Seedrs is a platform where you can invest in startup companies across Europe and buy company shares. If the startup is successful, your funds will be worth a lot more than what you invested.
Each startup describes their company, product, plans for the future, details about the market they’re in and achievements so far. The pitch also states how much equity share it offers (e.g. 10%). While the startup can value itself based on whatever criteria they choose, if it values itself too high it risks that not enough investors will invest in their startup and the funding will fail.
Can I join Seedrs
Opening an account on Seedrs is easy and you can use your Facebook, Google or LinkedIn account to register. You’ll need to submit some documents to verify your identity. The platform is open to international investors.
Investing in Seedrs
After registration, you can browse the pitches that are currently looking for funding. They are usually open for 60 days but may be closed early by the startup if the funding goal is reached earlier.
Each pitch has its own page that contains more detailed information. It also shows who has invested and how much. Investors can choose if they want to show their bid as Anonymous if they don’t want to disclose the name to the community.
If you like a pitch, you can invest by clicking the Invest button. If the funding of the pitch is below 100% you can add money into your account later. You can fund your account by either bank transfer or credit card.
The pitches are either in EUR or GBP. If your bank account currency is not EUR or GBP, you can save up on some currency conversion fees by using Transferwise. If you don’t have a Transferwise account, you can create one here.
After the funding round is closed
You can view your open investments on your account page.
Seedrs completes all the paperwork with the startup and later it will act as a nominee for the investors. By using the nominee structure the startup doesn’t have to deal with each individual investor in part but only with Seedrs, who represents all the investors.
You’ll receive a share certificate in your email and then you’ll need to wait for an exit opportunity. This could come in the form of an IPO, selling of the startup to a bigger company, or the startup owners willing to buy back equity in their company.
After the funding is closed the startups will post periodical updates to the investors regarding how they are progressing. Some of them post updates each quarter while some of them less often. You can view their updates on your portfolio page.
At the time of exit, Seedrs charges the investors a fee of 7.5% on the profits the investors make. Your investment will be illiquid until the exit.
Each month there’s a secondary market opened for a week where investors can sell their shares to other willing investors. If you’re interested in a startup and you didn’t get a chance to invest while they were doing their pitch, you can buy those shares here.
Although the Secondary Market feature is great, what’s not that great is that Seedrs sets the price at what those stocks can be sold, based on their fair-value policy.
One feature that Seedrs offers and it scares me is the auto-invest tool. The startups usually fail, so doing your own research might work better than betting small amounts on all the existing pitches on the market.
Conclusions on Seedrs
Seedrs offers everyday investors the opportunity to invest in startups they believe in. The community is great, and some important questions and clarifications are asked in the discussion forums. This helps to make up your mind if you’re willing to invest in a pitch or not.
The secondary market is great if you need to free up your capital before the startup provides you with an exit. However, Seedrs makes it a bit weird by setting themselves the price for each stock you own. I do use the secondary market from time to time to buy additional shares in companies I like.
After the secondary market, the next best thing on Seedrs is that companies post regular updates on the platform. You can also have discussions with other investors, ask questions, get company financial reports.
The auto-invest feature could be a great idea, but in the current state, it’s just a recipe for disaster. There’s no way to filter the pitches at least by sectors you’re interested in.
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