Investing in Businesses

Making Investments Through Seedrs

Investing in Businesses

  • What is investing in businesses about?

    Investing in businesses is about picking businesses that you believe have the potential to grow. You invest in exchange for a portion of their equity, meaning that you buy shares (or other equity-like interests) in the business. If a business you've invested in succeeds, the shares that you own will become worth more than you paid for them. However, if the business fails - as the majority of early-stage businesses do - you'll lose your investment.

  • Can investing in businesses be profitable?

    One of the key reports we use to support the proposition that investing in businesses can be profitable comes from a major study on angel investing, Siding with the Angels, which was published by the National Endowment for Science, Technology and the Arts (NESTA) and the British Business Angels Association (BBAA) in 2009. To our knowledge, this report is the most comprehensive study of returns from angel investing in the UK ever published.

  • Will investing in businesses continue to be as profitable in the future?

    No one can say for sure, but we predict that it will become even more profitable, especially relative to other asset classes.

    In a world where the creation of value is increasingly driven by innovation and adaptability rather than scale, businesses that are small and agile are well-positioned to outperform their bigger, slower counterparts. There will continue to be many failures of course, but we think that there will be more, and larger, successes, which in turn will mean that increasingly outsized returns will be available to investors in early-stage companies.

  • Why do businesses need to raise investment?

    When an entrepreneur starts a new venture, they usually need money to turn the idea into the beginnings of an actual business that can reach out to customers and later-stage investors. Depending on the business, this capital might allow them to build a minimum viable product (technology startups), buy equipment (manufacturing startups), lease space and acquire inventory (retailing startups), hire a great team, expand their market and customer acquisition efforts, and so forth.

     

  • How much equity do investors get for their investment?

    Each business decides how much money it wants to raise in exchange for a certain percentage of its equity, and each investor’s equity interest will be proportionate to the size of their investment. So if a campaign raises £150,000 in exchange for 20% of its equity, and you invest £1,500 (1% of £150,000), you will receive 0.20% (1% of 20%) of the equity of the business.

  • Is Seedrs an angel network?

    No. Angel networks introduce investors and entrepreneurs but tend not to get closely involved in the investment process - it’s up to each investor and each entrepreneur to negotiate a deal individually and get lawyers to draft up the necessary contracts. Seedrs is a full investment platform, allowing investors to invest in businesses directly through the platform. Many angels choose to invest through Seedrs because of the increased efficiency and access to deal flow.

  • Is Seedrs a fund?

    No. When investors invest in a business through Seedrs, they invest solely in the single campaign that they’ve chosen. However, we occasionally make available campaigns for individual 'funds' looking to raise investment for a pool of known or to-be-selected businesses (for an accelerator cohort, for example).

  • Is Seedrs like peer-to-peer lending?

    There are similarities but also important differences. The concept of having many people provide finance in small quantities via the internet was pioneered by peer- to-peer lending platforms like Zopa, Funding Circle and Kiva, and our founders were inspired by those models when creating Seedrs.

    However, there are two major distinctions between peer-to-peer lending and Seedrs. First, Seedrs is generally about early- and growth-stage finance –for businesses, whereas most peer-to-peer lending sites focus on personal finance or later-stage businesses. And second, Seedrs is about equity investment rather than debt, which means that investors who use Seedrs can achieve much higher returns than they would in peer-to-peer lending, but they also bear the risks of the business and won't get their original investment back if the business fails.

  • Is Seedrs a form of crowdfunding?

    Yes. Crowdfunding is a broad term that has come to be used for a wide-range of financing techniques, including charitable and political donations, art patronage and entrepreneurial finance. Most forms of crowdfunding have not provided funders with a potential for financial return: they usually rely on altruistic giving or non-monetary rewards. Seedrs allows people to back businesses by crowd investing, rather than donating, and therefore receive genuine financial returns when their investments are successful.

  • Is there a chance investors could lose more than they invested?

    No. As an equity investor, investor liability will be limited to the amount invested, which means that even though they might not get their investment back, they can't be called on to pay anything more no matter what happens to the business.

  • What are the main risks of investing?

    There are three key risks when investing in an early-stage company. The main risk is simply that the business could fail, and investors won't get any money back. And even if the business succeeds, investments are likely to be illiquid for a substantial period of time - often a number of years - meaning that investors are unlikely to be able to sell the investment and will likely not receive dividends from it either. Finally, there is the risk of dilution: if the startup raises more capital later on (which most successful businesses need to do), the percentage of equity that existing investors hold in it will decrease relative to what they originally had. See our Risk Warning for additional details on these risks.

  • Should anyone invest all of their money in businesses?

    Absolutely not. We strongly suggest that investors invest most of their capital in safer, more liquid assets, such as mutual funds, bonds and bank deposits. As a rule of thumb, active angel investors tend to invest no more than between 5% and 15% of their capital in early-stage businesses. Whatever proportion of money users choose to invest, the most important thing is that they can afford to lose all of it.

