For centuries, businesses have relied on stock exchanges to trade shares for equity. It’s a system that works well, bringing companies together with investors to make a profit.
The majority of the world’s stock exchanges, however, aren’t designed for the millions of start-ups and fast-growth SMEs across the UK, which, as the head of the London Stock Exchange admitted this week, are ‘powering’ the economic recovery.
In my experience as an entrepreneur and business owner – I’ve founded and worked with more than ten companies across Asia, Central America, Europe, Canada and the US – the process of financing a start-up can be time consuming, difficult and expensive.
Companies outside the traditional money centres of Silicon Valley, New York or London lack access to networking opportunities and capital, meaning many bright, new businesses are overlooked. Similarly, the opportunity to invest in early stage businesses is closed to most ordinary people.
By building an online trading platform designed specifically for small businesses, we could dispense with a lot of the costly requirements of listing, making the advantages that stock exchanges offer – notably control, flexibility and liquidity of investment – accessible for startups and the people looking to invest in them.
My creation, the Startup Stock Exchange or SSX, will undoubtedly be compared to crowdfunding and there are similarities, namely that businesses can raise funding from anyone, in any amount.
However unlike crowdfunding, SSX provides a liquid and transparent marketplace. Investors buy publicly traded shares in the companies, with the capability of selling them at any point.
The companies abide by clear rules and regulations modelled on the Alternative Investment Market and Alternext, providing Investors transparency and strong governance that is not available through crowdfunding.
With SSX Startups decide how many shares they want to sell and when, allowing them to raise money for future growth, without losing day-to-day control of the business or racking up large bills. Furthermore, the cost of listing via SSX is half that charged for listing on CrowdCube and a third of the cost generally involved in working with outside, private investors.
To list, companies must first complete the SSX application process and undergo rigorous due diligence, to ensure investing through our platform remains as risk free as possible. We employ a six-step vetting process that, if a company is approved, allows it to offer their shares on the exchange, and companies are guided through the process with consultancy, online tutorials and resources provided by SSX.
The process of listing takes anywhere from 30 to 60 days and only two to three per cent of businesses are accepted, due to the high standards we set.
A company at any stage of growth may apply to be listed with SSX and there is no minimum or maximum share offer required to list, although we typically find it is best suited to companies looking for between $100,000 and $3m.
Our approach also offers investors more flexibility as they control their own trading accounts online, allowing them to buy or sell (even one single share) in real time whenever they choose. Subsequently, they have the opportunity to see a faster return than with other funding models , while finding deals that would not be available otherwise.
SSX does not seek to replace traditional stock exchanges – far from it. In fact, we are structured so that the start-ups that list via SSX graduate to traditional, established exchanges, once they have grown due to the funding they secured through SSX.
We are plugging a gap in the market by providing stock exchange benefits to promising and ambitious businesses, for whom these opportunities were previously unreachable.
Ian Haet is the founder and chief executive of the Startup Stock Exchange.
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