Crowdcube is pulling back on plans to take its crowdfunding model into the public markets, after saying last year it wanted to do the world’s first crowdfunded IPO.
Luke Lang, chief marketing officer and cofounder of Crowdcube, told Business Insider: “I guess we continue to monitor that but the more that we look at it, the more you see how difficult it is. I know some of our competitors are starting to make noises about it — it’s a really difficult play.”
Crowdcube announced plans last year to offer retail investors — ordinary people with a few £1,000 to play with — the chance to buy shares in their initial public offering, the stage just before they become publicly listed. These shares traditionally only go to institutional investors because their big balance sheets mean it’s more economical for stockbrokers to go straight to them with share allocations.
Lang says: “If you look at IPOs as they stand at the moment, market forces dictate that retail investors are locked out at the moment. Institutions are mopping it all up.”
Crowdcube hoped that it’s platform, which is designed to cope with thousands of small investors, would make it more economical. The company planned to pursue its IPO dream after a £6 million investment from traditional City stockbroker Numis last year.
But Lang says: “We’ve looked at it and the technology that underpins it is legacy, it’s outdated, it’s stuck in the 20th century. It kind of doesn’t make a lot of sense for us to build solutions that plug into legacy systems because that’s an investment in the past. That doesn’t really sit well with us. And the economics are terrible.
“If you’re just having an allocation that you’re just selling on, your margins are tiny. You really need to embed yourself within the fundraising process otherwise it just doesn’t make any economic sense.”
Rival crowdfunding platform Seedrs staged what it claimed to be the first crowdfunded IPO last year for blockchain investment company Coinsilium, raising over £1 million for the company alongside its listing on the ISDX stockmarket.
Crowdfunding startup SyndicateRoom was also rubber stamped by the London Stock Exchange to offer access to initial public offerings on London’s high-growth AIM market.
Lang says: “I kind of fear for our competitors, like SyndicateRoom like you mentioned, that are making a big play on IPOs. I know that the IPO market has slowed down and the economics, from what we’ve looked at, are god awful to be honest.”
Speaking to BI ahead of the company’s crowdfunding round on its own platform, Syndicate Room CEO Goncalo de Vasconcelos said: “That makes me quite happy that they’re missing our vision. From our prospective, it’s a huge market, much bigger than crowdfunding. What we are building is one platform for the entire equity journey of a company.”
Despite pulling back from plans to roll out in the public markets this year, Lang says an entry into the IPO market is not off the table.
“We would look at it from an ambitious point of view that we think we can redefine the market and get those incumbent players to maybe use our technology rather than their own,” he says. “There needs to be a significant shift. It’s certainly something on our roadmap and that we’re looking at doing.”
Crowdcube is the UK’s biggest crowdfunding platform, having raised over £160 million for startups like Camden Town Brewery, JustPark, BrewDog, Mondo, and more.
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