Seedrs chair Jeff Lynn, who pointed to the opportunities presented by a harmonised regulatory system for crowdfunding in the EU, that has recently been introduced.
Republic’s founder Kendrick Nguyen said that:
“We knew international expansion was necessary to achieve cross-bordered participation. In working with Seedrs, we have admired their technological capabilities, the strength of their team and their strong presence in the UK and soon Europe. We anticipate further developing the strengths of both companies from retail, secondaries, crypto, and communities to create a clear industry leader.”
The CMA decision not to allow Seedrs and Crowdcube to combine in a sector where critical mass is crucial always looked misguided, however by partnering with larger US businesses Seedrs may now be able to fulfil its potential and the increased competition between itself and Crowdcube may help to grow the Crowdfunding space that much quicker.