  • Should users invest money in one business or small amounts in multiple businesses?

    We think that the better practice is to diversify by investing small amounts in multiple businesses. Because the distribution of returns from early – stage businesses is highly skewed - meaning that the majority of startups fail, and most of the profits come from a few big successes - investors are more likely to make a profit by investing in a number of businesses in the hopes that the successes of a few outweigh the losses of the rest.

Making Investments Through Seedrs

  • Who can invest on Seedrs?

    People from throughout Europe may invest through Seedrs. We may be able to authorise a small number of investors outside of Europe to invest in a particular campaign if they have a sufficiently strong pre-existing connection with the entrepreneur. Please contact support@seedrs.com for further details.

  • Does Seedrs review each campaign's Q&A section?

    We do not review or approve the content in the Q&A which accompanies Seedrs campaigns. The Q&A constitutes "one-off communications" between entrepreneurs and potential investors and should be treated as one-on-one conversations. It is the responsibility of a campaigning entrepreneur to monitor and respond to questions raised in their Q&A and respond to them accordingly. We are not able to remove Q&A content on request, however, we do reserve the right to remove any content in the Q&A that we consider spam, abuse or trolling.

  • Does Seedrs advise as to where to invest?

    We are not authorised to give advice. While we confirm and approve all the information provided in each campaign, we do not make our own judgment about whether it's a good business. We believe that a large number of diverse investors are better suited to assess the business’s prospects than a few professional managers. That said, we do our best to exclude businesses that are proposing to do something illegal, unethical or just not viable.

  • Is there a minimum or a maximum investment?

    The minimum is £10/€10 per investment (although some campaigns may have a specific minimum investment which is greater than £10/€10 as a result of its share price). Given the risk profile and returns potential of early-stage businesses as an asset class, however, we strongly suggest that investors seek to build a balanced, diversified portfolio.

    The maximum investment is however much money the business is willing to accept, less anything that's already been committed by other investors.

  • How do I pay for an investment?

    There are currently two ways to deposit money into your Investment Account to pay for investments:

    • Bank card – You can deposit money directly into your Seedrs account via bank card payment from any supported country. We currently only support Visa and MasterCard. Our secure card processor, Stripe, handles these payments. This is the fastest deposit method.
    • Bank transfer – Using your unique reference number provided in your Investment Account, you can deposit money into your Seedrs account by initiating a standard electronic bank transfer (also called a payment). Bank transfers can several business days to clear your Seedrs account.

    We do not charge any fees on either of these deposit methods.

    If you’ve deposited money in a different currency than the campaign is using to fundraise, our third party currency conversion provider, The Currency Cloud, seamlessly allows you to transfer funds between your currency accounts so you can pay for your investment in the correct currency.

     

  • What happens if a campaign doesn’t reach its target?

    Investors will get their money back in full. Seedrs operates on an all-or-nothing basis, meaning that if the business does not raise all of the money its campaign is seeking within it's allotted campaign period, it gets nothing and investors receive their funds back into their Seedrs account.

  • What is "overfunding" of campaigns?

    After a campaign has reached 100% of its funding target, entrepreneurs have the option of raising more than their target investment amount if the demand is there from investors. We call this "overfunding".

    We operate an all-or-nothing model where entrepreneurs must reach their minimum target or investors get their funds back. But if a campaign goes into overfunding, the entrepreneur will be able to accept any amount from 100% and up during the remaining duration of their campaign (in exchange for a corresponding amount of additional equity). Entrepreneurs are not required to take investment but reserve the right to accept any amount beyond 100%.

  • Once a campaign has reached its target will the investment definitely be completed?

    No. Once all the money has been invested, we conduct a legal due diligence process and negotiate a legal agreement with the business on behalf of investors before the investment is completed. If we identify problems in the legal due diligence process or are unable to agree legal terms, we'll cancel the investment and return funds back to investors, just as we would if the campaign had not received commitments for all of the money it was seeking.

  • Are investments public?

    Investors can choose to share their profile publicly with other Seedrs members, or not, from within their profile. They can also choose to make each investment public or anonymous at the time of investment.

    Even if an investment is private, the business will be informed of the identity of all of their investors before the investment is completed, and in certain cases investments may be recorded in public filings with Companies House or elsewhere as required by law.

  • Why am I having problems using my card to make a payment?

    You can make a deposit through Stripe using most European bank cards. However, Stripe may not recognise cards from some countries. We support Visa and MasterCard, but American Express is not currently supported.

    If you can’t make a card payment, then you can still make a transfer to Seedrs using a bank deposit, through your bank or another payment service such as Transferwise (the fees are much lower than an international bank transfer).

  • Can I withdraw my funds?

