Monday, 2 October 2017

Seedrs posts increased losses on tiny turnover


Seedrs - the UK's other retail equity crowdfunding site, has just filed losses of £3.8m, up from last year's loss of £1.6m. Is it any wonder they are raising another £4m?


They are building, apparently. A large CA, with £9.5m (from the £10m equity raise) in the bank and very low creditors, displays admirable restraint that another company could learn from. The cash plus the new £4m raise, has a purpose. 

But the income of just over £1m looks very vulnerable on this current market. It wouldnt take much to make this head south. If you are going to make increasing losses then you do need to be seeing some good progress on the traction side. £1m is quite frankly pathetic for the noise they make. That equates to £25m in completions at a 4% commission or even less if they are working off a higher rate.

Seedrs has expenditure of over £5m - so they need to making 5 times the revenue just to BE with a constant cost base. Given the time it has taken to get here, what are the chances of this before we all die? 

We really thought they were doing better than this after 8 years. For their revenues to grow by only 25% (2015 revenue was £800k) is hardly impressive in a growth business.  It also puts their claim to have raised over £230m since they started, into doubt? Either that or 2016 was a nightmare. But then that's what the PR Dept. is for. 

5 comments:

  1. This isn't specifically aimed at Seedrs but at the whole of the new tech and startup sector including most of the businesses that raise cash through ECF. Your blog is doing a great job in exposing a huge scandal, we're not creating innovative, well run companies we're pumping money into basket cases in the hope that one day they'll get bought out. No wonder the banks won't lend to these chancers and at some point amateur investors and VCs will finally wise up and realise that the vast majority of these companies will never, ever make any profit.

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  2. My impression is that Seedrs have had to discount their fees a lot to win new business so actually their contribution margin from the £1m is around the 1% - 2% mark (perhaps £50 - £100m invested?).

    Clearly this could be a good business strategy as not only do you get the carry in future years but once a company is locked into Seedrs nominee structure they will find it very easy to launch future fundraising campaigns which will attract the 6% stated margins and probably means that they will remain with Seedrs going forwards.

    However I am a little surprised that they are discounting so much when Crowdcube are, at the same time, managing to increase their margins.......!

    Both companies just need more companies raising funds (ideally at a more realistic valuation). Therefore I guess the question is - is the market big enough for both of them?????

    Hopefully Seedrs will use some of this £10m raised funds to open new offices all round the world and start driving the revenue up!

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  3. If (Once) CC goes out of business they'll have a much better market share...

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  4. Perhaps that’s why they are selling out Wealthify investors on a cheap (17% return?) to generate more fees.

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  5. The model with Seedrs is long term, they have a long term stake in every business they fund via the "carry".

    Presumably the investors in seedrs understand this, they are spreading their net quite wide and should some mega exits, dividends, etc start to pay out over the next ten years the tiny fees they collect on raising should look small in comparison.

    One hopes, for their sake.

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