Silicon Valley has a very well-established seed funding system for startups — perhaps too well-established — but in Europe it’s a very different situation. Early stage money can be hard to come by, and in many cases starting out as true seed investors is a place that many angels fear to tread.
Step in Seedrs, a crowd platform that allows investors to find and in return for equity: a Kickstarter for pre-revenue businesses. On Tuesday afternoon, the U.K.-based service is opening its doors to the first tranche of startups, with the aim of connecting them to investors later this summer.
“We want to fill the super-early stage capital gap,” says Seedrs co-founder and CEO Jeff Lynn. “The first £50,000 or £75,000 — enough to get you to minimum viable product or to get your proof of concept — is really tough. We think we can massively increase the market, and then massively increase the amount of angel investing that happens in the U.K.”
So how does it work? Subject to vetting, investors can sign up to put in anything from £10 to £100,000. Startups can ask for funding of up to £150,000 — a relatively small sum, given that European law allows crowdfunding up to €5 million… but Lynn says it’s all part of making sure the service concentrates on that seed gap.
Unlike some other crowd investment services, Seedrs continues to manage the equity on behalf of the investors — acting as a middleman to broker the relationship between
Over 1,000 investors have already signed up to take part, and as of Tuesday startups are being invited into the system for the first time. Investors will be then given access to the site on July 6, which gives startups six weeks to prepare their pitches.
“We hope to get 20, 30 startups so that there’s an interesting selection to choose from,” says Lynn.
It’s fair to say that there is a ton of activity in this area at the moment, with a range of companies in many countries following the trail blazed by Kickstarter (if you haven’t read it, take a look at Om’s epic interview with Kickstarter’s Perry Chen. But Seedrs hopes it can fill a unique, specific void by starting out focused on the U.K market. That means it’s fought hard to get regulatory approval: official licensing by Britain’s Financial Services Authority has taken it more than a year to complete — but puts it on a much firmer footing. And it already has some buzz, including winning a prize at the London Web Summit that saw it score a £50,000 investment from DFJ Esprit.
Soon, though, the company hopes that it can go further. It wants to get Europe-wide regulatory approval in six to nine months, and then potentially head beyond the continent. “Maybe we go to the States, maybe not,” says Lynn. “We’re also looking at India, we’ve got good connections in Brazil. There are lots of options.”
It’s hoping to get there by with £1 million in funding, raised from DFJ Esprit, Luke Johnson’s Digital Prophets, and a number of angels.
So why wouldn’t a smart, early business use Kickstarter? A number of companies — most notably Pebble — have managed to find significant funds without giving any stake in their businesses.
Lynn says he knows that the allure of the equity-free raise is alluring, but for most businesses it is a far easier job to raise money from serious investors. And investors, of course, want a return.
“Look, if you can raise the money on Kickstarter instead of giving away equity, that’s great. But once we’re in the market I think Kickstarter and Indiegogo will become places for creative projects for which there’s no meaningful upside, just like they were always intended to be,” he says.
“Nobody wants to be the guy who Kickstarted Mark Zuckerberg.”