    If you’ve transferred money into your account and not yet invested it, or if money has been refunded or paid to your account you can withdraw the money at any time by visiting your Investment Account and clicking on “Withdraw”.

  • What are the eligibility requirements in order to make investments through Seedrs?

    To make investments, you need to successfully complete our Investor Questionnaire, or self-certify as a "high net worth individual" or a "sophisticated investor" (or, if you are an institution, a “high net worth company, unincorporated association, etc”). This is necessary to show us that that you have the professional judgment and understanding to appreciate the risks and considerations of investing in early-stage businesses as an asset class.

  • What is identity verification?

    Like all financial services businesses, we are required by anti-money laundering regulations to verify the identities of our investors. You’ll need to pass this process before you can make a deposit into your Seedrs account:

    • Automatic: Often we can verify your identity automatically when you enter your personal details on the platform before you make a deposit by using a third party online database. But sometimes we are unable to verify your identity this way. This is nothing to worry about and can happen for a number of reasons, for example if you have recently moved house, if the database does not cover the place where you live, or a simple data entry error.
    • Document: If we can't identify you using the automatic process, then we will need to verify your identity using documents as evidence of your identity and address. You will be asked to upload copies of the following two documents through the platform (which can be scans or photos taken on your mobile phone):
    1. Identity: Government issued photo ID (e.g. passport, national ID card, driving licence); and
    2. Address: Recent (i.e. within three months) utility bill, bank statement, or a letter from a national or local authority showing your name and address.

    The information that you send us will be used solely to verify your identity and will not be used for any other purposes. Please note that we require two separate documents (even if your government issued photo ID also states your address). Once we have reviewed these documents we will let you know whether you have cleared the process or if we require anything else.

    Remember that this is only required to be completed before you make a deposit into your Seedrs account. However, you can still make investments on the platform before then but you won’t be able to pay for (and so complete) such investments until identity verification has been completed.

  • What do users get for their investment?

    Users purchase ordinary shares in a business. These are the same type of shares that the founders and other early investors will usually have. We then hold those shares for them as their nominee: this is a common way of holding shares on behalf of large numbers of investors and makes it possible for us to take care of the administrative work involved in being a shareholder.

    This structure means that all investors are given the opportunity to vote and receive regular updates from the businesses they've invested in directly through the platform, all while we protect their rights with our professional subscription agreement.

     

  • What's to stop entrepreneurs from running away with the money?

    Us. We have a number of measures in place – including conducting upfront checks, holding entrepreneurs and businesses accountable for the information they have provided us, and, if necessary taking legal action against the entrepreneurs and business for non-compliance with the subscription agreement – to ensure that the  investment monies are used for genuine business purposes.

    Entrepreneurs may make bad business choices, and that's a risk investors bear, but if any entrepreneur tries to act dishonestly we will investigate and, if appropriate, pursue legal action against them. That said, we believe that 99.9% of entrepreneurs are well-intentioned people trying to create great businesses, and we expect only to have to use these measures on rare occasion.

  • What will the tax treatment of investments be?

    In the absence of any tax relief, shares will be treated similarly to any other equity investment investors might hold. Any questions in relation to your tax position should be addressed with a professional adviser.

  • In what tax year are investments deemed to be made?

    After an investment is made through Seedrs, there is a period of time between when funds are committed and when we complete the investment in the company. This is because we only complete an investment after the business has reached 100% of its funding target and we have finished our legal due diligence process.

    For tax purposes, investments will be deemed to have been made when we complete the investment into the company, not when funds are committed through Seedrs. We appreciate that this can cause some uncertainty for tax planning purposes, but because we do not know how long it will take a given business to reach its funding target and finish due diligence, we cannot predict exactly when we will be able to complete an investment in it.

  • How are investors categorised in relation to Seedrs for FCA purposes?

    Depending on how users become investment authorised by self-certifying, or taking the investor questionnaire, they will be categorised as follows:

    • Self-Certified Sophisticated Investors. Some of our investors self-certify that they meet the requirements of a "sophisticated investor", which are set out in law. These investors are categorised by us as "retail clients/sophisticated investors", meaning that they are afforded the rights and protections the FCA grants to retail clients/sophisticated investors.
    • Self-Certified High-Net-Worth Individuals. Others self-certify that they meet the requirements of a "high-net-worth individual" (or, for institutional investors, the equivalent category of “high-net-worth company, unincorporated association, etc”). As with sophisticated investors, the requirements for this self-certification are set out in law. These investors are categorised by us as "retail clients/high-net-worth individuals", and they are in the same position as Self-Certified Sophisticated Investors for purposes of FCA rights and protections.
    • Category 7 Persons. Investors who successfully complete our investor questionnaire and then elect to be treated as professional clients are categorised by us as "professional clients/Category 7 persons". These investors are afforded the same rights and protections by us as are retail clients, but they do not receive the same rights from the FCA. The primary difference is that these investors will be treated differently to retail clients if they complain to the Financial Ombudsman Service or claim compensation under the Financial Services Compensation Scheme (although retail clients also cannot claim FSCS compensation for investment losses).

