Seedrs reveals £4.6m losses day after Crowdcube merger

Written by Ruby Hinchliffe
6th October 2020

Seedrs has revealed it made a £4.6 million loss last year on a revenue of just £4.2 million.

The crowdfunding fintech published its 2019 financial results just a day after announcing its merger with rival Crowdcube.

Crowdcube’s merger of Seedrs creates a £140 million equity crowdfunding player based out of the UK

Seedrs also included a paragraph entitled “material uncertainty related to going concern” in its results. The phrase has appeared in both Monzo and iwoca’s recent results.

“The group’s ability to continue as a going concern may be dependent on additional capital being raised that is not yet committed,” the statement reads.

Loss-making rivals join ranks

Crowdcube also made a loss for the year ending 30 September 2019. With revenue sitting at £7.7 million, it published operating losses of £2.47 million.

It decreased losses by 13% compared to 2018, but a 2020 decline in launches, funding and investment may prove challenging.

Crowdcube closed the first half of 2020 on £3 million in revenue. It calls Chip and Freetrade raising £2.5 million and £7 million crowdfunding rounds “beacons of light”.

The start-up also tells shareholders in its Q2 2020 update that it has made cost-savings of around £3 million for the year.

The acquisition

Crowdcube’s merger with Seedrs is set to create a £140 million equity crowdfunding player based out of the UK.

The deal is positioned as a “merger of equals” structured as an acquisition “for legal purposes”. Whilst Crowdcube is valued at £84 million, Seedrs is valued at £56 million. Crowdcube’s existing shareholders will own 60% of the combined entity, and Seedrs’ investors owning the remaining 40%.

The platforms were founded after the 2008 financial crisis. They aim to help start-ups raise funds without having to tap venture capital or angel investors off the bat.

Seedrs’ boss Jeff Kelisky heads up the combined group as CEO. Crowdcube chief Darren Westlake serves as executive chairman.

“It’s been a long process for us internally; but also externally, the observers of the market have seen the benefits of putting the two companies together,” Westlake tells CNBC.

Why join forces?

Consolidation of the two funding platforms may not be a blessing to those they serve.

Atmen, a Black-founded UK-based digital bank, told FinTech Futures that these sort of platforms sing the same story: “come to us when you have a revenue line”.

Sarah Kocianski, head of research at 11:FS, highlights this issue of competition with the two biggest players joining forces.

“It will be interesting to see what the CMA [Competition Market Authority] makes of the deal given these are arguably the two largest players in crowdfunding in the UK, which means there will effectively be no competition to the consolidated company,” she tells FinTech Futures.

“They could very well throw a spanner in the works.”

Andy Moseby, corporate partner at law firm Kemp Little, thinks the acquisition will help combat the 20% drop in platform activity Seedrs experienced earlier this year.

“We hope the merger will help reinvigorate investment in the UK start-up community which, post-COVID, has struggled to access non-governmental funding.

“The ecosystem is crying out for innovative new funding methods; merely combining the platforms of Crowdcube and Seedrs together may not be enough to see a new boom in fundraising for UK start-ups.”