Crowdcube, Seedrs and SyndicateRoom: Impact of Covid-19

What has been the biggest impact Covid-19 has had on your company?

Luke Lang, co-founder and chief marketing officer, Crowdcube.

"Covid-19 is first and foremost a health crisis, so it's difficult to look beyond the impact this pandemic has had on our employees and their families, with some suffering from the symptoms.”

“But the entrepreneurial community we serve has also been deeply affected by the economic fallout from Covid-19."

Crowdcube also pointed to its Save Our Startups campaign, which was launched with an open letter to the UK government which Lang said "has been slow to implement funding support for startups and scaleupts".

Jeff Lynn, co-founder and executive chairman, Seedrs.

"The impact we are feeling the most is that we’re all now working remotely!”

“As a digital business, we’re very fortunate that we’re able to do so, and that we can continue to provide the same level of service to our entrepreneurs and investors as we could when we were in the office.”

“But I think the whole team misses getting to work together in person, and I’m sure that some of the great sparks of innovation that we’ve had through the years -- and that has made Seedrs what it is -- will be harder to come by during this period."

Marcin Zaba, head of marketing, SyndicateRoom.

“The biggest impact on SyndicateRoom - and on the whole startup investment industry - has been the reduction of investment levels flowing from private investors into startups, either directly or via funds. Q1 is usually the busiest quarter, but has been remarkably quiet."

"With the approach of the tax year end, March usually sees a significant increase in Google search volumes. This year, the end of March had the same search volumes as the quiet week between Christmas and New Year."

Have you seen both the volumes of investment and number of campaigns on your platform decline since the arrival of the pandemic?

Lang

"We launched 71 pitches on Crowdcube in the first quarter of 2020, which was down from 91 in the same period in 2019. Encouragingly, we launched 27 pitches in March despite fears around Covid-19 escalating rapidly during this month.”

“Similarly, we funded 48 businesses on Crowdcube in Q1 2020, which was down from 55 in the same period in 2019. Again, funding activity remained strong, relatively speaking, with 18 businesses successfully funding in March.”

"As you would expect, during March we saw a slowdown of investment on Crowdcube, however, this was a relatively gradual change in investment behaviour that has now stabilised.”

“We’ve seen over 15,000 investments on Crowdcube in the last six weeks and I’ve been buoyed by the volume businesses who remain actively looking to raise investment with Crowdcube at this time, including a tech business who raised over £1.6m privately last week within a few hours."

Lynn

"The pattern so far has been interesting. When the enormity of Covid-19 really hit everyone in mid-March, we saw a number of entrepreneurs put a pause on going forward with their campaigns, and in turn investment levels went down a good bit.”

“But then in the past few weeks, as everyone has started settling into the new temporary reality, we've seen a sharp uptick back to pretty normal levels." 

"The graphs are pretty much a perfect “U”. That’s not to say there is no impact: the distribution of campaigns is probably shifting somewhat, as those businesses that are in sectors that are less affected by (or that even may benefit from) the crisis are the ones most likely to go forward and attract investment.”

“While I expect activity will be quieter in sectors most negatively affected by the crisis. But on balance, we seem to be back at about even, and we’re hopeful it stays that way.”

Zaba

"We’ve not seen a decline in the number of deals we’re investing in, and the quality remains very high. Since the pandemic started we’ve made new investments into 16 companies - 10 of those investments took place in March and April."

“We’ve also supported an additional 17 companies that are already within our portfolio. We’ve got plenty of very promising startups that we’re reviewing and look forward to supporting them in this tough period. However, we do expect deal flow to be impacted if the economic uncertainty continues beyond the summer.”

“That said, new startups will emerge to take advantage and prosper in the new circumstances and we are positioned to be among the first to invest in them.”

Has there been any upside to Covid-19?