  • Do investors need to manage investments once made?

    No. We manage each investment as nominee, including signing documents, requesting regular trading updates and dealing with the various other administrative requirements of being a legal shareholder. However, investors can keep up to date on how their businesses are growing through their Portfolio, where they can read updates from management, media links and other information.

  • Can investors stay involved with businesses after they've invested?

    Absolutely. In addition to watching the business’s progress through the Portfolio section of the website, investors are welcome to reach out to the business to offer support, advice or mentorship at any time. One of the biggest benefits to a business using Seedrs to raise capital is that it can tap the expertise and wisdom of its large base of investors.

  • How do investors make money?

    The main way investors can make money from investments is if they sell their shares. This is most likely to happen if the business is bought by another company or floats on a stock exchange – also called an exit event. It takes time for businesses to grow to the point of exit; it may take several years for this to occur. In addition, investors may also receive dividends the company pays on their shares .

  • How will you distribute returns to investors?

    Any money investors receive from an investment will be credited to their Seedrs Investment Account. The money can then be withdrawn, or invested in another business, at any time.

  • Can investors follow-on their investments?

    Although we may not facilitate subsequent financing rounds directly, where possible we will let investors know when the company is looking to raise more money, and they will be free to discuss making an investment with its management.

  • What happens if a business fails?

    This is more likely to happen than not. In some cases the business will either be wound up or sold for a nominal price, while in other cases the business won't formally shut down but we'll write off the investment and dispose of the shares. Any proceeds from these processes will be distributed to investors, but they're likely to represent far less than the original investment, and there may not be any proceeds at all.

  • Why do people need Seedrs to be able to invest?

    Unless they're extremely wealthy and have lots of time on their hands, it is very difficult for most people to invest in early-stage businesses the traditional way as a business angel. Due to transaction costs and other considerations, most angels find they need to invest at least £10,000 per business; and because this is a high-risk type of investing, many angels try to invest in at least 10 and often more. This means that to be an angel, people generally need to have £100,000 or more to allocate just to businesses (which means that they need to have far more than £100,000 in order to build a diversified portfolio that includes safer assets), and they also need to have the time to find, negotiate and execute a large number of offline investments.

    Investors with that much money and time available might not need Seedrs (although we can still provide them with access to investment opportunities they might not otherwise find, and more efficient investing). For everyone else, though, Seedrs provides the chance to invest small amounts of money through a streamlined, online process, which means that we're the one way to participate in the benefits of investing in early-stage businesses without having both a fortune and tons of time to spare.

  • Are Seedrs investments safe?

    No. The equity of an early-stage business is considered a high risk investment, and in most cases money will not be returned to investors. The goal with this type of investing is to invest in one or several businesses that perform so well that they more than compensate for the ones that don't work out. But as there's no guarantee that investors will pick one of the big winners, investors should only invest money they can afford to lose.

  • What fees do you charge investors?

    We only charge a single, straightforward fee of 7.5% on any profit that you make on an investment held by us as nominee. This is all you will ever pay us, and you only pay if you make a profit.

    This means that our incentive is to see you make money on your investments.Please note that if your shares are publicly listed you will also need to pay any broker's fees incurred on selling your shares on the public market (our current broker's fees can be found here).

    We’ve completely aligned our success with yours. Our team works hard from before you make an investment through to the sale of shares to earn our fee, including:

    • Reviewing each and every statement made in campaigns to ensure they are fair, clear and not-misleading. For each statement made, we require evidence to back it up;
    • Assisting with all EIS or SEIS advanced assurance paperwork to ensure investors receive their reliefs;
    • Preparing the relevant legal documentation and conducting all legal due diligence required to complete the round of financing raised on Seedrs, including execution of our subscription agreement and the adoption of our standard articles of association; and
    • Guaranteeing that each company provides quarterly trading reports to investors through the platform and enforcing investor rights afforded to them in the Subscription Agreement.

  • Who invests on Seedrs?

    Seedrs was established to allow people who understand the risks of investing, but don’t have both vast fortunes and tremendous amounts of time to build a diversified portfolio of investments in early-stage businesses. Our target investors include active professionals, business owners and managers, academics and similar types of people who don’t have both the capital and time required to be a traditional angel investor. We also have many angel investors and venture capitalists using the platform to source investment opportunities.

  • What happens when a campaign reaches 100%?

