By John Reynolds on Wednesday 7 October 2020
AltFi spoke to Darren Westlake and Jeff Kelisky, the respective CEOs of Crowdcube and Seedrs, about the merger between the two crowdfunding platforms and what lies ahead for the new business.
The merger of crowdfunding platforms Crowdcube and Seedrs was announced earlier this week.
AltFi spoke to Darren Westlake, the CEO of the new business and Jeff Kelisky, executive chairman, about the merger. Here are some of the highlights of the conversation.
Can you talk us through the background to the merger? Has it been in the making for some time?
Westlake said: “We have been speaking to Seedrs for a long time. We obviously know each other pretty well. Over the years I have had various kind of chats with Jeff Lynn [founder of Seedrs].”
“And at some point in time, we started talking about what it might look like if we put our two businesses together. And nothing really kind of came from that to start with,” he adds, saying the focus was on building their own businesses.
Westlake continues: “I think probably about a year ago we started to take that a little bit more seriously and started to really think about how we could put the two companies together.”
Kelisky says: “The conversations involved multiple dimensions. And what was helpful, over that time, was each element of our view of the future, those pictures started to get closer and closer together as we each matured as businesses," adding that both businesses have complementary strengths.
Kelisky continues: “The driving force in many ways was the recognition that the value of scale and being on the front foot as we could see the picture of the landscape changing and demanding more.”
What impact did Covid-19 have on this deal?
Kelisky said: “Covid in some ways interrupted the conversations briefly while we each focused on our Covid defence plans as the economy was impacted by the pandemic.”
“And those defence plans that we each put in place when we met again several months later had actually overperformed, so we were now in a situation where we were in conversations, both happy about our own progress, reaffirmed about the strategic rationale and actually wanting to accelerate.”
Mergers can be political. With Crowdcube investors owning 60 per cent of the company, won’t Crowdcube executives take all the top jobs?
Westlake said: "There is a bunch of stuff that we’re unable to make decisions on because of the CMA process. But actually the top jobs is one area where we have been able to plan ahead.”
Will there be job losses, given there is likely to be some duplication of some roles?
Westlake: “It is not something that we have been able to plan that far ahead. We are limited to what the CMA allows us to do. We haven’t been able to go to that level of detail yet.”
In the merger announcement, you talk about improving customer experience and launching new products. Can you shed some light on this?
“People will have a portfolio on Crowdcube and they will have a portfolio on Seedrs. On one platform clearly you will have a combined portfolio and all of your investments and you will be able to track those investments and they will all be in one platform. So that will be a much easier and much slicker experience for investors.”
Westlake adds: “The other area that is really interesting for both of us is we both had a lot of interest in secondary markets, in creating liquidity for companies and for investors and we both think there is a massive opportunity to deliver fantastic customer experiences in that area. That is definitely an area we will be working on together.”
Kelisky adds: “The other dimension is in bringing the two businesses together and the scale of both businesses that come to us and investors. It then enables partnerships that wouldn’t otherwise be possible to be a much stronger part of the fintech ecosystem who want access to those businesses or to those investors in terms of providing services."
Have you got a new name for the business?
Westlake said: “No, not yet. We haven’t decided yet. We haven’t got any ideas on that.”
By merging Crowdcube and Seedrs, won’t it make the funding market for new businesses less competitive?
Kelisky said: “Not at all. The market place overall in the UK for private is over £12bn. We represent two per cent of that together. So, we’re still small in the world of private company investing in the UK.”
“Our goal here is really around trying to by being one platform be much more valuable to the investor base.”
Westlake adds: ‘We lose a lot of business to our competitors that are not Seedrs. So to funds and to VC and to angels. And there is not a day that goes by where we don’t lose a company that we are speaking to who goes off and raises money elsewhere."
“That happens to us all the time and it is very difficult for us to compete with VCs and funds. Entrepreneurs have a bunch of different options to raise money in lots of different ways."
Seedrs lost around £4m in the year ending December 2018. Will you make a profit in the year ending December 2019? Crowdcube lost around £2.6m in the year ending September 2019. What will Crowdcube's figures be like this year?
Kelisky said: “We will still be loss-making.”
Westlake said: “We are still finishing off the numbers for the year so we don’t have them at the moment.”