Equity Crowdfunding Updates: March 2016

As an early Easter present, Beauhurst has released ‘The Deal’, its 2015 report on UK high growth companies and their investors. In good news for crowdfunding platforms everywhere, the report clearly states that “crowdfunding’s impact is now really being felt”.  Analysing and breaking-down announced and unannounced deals in the equity crowdfunding market, Beauhurst outlines the elevation of this market as it continues to sideline private equity and private investment vehicles.  We have summarised the key findings from the Beauhurst report.

Another Record Year

The report, which monitors equity fundraising transactions across the UK, compiles trends across the industry, as 2015 represented “another record year for equity investment into the UK’s fast-growth companies”.

One of the most striking statistics to be drawn from the report pertains to equity crowdfunding platforms as a whole. The number of deals for such platforms increased 45% across 2014 and 2015. This bodes well for 2016, as entrenched faith within this mechanism of fundraising should lead to another record number of deals.  Consequently, the report anticipates that “crowdfunding platforms’ deal sizes will also grow.” Ultimately, Beauhurst concludes that Private Equity and Private Investment vehicles have taken a hit as crowdfunding platforms’ growth continues its vertical climb.

Three Key Trends

1. The mobile app market is not what it used to be (but that’s not a bad thing): 

The drop-off in equity investment for mobile app companies demonstrates not that the market is slowing, but that it’s evolving. In 2015, payment processing, health apps and education apps secured the most successful investment in this crowded market.

2. Seedrs continues its march toward crowdfunding/world domination:

Crowdfunding dominates seed-stage investment, with Seedrs topping the list of top investors. This reflected a successful year for an increasingly ubiquitous Seedrs, who also marked second place in venture-stage investment, occupied the top place for technology investment, conducted the most transactions in London and were declared the most active investor in the Business & Professional Services Market.

3. Technology doesn’t just rule our lives, but also the equity crowdfunding sector

Technology remains the number one sector for equity crowdfunding, occupying 35% of all activity – however, leisure and entertainment saw an impressive 27% climb in deal numbers, the largest of any sector.

What Else Should We Be Aware Of?

Also notable amongst the report’s findings is that the average fundraising amount for seed-stage companies rose to £650,000.  This is an impressive amount, and a gesture of faith, as venture capitalists inject increasingly high sums of cash. The formula for success is set out clearly by Beauhurst, as the report delineates that this new confidence in equity crowdfunding is vital: “larger investments earlier on can mean a new business is less likely to run out of runway and will, therefore, be more likely to succeed, thereby encouraging new investors”.  In other words, everybody wins.

All in all, Beauhurst predicts a total amount of £4.8bn in announced investment for 2016.  Interestingly, this sum shows only the tip of the proverbial iceberg, with unannounced deals in high-growth companies comprising an altogether larger figure. As a result, Beauhurst states, the proliferation of equity crowdfunding among these companies is “approximately 127% larger than previously estimated.”  This figure of unannounced investment ranges not only across new fast-growth companies, but more established and aged businesses.  This demonstrates market-wide confidence and growth.

2015 showcased the defining trends of equity crowdfunding expansion, permitting insights into the industry’s future. As equity crowdfunding continues to jostle with private equity as a leading player, reports such as Beauhurst’s allow us to handle the reins of the platforms as they continue to change the game.

Also available on Equitise’s blog here

Cheers,

Will

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