    If a campaign receives 100% of the investment it is seeking within the campaign period, we perform detailed due diligence on the business, the company and the directors. This includes:

    • Helping the entrepreneur set up the company if it has not already been incorporated or needs to create a UK structure,
    • Assisting with all EIS or SEIS advanced assurance paperwork,
    • Sending the entrepreneur a typical early-stage investment due diligence request list, requesting that they send us any contracts, paperwork or other information with respect to general corporate matters, shareholders, financials (including debt), commercial contracts, property, intellectual property and related matters, all of which we review, and
    • Interviewing directors, if we deem it necessary.

    Once we have completed legal due diligence, our investment team prepares the relevant legal documentation required to complete the round of financing raised on Seedrs. This includes the execution of our standard form subscription agreement and the adoption of our standard form articles of association, in each case modified as necessary to reflect any relevant circumstances. We also ensure that any intellectual property owned by individuals is transferred into the company’s name, and any outstanding director loans are dealt with in an appropriate way before closing.

    And when we are happy that everything is in order, we transfer the funds to the company, less our fee. If any material problems arise during the due diligence process, if we discover anything which we believe would result in the completion of the deal not being in the interests of the investors or if the company is not willing to adopt our articles or sign our subscription agreement, then we will cancel the deal and return investors' investment funds.

  • What is a nominee?

    We act as the nominee shareholder on behalf of each investor on Seedrs. This means that:

    • Investors do not need to worry about managing their investments. We ensure that their investments are protected using both the statutory provisions afforded to shareholders as well as the professional, investor grade, contractual protections that are in place under our subscription agreement with each company.
    • The companies do not have to worry about having to manage numerous individual investors. We have the power to take votes and issue consents on behalf of each Seedrs investor, which results in an efficient and streamlined process for everyone. This also means that a company that has raised investment through Seedrs will not face problems with a large cap table when raising later-stage funding from VCs or others. In the absence of our nominee approach, the difficulty in obtaining consents and other signatures from each individual investor could make it nearly impossible to raise further finance; under the Seedrs structure, we take care of those consents and signatures the same way as a single institutional investor would.

Legal Structure

Raising Capital

Seeking Investment Through Seedrs

Post-Fundraising Process

Legal Structure

  • Is there a chance investors could lose more than they invested?

    No. As an equity investor, investor liability will be limited to the amount invested, which means that even though they might not get their investment back, they can't be called on to pay anything more no matter what happens to the business.

  • Do businesses issue shares directly to investors?

    No. Companies issue shares to us as nominee of the investors. This is a common way of holding shares on behalf of large numbers of investors, and it means that we are the sole legal shareholder for businesses to deal with on administrative matters, such as casting votes and issuing consents.

  • What is a nominee?

    We act as the nominee shareholder on behalf of each investor on Seedrs. This means that:

    • Investors do not need to worry about managing their investments. We ensure that their investments are protected using both the statutory provisions afforded to shareholders as well as the professional, investor grade, contractual protections that are in place under our subscription agreement with each company.
    • The companies do not have to worry about having to manage numerous individual investors. We have the power to take votes and issue consents on behalf of each Seedrs investor, which results in an efficient and streamlined process for everyone. This also means that a company that has raised investment through Seedrs will not face problems with a large cap table when raising later-stage funding from VCs or others. In the absence of our nominee approach, the difficulty in obtaining consents and other signatures from each individual investor could make it nearly impossible to raise further finance; under the Seedrs structure, we take care of those consents and signatures the same way as a single institutional investor would.

Raising Capital

  • Why do businesses need to raise investment?

    When an entrepreneur starts a new venture, they usually need money to turn the idea into the beginnings of an actual business that can reach out to customers and later-stage investors. Depending on the business, this capital might allow them to build a minimum viable product (technology startups), buy equipment (manufacturing startups), lease space and acquire inventory (retailing startups), hire a great team, expand their market and customer acquisition efforts, and so forth.

     

  • How much equity do investors get for their investment?

    Each business decides how much money it wants to raise in exchange for a certain percentage of its equity, and each investor’s equity interest will be proportionate to the size of their investment. So if a campaign raises £150,000 in exchange for 20% of its equity, and you invest £1,500 (1% of £150,000), you will receive 0.20% (1% of 20%) of the equity of the business.

  • What types of businesses can use Seedrs to raise capital?

    A wide range of businesses can seek capital through Seedrs, from high-growth, technology-driven ventures, to more traditional businesses like retail stores, restaurants and professional services firms, regardless of the business’s stage of growth, whether it be an idea-stage startup or later-stage growth business.

  • Is Seedrs an angel network?

    No. Angel networks introduce investors and entrepreneurs but tend not to get closely involved in the investment process - it’s up to each investor and each entrepreneur to negotiate a deal individually and get lawyers to draft up the necessary contracts. Seedrs is a full investment platform, allowing investors to invest in businesses directly through the platform. Many angels choose to invest through Seedrs because of the increased efficiency and access to deal flow.

  • Is Seedrs a fund?

