Crowdcube has exceeded its crowdfunding target of £5 million ($6.5 million) in less than 2 days, after promising investors growth by targeting bigger companies and pushing into the public markets.
Crowdcube has attracted £6.2 million of investment on its own platform as of Tuesday afternoon, 124% more than it originally targeted. Venture capital firm Balderton are also investing a further £1 million alongside the crowdfunding campaign.
Crowdcube, founded in 2011, is the UK’s biggest crowdfunding platform and lets ordinary people buy chunks of fast-growing, private startups from as little as £10. The platform has over 290,000 registered investors and over 400 companies have used its platform to raise over £170 million.
The startup went live with its crowdfunding campaign on its own platform on Monday and published a full prospectus alongside it, revealing financials and the company’s plans for the future.
In it, Crowdcube promises investors a push into new markets such as initial public offerings (IPOs), despite cofounder Luke Lang telling Business Insider earlier in the year that it had looked at it and had concluded “the economics are god-awful.”
Lang told BI this week: “I caveated that with if you just have a slice of the allocation. If you’re just reselling somebody else’s IPO you’re only making a very small margin and that, in my view, isn’t a very sustainable model.”
This is a model that has been adopted by Crowdcube’s rival Syndicate Room. Lang’s comments seem to imply that Crowdcube would like to function as a traditional stock broker when a company lists, selling all its share book before the listing on the London Stock Exchange. But Lang wouldn’t go into details on to how and when Crowdcube would break into the public markets.
It’s about finding the right business that’s looking to do an IPO that we think sits with our ethos and would be a good investment opportunity for our investors
Lang says: “Although there are clear challenges around offering IPOs to retail investors, we still remain committed to doing that in the future. It’s about finding the right business that’s looking to do an IPO that we think sits with our ethos and would be a good investment opportunity for our investors. We’re always looking out for those kinds of opportunities.”
Crowdcube first floated the idea of getting in on IPOs (initial public offerings, where private companies list their stock on public markets) last year when City of London stockbroker Numis invested.
Crowdcube’s latest round is thought to be the biggest single crowdfunding campaign on a platform in the UK. BrewDog raised £19 million earlier this year in both debt and equity but that was across Crowdcube, its own website, and was across multiple countries. (BrewDog originally targeted £25 million.)
However, the £6.2 million Crowdcube has so far attracted is well below the £39 million that was pledged by investors who pre-registered interest in the funding round. Crowdcube has allocated £12 million-worth of shares for investors if the campaign gets that far.
Here are some stats Crowdcube shares on the raise so far:
- £5 million target hit in 4 hours and 8 minutes;
- 2,620 investors so far;
- Largest single investment is £1 million;
- 298 overseas investors from 56 countries.
Break even by 2018
Crowdcube, the UK’s biggest crowdfunding platform, is valued at £65 million the latest investment round, equivalent to 24X its 2015 revenues. The company, founded in 2011, says in its prospectus that the likes of TransferWise and Funding Circle have raised money at similar multiples in the last 18 months.
The platform made a loss of £5 million on revenues of £1.5 million. Cofounder Luke Lang told BI he’s “constrained” by Financial Conduct Authority rules about talking about profit forecasts. All he would say is that Crowdcube is looking to execute the plans set out in its prospectus within 3 to 5 years. The prospectus says Crowdcube: “expect[s] revenues to reach break-even by the end of 2018.”
As well as looking at IPOs, Crowdcube wants to build tools to let investors cash out of their shares before a sale or IPO of the business. They would do this by trading with other investors.
Lang told BI: “Tom at Mondo has been quite open about coming back and doing another crowdfunding round either later this year or early next year. Clearly, there’s appetite there, they raised £1 million in 96 seconds, and there will probably be an uptick in valuation so maybe some of the investors will want to sell their shares. That’s the kind of thing we’re looking to facilitate and pioneer.”
He adds: “It’s not just about investors who have invested on Crowdcube historically as well. There are a lot of options and plans we’re thinking about. We’re incredibly ambitious and we always have been. Things like building a secondary market for investors clearly requires investment in our tech team and our product team. That’s a large part of the investment.”
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