Seedrs’ backers essentially have the chance to contribute to Worth Capital’s Big App Fund. This fund will invest in the three or four winners of a pan-European competition to discover the top new Apps in the retail and e-commerce sectors. The prestigious competition has quite the following, with Facebook playing an instrumental role in its promotion. Facebook will also be key in recruiting a dazzling array of contestants. The winners receive not only a cash injection but also prolonged mentoring from Worth Capital. The competition itself kicked off on Monday 1st September this week.
So how does this Seedrs offering work? The Big App Fund is looking raise £350,000 – and investors are taking a share in the fund’s holdings. £150,000 from the fund will be invested into the Big App Fund winner, with a further £100,000 being pumped into each of the runners up. Those amounts will be good for between 10%-30% of the app-based businesses.
This is an interesting opportunity for investors. The competition to make it as one of the top 3 or 4 apps is fierce. The best 100 entrants attend a Pitch Day at Facebook’s London HQ to help them fine-tune their propositions, before the number is cut down to 10 for the final round of judging. So, in terms of quality of premise, investors in this deal are probably going to be getting exposure to some pretty impressive young businesses. And that’s the other key point here: investors involved in this singular fundraise will actually end up with a slice of up to 4 different early-stage businesses. Worth Capital will also take an option of 7% in each of the winning apps.
The downside is that by spreading risk in this way you’ll have decreased your exposure to each individual app – meaning your potential upside if one of the four were to take off is lessened. The other key point to make is that investors in this deal can’t really do any due diligence of their own, because at the point of investing they have no idea which apps are going to win the contest. In other words, investors will have to rely upon The Big App 2014 to pick the right businesses as winners. It’s for that reason that the competition has in place an “expert” panel.
Jeff Lynn, CEO of Seedrs, gave his take:
“This is a very exciting competition and investment opportunity. The Big App Fund offers private investors an ideal way to gain a slice of the action in this hugely expanding market. The added value of an expert panel picking the best companies to invest in, the mentoring these companies will get and of course Facebook’s support in recruiting entrants and the promotion of the winners makes this a genuinely unique opportunity for investors.”
It’s also worth noting that the mobile app market is exploding at the minute. There were 1.24 billion mobile devices sold globally in 2013. Portio Research predicts that there will be about 4.4 billion mobile app users by 2017. More to the point, the Venture Capital space in taking notice. VCs invested $3.5 billion in mobile businesses in 2013. Will private investors follow suit? With nearly £200,000 raised in less than a week, it would seem so.
Campaign Breakdown:
Investment sought - £350,000
Investment already funded - £183,200
Minimum investment - £100