    No. When investors invest in a business through Seedrs, they invest solely in the single campaign that they’ve chosen. However, we occasionally make available campaigns for individual 'funds' looking to raise investment for a pool of known or to-be-selected businesses (for an accelerator cohort, for example).

  • Is Seedrs like peer-to-peer lending?

    There are similarities but also important differences. The concept of having many people provide finance in small quantities via the internet was pioneered by peer- to-peer lending platforms like Zopa, Funding Circle and Kiva, and our founders were inspired by those models when creating Seedrs.

    However, there are two major distinctions between peer-to-peer lending and Seedrs. First, Seedrs is generally about early- and growth-stage finance –for businesses, whereas most peer-to-peer lending sites focus on personal finance or later-stage businesses. And second, Seedrs is about equity investment rather than debt, which means that investors who use Seedrs can achieve much higher returns than they would in peer-to-peer lending, but they also bear the risks of the business and won't get their original investment back if the business fails.

  • Is Seedrs a form of crowdfunding?

    Yes. Crowdfunding is a broad term that has come to be used for a wide-range of financing techniques, including charitable and political donations, art patronage and entrepreneurial finance. Most forms of crowdfunding have not provided funders with a potential for financial return: they usually rely on altruistic giving or non-monetary rewards. Seedrs allows people to back businesses by crowd investing, rather than donating, and therefore receive genuine financial returns when their investments are successful.

  • Should a business raise debt or equity?

    We think that equity is a much better option than debt for growth-focused businesses, because equity creates a greater alignment of interests between the investors and the entrepreneur.

    Early-stage businesses, by their nature, tend to involve a lot of risk and a high likelihood of failure. If a business raises debt capital and it doesn't work out, the lender can still insist on being repaid - which in many cases means that the business has to pay them back personally or else declare bankruptcy. And even if the business goes well, lenders usually want to be repaid very quickly, so the entrepreneur is forced to take cash out of the business that could be used to grow.

    In contrast, raising equity capital allows businesses and their investors to share the risk of the business, so founders don't end up personally ruined if the business fails, and it's in the investors’ interest to see the business grow rather than pay out cash quickly. Once the business has grown and become less risky, it may be that debt is a useful option to finance expansion or working capital needs, but when raising growth capital we feel that equity is the way to go (that’s why we built a platform for investing equity!).

  • How can entrepreneurs protect the confidentiality of their idea?

    They can't, but confidentiality is the last thing a new business should be worrying about. Sharing their idea is critical to raising funds, attracting collaborators and building their product.

    What about the risk that someone steals the idea in the process? Eric Ries provides a very clear answer to this in The Lean Startup:

    "The most common objection I have heard over the years to building a minimum viable product is fear of competitors - especially large established companies - stealing a startup's idea. If only it were so easy to have a good idea stolen! Part of the special challenge of being a startup is the near impossibility of having your idea, company or product be noticed by anyone, let alone a competitor. In fact, I have often given entrepreneurs fearful of this issue the following assignment: take one of your ideas, find the name of the relevant product manager at an established company who has responsibility for that area, and try to get them to steal your idea. Call them up, write them a memo, send them a press release - go ahead, try it! The truth is that most managers in most companies are already overwhelmed with good ideas. Their challenge lies in prioritization and execution, and it is those challenges that gives a startup hope of surviving. If a competitor can out-execute a startup once the idea is known, the startup is doomed anyway..."

  • What is the downside to raising equity investment through Seedrs?

    The main downside to raising investment is that entrepreneurs have to give away equity in the business. This could mean sharing future potential profits with investors, instead of keeping it for themselves. This may occur when the business eventually seeks an exit opportunity, such as a sale of the company or flotation, or distributes some of their profits out in dividends. Most entrepreneurs are happy to accept this trade-off, as in practice it usually means that they get a slightly smaller piece of a much larger pie. But if founders are really determined to keep ownership of 100% of the business, then they should look for other ways to finance it.

Seeking Investment Through Seedrs

  • Does Seedrs review each campaign's Q&A section?

    We do not review or approve the content in the Q&A which accompanies Seedrs campaigns. The Q&A constitutes "one-off communications" between entrepreneurs and potential investors and should be treated as one-on-one conversations. It is the responsibility of a campaigning entrepreneur to monitor and respond to questions raised in their Q&A and respond to them accordingly. We are not able to remove Q&A content on request, however, we do reserve the right to remove any content in the Q&A that we consider spam, abuse or trolling.

  • Does Seedrs advise as to where to invest?

    We are not authorised to give advice. While we confirm and approve all the information provided in each campaign, we do not make our own judgment about whether it's a good business. We believe that a large number of diverse investors are better suited to assess the business’s prospects than a few professional managers. That said, we do our best to exclude businesses that are proposing to do something illegal, unethical or just not viable.

  • Is there a minimum or a maximum investment?

