Landbay: Convertible Triggered

By Rupert Taylor on 8th March 2016

P2P/Marketplace LendingEquity Crowdfunding

As well as achieving record-breaking volume growth secured property lender Landbay is also delivering value creation and product innovation as an issuer in the equity crowd funding space. As reported at the time of Landbay’s recent tie up with Zoopla, the platform had raised a total of £535,061 of equity capital across 5 prior fundraising rounds. Working together with Seedrs, the company has now delivered huge paper gains to investors. In January 2014, Landbay completed its first round of financing on Seedrs at a valuation of just £616,667. The more recent round came at a valuation of £4,516,206 in January 2015. Today the company is raising capital at a spectacularly higher valuation of £10,302,390 ensuring that investors in prior rounds are sitting on profits that range from the satisfying to the spectacular. 

Landbay: Convertible Triggered

As reported three weeks ago, Zoopla, FTSE 250 owner of UK property search portals, recently inked a series of investments into the UK proptech sector.  Whilst the exact terms and individual amounts were left undisclosed, the company revealed a total investment of £1,000,000 across four companies: FixFlow, PropertyDetective, Trussle and Landbay. This partnership provides the opportunity for Landbay to reach a huge pool of potential borrowers and lenders within the residential property space, as well as providing a powerful endorsement of their model from a more established market disruptor. 

At the time of this deal, we highlighted that – in addition to this investment, and the preceding raises of straight equity – Landbay had also completed 2 rounds of ‘convertible equity’ in order to source a further £654,900 of funding.  We went on to speculate that the investment by Zoopla could trigger the conversion of that ‘convertible’ equity. 

Convertible equity, often associated with silicon valley tech start-ups, gives the holder the right to participate in the next qualifying equity raise at an agreed discount. In this case the terms were set such that on a raise of greater than £1,000,000 ‘from one transaction or a series of transactions’ the convertible holders would participate at a discount of 15%. 

It turns out that this ‘convertible’ is indeed due to convert but further interesting details have come to light. Landbay has in fact now issued a total of £900,000 in ‘convertible equity’ and the difference between the £654,900 we reported and £900,000 is, in fact, the Zoopla investment.    

Hot on the heals of the announcement of the Zoopla partnership, Landbay launched another equity round on Seedrs. Unsurprisingly, given the endorsement of Zoopla, the round has exceeded its target of £1 million now standing at £1,370,239. This round satisfies the definition of a qualifying equity raise so the convertible is indeed now due to convert. As such both the owners of the original £654,900 of convertible, and Zoopla, will participate in this latest equity round – but at a juicy 15% discount.

Interestingly AltFi understands that the investor base at Landbay remains a healthy blend of ‘crowd’, who chanced upon the raise on Seedrs, as well as a number of cornerstone ‘angel’ investors. We believe that as much as £750,000 of the latest £1.3m round of ‘ordinary’ equity has come from a handful of ‘high net worth’ individuals. This illustrates the point raised in our recent article explaining the difficulties of identifying the proportion of equity crowd funding volume that can be accurately defined as having come from ‘the crowd’. However, it also illustrates that Seedrs has a powerful network of angels to call upon, who may participate alongside the crowd. This should provide reassurance to the ‘crowd’ that they have indeed found an interesting investment opportunity and at an attractive valuation. 

As far as we are aware this is the first example of a ‘convertible equity’ round originated by a European crowd-funding platform being successfully triggered. It is certainly the first of its kind in the UK and is a fine advertisement for the instrument, the issuer, and the originating platform – in this case Seedrs. John Goodall, CEO & Co-Founder of Landbay, commented:

“We have enjoyed working with Seedrs over the last two years – we have raised multiple funding rounds via their platform. We have always been impressed with their professionalism and the standards that they have set in the crowdfunding industry.”

The Liberum AltFi Volume Index reveals that Landbay enjoyed the fastest percentage growth of any UK P2P platform in 2015 delivering an astonishing 969% year-on-year growth. This growth in the underlying business, coupled with the sourcing of innovative funding from alternative finance markets, together with a contented and influential investor base, makes the company something of a poster child within the industry.  Landbay’s progress, ably supported by Seedrs, is to be applauded. 

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