Crowdfunding investment platform SyndicateRoom has gained intermediary status with the London Stock Exchange (LSE), meaning it can offer investors access to initial public offerings (IPOs) of companies listing shares on the London stock market through its online platform.
Co-founder and CEO Goncalo de Vasconcelos told Business Insider: “What we are doing now is crowdfunding growing up.
“We are authorised by the FCA [Financial Conduct Authority], we have been accepted as a member of the LSE — bare in mind these bodies go through a huge amount of due diligence — and that means from now on we are the only platform that allows the crowd to invest in IPOs. That is incredibly exciting.”
IPOs are when private companies go public, listing their shares on the stock market. The mechanism lets companies raise money and means investors can easily invest in and trade company stock.
While IPOs are technically already open to retail investors — ordinary savers, who make up the bulk of crowdfunding — de Vasconcelos says that in practice it is very hard for small time investors to get access to these investments, which are typically offered at a better price than publicly traded shares.
He told Business Insider: “It’s possible for you and I to buy and sell public shares. It is much harder to get access to IPOs and private placings when there is a discount on the share price and typically only institutional investors — asset managers, wealth managers — have access to them.
“Yes you can call a broker, but you really will struggle to find a broker that will take a £1,000 order because it’s just not cost efficient. We’re breaking a barrier by doing what we do best — do it all on a platform, very efficient.”
This all ties in neatly with Cambridge-based SyndicateRoom’s mission statement — to let ordinary investors gain access to the kind of deals that professional investors normally only get involved it.
de Vasconcelos says: “We are the only investor-led crowdfunding platform. What this means is we allow the crowd to invest together with professional investors — angels, VCs, family offices. Our key vision is it shouldn’t matter if you’re a small-time investor with £1,000 to investor or a professional with millions, on pound for pound invested you should all have the same opportunity.
“We tend to fund businesses that you’d never think of crowdfunding — healthcare, engineering, manufacturing. A lot of IP-based companies. That’s what the professionals like to invest in. My key question in my mind is always, why should you invest in the deals that the professionals don’t want to invest in?”
Nearly £50 million invested over the platform and, while de Vasconcelos won’t disclose the number of investors on SyndicateRoom’s platform, he says it’s “thousands and thousands and thousands.”
For IPOs, SyndicateRoom will aggregate all the orders from its membership into one bulk order for shares, making it more cost effecient. The company is partnering with stock brokers who “run the book” on IPOs — make sure there are buyers for all the shares that a company wants to sell.
de Vasconcelos says: “Brokers are welcoming this because we are an incremental distribution channel. It’s completely uneconomical from them to take a call from someone who wants to place £1,000 order.”
de Vasconcelos says the Financial Conduct Authority (FCA) and the LSE have also both been very receptive to the partnership: “They want to see innovation. They want to see retail investors given fair and transparent access to the same opportunities as the professionals. That’s exactly what we give them.”
While SyndicateRoom is the first crowdfunding platform to get intermediary status, several others are trying to extend the crowdfunding model to public markets. Seedrs ran what it claimed was “the first-ever crowdfunding campaign for a company’s IPO” last year, which blended a crowdfunding with a public listing, and Crowdcube, the UK’s biggest crowdfunding platform, last year partnered with stockbroker Numis Securities to develop a crowdfunding IPO platform.
SyndicateRoom already has its first IPO lined up for members to invest in — HealthCare Royalty Trust, a healthcare investment vehicle that is looking to raise £200 million.