    The minimum is £10/€10 per investment (although some campaigns may have a specific minimum investment which is greater than £10/€10 as a result of its share price). Given the risk profile and returns potential of early-stage businesses as an asset class, however, we strongly suggest that investors seek to build a balanced, diversified portfolio.

    The maximum investment is however much money the business is willing to accept, less anything that's already been committed by other investors.

  • Is there a minimum or a maximum that can be raised?

    No. There is no minimum or maximum.

  • What happens if a campaign doesn’t reach its target?

    Investors will get their money back in full. Seedrs operates on an all-or-nothing basis, meaning that if the business does not raise all of the money its campaign is seeking within it's allotted campaign period, it gets nothing and investors receive their funds back into their Seedrs account.

  • What is "overfunding" of campaigns?

    After a campaign has reached 100% of its funding target, entrepreneurs have the option of raising more than their target investment amount if the demand is there from investors. We call this "overfunding".

    We operate an all-or-nothing model where entrepreneurs must reach their minimum target or investors get their funds back. But if a campaign goes into overfunding, the entrepreneur will be able to accept any amount from 100% and up during the remaining duration of their campaign (in exchange for a corresponding amount of additional equity). Entrepreneurs are not required to take investment but reserve the right to accept any amount beyond 100%.

  • Once a campaign has reached its target will the investment definitely be completed?

    No. Once all the money has been invested, we conduct a legal due diligence process and negotiate a legal agreement with the business on behalf of investors before the investment is completed. If we identify problems in the legal due diligence process or are unable to agree legal terms, we'll cancel the investment and return funds back to investors, just as we would if the campaign had not received commitments for all of the money it was seeking.

  • What fee do you charge businesses?

    We charge businesses a fee of up to 7.5% of the money they successfully raise through Seedrs. This means that we do not charge businesses a fee to seek capital. We feel that so-called “pay-to-pitch” models deter many great entrepreneurs because they risk losing money even if they don’t get investment. Our fee model ensures that entrepreneurs only have to pay us if they raise money through us, and we think this is important to attracting high-potential businesses.

  • Who invests on Seedrs?

    Seedrs was established to allow people who understand the risks of investing, but don’t have both vast fortunes and tremendous amounts of time to build a diversified portfolio of investments in early-stage businesses. Our target investors include active professionals, business owners and managers, academics and similar types of people who don’t have both the capital and time required to be a traditional angel investor. We also have many angel investors and venture capitalists using the platform to source investment opportunities.

  • How do investors find out about Seedrs?

    We market Seedrs to investors using PR, social media, conferences and other tools to communicate the benefits of investing in exciting new businesses.

    We also encourage entrepreneurs to tell their friends, family, customers, partners and members of their community about their campaigns. People are far more likely to invest in businesses run by entrepreneurs they know and like. While campaigns usually get some investment from people who find them on the site, they tend to receive get a more engaged and enthusiastic investor base from people they send the campaign to directly from within their existing network.

  • Why do businesses need Seedrs to raise money?

    Seedrs is the easiest way for founders to access the capital of people who want to invest in businesses but do not have both the money and time to be traditional angel investors. This could include friends, family, customers and members of a business's community, along with other people across Europe who are interested in, and want to share in the success of, dynamic new businesses. Due to high transaction costs and other considerations, it is very difficult to raise capital from these people directly offline. Seedrs makes it a straightforward and simple process for companies to raise investment, as well as build engagement with, or reward, their community.

  • Will founders still have control of their business if they raise through Seedrs?

    Accepting external investment into a company (from any source) always comes with certain responsibilities, but entrepreneurs are still in control of their business on a day-to-day basis.

    So long as they retain over 50% of the business's equity, they will keep control of it. For this reason, we suggest that they do not offer more than 50% of a business's equity in exchange for the money raised through Seedrs.

Post-Fundraising Process

  • What's to stop entrepreneurs from running away with the money?

    Us. We have a number of measures in place – including conducting upfront checks, holding entrepreneurs and businesses accountable for the information they have provided us, and, if necessary taking legal action against the entrepreneurs and business for non-compliance with the subscription agreement – to ensure that the  investment monies are used for genuine business purposes.

    Entrepreneurs may make bad business choices, and that's a risk investors bear, but if any entrepreneur tries to act dishonestly we will investigate and, if appropriate, pursue legal action against them. That said, we believe that 99.9% of entrepreneurs are well-intentioned people trying to create great businesses, and we expect only to have to use these measures on rare occasion.

  • Do investors need to manage investments once made?

    No. We manage each investment as nominee, including signing documents, requesting regular trading updates and dealing with the various other administrative requirements of being a legal shareholder. However, investors can keep up to date on how their businesses are growing through their Portfolio, where they can read updates from management, media links and other information.

  • Can investors stay involved with businesses after they've invested?

