Many of the equity crowdfunding platforms chirp to the same tune: understand the risks, invest only what you can afford to lose, check that the valuation is fair, ensure that you are investing on reasonable terms, and so on. They call, in other words, for investors to be dispassionate. They call for investors not to get swept up in the story of a given fundraise, but rather to first analyse that fundraise with a clinical eye.
So what happens when we heed their advice, and consider alone the potential financial benefits of investing in a project? When constructing this “Crowdview” column, that’s what I have endeavoured to do.
This week, the campaign in the spotlight is Info-CTRL – which intends to raise £300,001 via the SyndicateRoom platform. A one liner on the story: “Info-CTRL offers a SaaS (Software as a Service) solution that enables companies to manage operational processes via spreadsheets on a company-wide basis without forcing individual users to move away from their own personal approaches”. Moving on.
It’s SyndicateRoom, and that means that all private investors will invest on exactly the same terms as the lead VC or Angel investor in the round. The lead investor in this instance is Finance Birmingham. All private investors can expect pre-emption rights on the issue of new shares and drag-along/tag-along rights. Should Mrs. Miggins invest, she will hold the same share class as Finance Birmingham – meaning the same voting rights, the same rights to dividends and to any return of capital.
Info-CTRL is seeking an investment of £300,001, for 37.47%, at a pre-money valuation of £500,650. £204,504 has been invested so far. What immediately stands out about the fundraise is the amount of equity on offer. 37.47% is quite the slice, telling you that Info-CTRL needs to give up a fair portion of its equity just to get off the ground. Will the company’s management remain sufficiently well incentivized to drive the business to success? Bear in mind, also, that this is not the first time that Info-CTRL has raised money (its SEIS relief has already been burned through), nor will it be the last time that it raises money (further £150k fundraises are planned for Year 1 and Year 3).
The company’s pre-money valuation of roughly £500k is just over 2x cumulative revenues. The company doesn’t expect to break into the black until between Year 2 and Year 3. It expects to make a £266k profit in Year 3. Info-CTRL has posted a total -£179k loss to date.
The round carries EIS relief.
So, how is the post-money valuation of around £800k justified? The company believes it faces an addressable market of some 347,000 UK companies – a potential user-base which may well swell to 426,000 in 7 to 8 years time. Info-CTRL “cautiously” expects to achieve an ultimate market penetration of 2% of the latter number – which equates to roughly 8,500 customers. It’s not obvious from the company’s website or campaign page exactly how its fee structure operates.
Seemingly none. This isn’t rewards-based crowdfunding, after all!
SyndicateRoom’s central USP is that every round comes equipped with a lead Angel or VC investor. The concept is that you, as the follow-on private investor, are able to lever off of the due diligence expertise of this lead backer – and thus more confidently allocate funds to projects (particularly given that, as mentioned, you will always invest on the same terms as the lead investor).
In terms of track record, SyndicateRoom is a relatively new platform, having launched in September 2013. The platform has grown extremely rapidly – and has to date funded over £31m in equity transactions. According to Founder and CEO Goncalo de Vasconcelos, not a single one of the businesses funded by SyndicateRoom over the past 2 years has failed, but it is, of course, early days.
In terms of transparency, the platform provides investors with a solid amount of fact-based information, and investors may request more granular detail from entrepreneurs directly.
As for the structure of the platform, anybody that invests in a business through SyndicateRoom will become a direct shareholder in that business. In other words, SyndicateRoom does not employ a nominee shareholder model.
I shan’t be opining on whether or not Info-CTRL represents an attractive investment opportunity. You have an overview of the info. More is available on the campaign page. It’s for you to decide. But FYI, you only have about 12 days, or £95,496 of required capital – whichever expires first – to do so.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.