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Seedrs hopes launch of secondary market will help companies raise more capital

In its latest edition of The Deal, Beauhurst claimed equity investment dropped for the first time in five years. Crowdfunding platforms, however, defied expectations – and Seedrs hopes to keep the ball rolling by launching a secondary market.
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The number of growth-stage deals on equity crowdfunding platforms in 2016 increased by ten per cent, Beauhurst explained. This success has prompted Seedrs to announce the launch of its secondary market.

Crowdfunding success in 2016 can be highlighted by Seedrs’ record-breaking month in October. Perkbox smashed its £1m target to reach £4.35m. In the same month, WeSwap raised over £2.4m, setting a record by having 3,000 backers. November also saw the first IPO of a Seedrs-funded business – FreeAgent listed on London’s AIM index, raising £10.7m.

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We have reported record deal numbers every quarter since the start of 2016, with a considerable uplift since the referendum last summer,” the platform’s CEO, Jeff Lyn, said. “This is a great endorsement for the equity crowdfunding space and Seedrs looks forward to continuing to lead the way with some exciting companies due to raise.”

While we wait to see what businesses Lyn referred to, Seedrs unveiled an interesting new offer. After seeing strong demand from investors to conduct secondary trades, the platform announced it would soon be launching the beta version of its secondary market.

“Until now, the shares investors purchase have been very difficult to trade, meaning they need to wait for an exit event such as an IPO or a sale of the business,” the company explained.

“Whilst Seedrs has already seen portfolio companies Chapel Down and FreeAgent achieve success on the public markets, allowing those investors to sell their shares and realise a profit, the long-term nature of this asset class means the vast majority remain illiquid for some time.

“The Seedrs secondary market seeks to change that. It will allow investors the opportunity to sell shares in companies they’ve invested in via Seedrs to other investors. Meanwhile, investors in Seedrs-funded companies will have the opportunity to increase their stakes. As in any market, the ability to buy or sell will depend on there being sufficient supply or demand.”

The offering may be targeted at investors, but Lyn believes there will be benefits for entrepreneurs as well.

“With the prospect of secondary sales now available,” Lyn said, “we expect more investors are likely to want to back the great businesses we work with.”

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Shané Schutte

Shané Schutte is a senior reporter at Real Business, with a particular specialism in employment and business law, human resources, information technology and sales/marketing.

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