    Absolutely. In addition to watching the business’s progress through the Portfolio section of the website, investors are welcome to reach out to the business to offer support, advice or mentorship at any time. One of the biggest benefits to a business using Seedrs to raise capital is that it can tap the expertise and wisdom of its large base of investors.

  • How will you distribute returns to investors?

    Any money investors receive from an investment will be credited to their Seedrs Investment Account. The money can then be withdrawn, or invested in another business, at any time.

  • Can investors follow-on their investments?

    Although we may not facilitate subsequent financing rounds directly, where possible we will let investors know when the company is looking to raise more money, and they will be free to discuss making an investment with its management.

  • What happens if a business fails?

    This is more likely to happen than not. In some cases the business will either be wound up or sold for a nominal price, while in other cases the business won't formally shut down but we'll write off the investment and dispose of the shares. Any proceeds from these processes will be distributed to investors, but they're likely to represent far less than the original investment, and there may not be any proceeds at all.

  • What approach does Seedrs take to managing the investment as nominee?

    We think that during the earliest stages of a business, it makes most sense for shareholders not to breathe down management's necks and instead to let them get on with growing their business. In our subscription agreement, there will be provisions in place to protect the investors, but we won't ask for a board seat or otherwise interfere in day-to-day management .

  • In addition to capital, can investors mentor and support businesses?

    Yes. The main form of mentorship and support comes from investors. We find that often the most useful thing for a business (other than capital) is connecting with the right specialist, and then deciding how and if they would like to work with them. By raising funds on Seedrs, businesses will be connected with hundreds, and potentially thousands, of people from a range of backgrounds, all of whom have a vested interest in the success of the business. Somewhere in that crowd there is likely to be someone who can help with what is needed, when it's needed (as well as lots of people who can test products and act as early-adopters and mavens). Additionally, we will be very happy to introduce teams to our extensive network of mentors, advisers, vendors and later-stage investors.

  • Will potential later-stage investors be bothered about there being many investors in a business?

    They shouldn't, because we act as the sole legal shareholder. Venture capitalists and other later-stage investors often don't like to invest in businesses with lots of geographically-scattered small shareholders in their cap table, as it can make the logistics of investing - and exiting - very complicated. But in the case of a Seedrs-funded business, there will just be one legal shareholder, us, who can sign documents and handle other logistics quickly and effectively, and that is the ideal scenario from most later-stage investors' point of view. Moreover, the fact that a business has so many investors that have demonstrated their support is likely to be very appealing to later-stage investors.

     

  • What happens when a campaign reaches 100%?

    If a campaign receives 100% of the investment it is seeking within the campaign period, we perform detailed due diligence on the business, the company and the directors. This includes:

    • Helping the entrepreneur set up the company if it has not already been incorporated or needs to create a UK structure,
    • Assisting with all EIS or SEIS advanced assurance paperwork,
    • Sending the entrepreneur a typical early-stage investment due diligence request list, requesting that they send us any contracts, paperwork or other information with respect to general corporate matters, shareholders, financials (including debt), commercial contracts, property, intellectual property and related matters, all of which we review, and
    • Interviewing directors, if we deem it necessary.

    Once we have completed legal due diligence, our investment team prepares the relevant legal documentation required to complete the round of financing raised on Seedrs. This includes the execution of our standard form subscription agreement and the adoption of our standard form articles of association, in each case modified as necessary to reflect any relevant circumstances. We also ensure that any intellectual property owned by individuals is transferred into the company’s name, and any outstanding director loans are dealt with in an appropriate way before closing.

    And when we are happy that everything is in order, we transfer the funds to the company, less our fee. If any material problems arise during the due diligence process, if we discover anything which we believe would result in the completion of the deal not being in the interests of the investors or if the company is not willing to adopt our articles or sign our subscription agreement, then we will cancel the deal and return investors' investment funds.

General

General

  • Who is eligible to join Seedrs?

    Anyone who is 18 or older may become a Seedrs member. For now, only residents of European countries (EU/EEA/CH) may make investments and raise investment through Seedrs. All investment activity takes place in the UK under UK law and so our contracts are all subject to UK law.

  • Is Seedrs authorised by the Financial Conduct Authority (FCA)?

    Yes. You can see the full details of our authorisation, including our full scope of permissions, on the FCA Register.

  • What browsers does the Seedrs website support?

    We support the following browsers:

    • Firefox 3.6 or above (http://www.mozilla.com/firefox/);
    • 
Google Chrome 10 or above (http://www.google.com/chrome);
    • Microsoft Internet Explorer 8 or above (http://www.microsoft.com);
    • Opera 11 or above (http://www.opera.com/);
    • 
Safari 5.1 or above (http://www.apple.com/safari/).

    We strongly recommend that you use a supported browser when using Seedrs. If you use an unsupported browser, you may not be able to enjoy parts of the platform in the way we designed them, and in some cases you may even lose functionality.