Lang

"The response of the Crowdcube team to these unprecedented circumstances has been awe-inspiring. I am intensely proud of how every one of them has responded to the challenges Covid-19 has presented over the past six weeks. Their passion, determination and teamwork has been an inspiration to me and other members of the management team."

"I’ve also been encouraged by how people are rallying around the businesses they truly believe in; we’ve seen this a lot in the past six weeks with purpose-driven businesses successfully raising investment with Crowdcube."

"It’s incredibly encouraging that we continue to fund businesses despite these challenging circumstances. On top of that, we’re having lots of positive conversations with businesses about funding rounds for the coming weeks and months so I am very hopeful of a very strong bounce back once the lockdown is relaxed."

Lynn

"I don’t know that there has been upside per se. Covid-19 is a real tragedy both for so many human lives and for the economy in general, and even if we are fortunate to be in a better position than some in working through it, we are all unreservedly looking forward to the end of it.”

"But if not upside, I suppose I’d identify two silver linings in the cloud. One is that, as a counterbalance to my first point about how we miss getting to work together in person with the rest of the team, we’ve demonstrated that we’re capable of working effectively in a remote setting when needed.”

“And the second is that there are a number of companies in our portfolio whose products and services are much in demand right now -- for example, we’re an investor in The Cheeky Panda, which makes high-quality and sustainable toilet roll -- and so while I’m sure this isn’t the way they wanted to achieve their growth, we will likely see them come out of this crisis in more robust condition than anyone expected.”

Zaba

"As is often the case with significant shocks, the Covid-19 pandemic has got us to really focus hard on our vision and purpose. It has given us clarity about how we adapt to these tough circumstances.”

“In a period when so many VCs are withdrawing from funding rounds at the last minute, we maintain our conviction in our investment model, and continue backing the UK’s most promising startups. “

What measures have you introduced to combat Covid-19? 

Lang

"During these difficult times, we are acutely aware of our important role in helping, supporting and funding startup, early-stage and scaleup businesses who may need our support now more than ever.”

“With this in mind, we moved quickly to introduce and highlight a series of measures and products to give businesses greater flexibility and a better chance of successfully raising investment with Crowdcube.”

“These included:

“Private rounds: An investment round only open to your existing shareholders. This is a streamlined funding option that enables businesses to raise funds quicker with limited internal resources, from their existing shareholders who are already familiar with their business and long-term plans.”

“Community-only round: An investment round open to a business's existing shareholders and wider community, that’s not publicly available on Crowdcube. This is a funding option that allows them to limit the public exposure of their round, by making it accessible to shareholders and potential investors who support and understand their business.”

“Early drawdown of funds: We know getting investment into a business could be crucial, so moved fast to enable businesses to close material investments into their pitch before it is formally closed.”

“Extensions of public rounds: We understand funding rounds may take longer than usual, so we committed to giving businesses the time they need to complete a successful round with Crowdcube.”

“Online webinars: Given the circumstances we stepped up our online digital demos and Luke is participating in a series of webinars to give entrepreneurs advice on how to respond to this crisis.”

“Funding advice: We rapidly updated our advice to entrepreneurs looking to raise finance in these circumstances and Bill Simmons, our CFO, also outlined the complicated Government measures that our community may have benefited from."

Lynn

“We’ve worked hard to identify actions that help our portfolio companies and investors, as well as those entrepreneurs and investors who haven’t previously worked with us, during this period of uncertainty.”

“Some of the measures we’ve already put in place include: fast-tracked fundraising campaigns for portfolio companies (and potentially first-time companies); convertible equity campaigns, which defer the need to set a valuation; extending campaign length beyond the standard 40-day timeline to ensure 100 per cent funding; online pitching events and office hours; assistance with government support programmes.”

Zaba

“We’ll be announcing some additional plans shortly, though we are already very focused on speed of investing to give busy entrepreneurs clarity about their funding round.”

“From the moment an entrepreneur is introduced to us and meets our criteria, we make a commitment to invest within 10 working days. Usually, it’s even quicker than that.”