Convertible equity term sheet

As a follow up to the two-page plain English Seedrs Term Sheet we launched earlier this year, we now have a version of the document for convertible equity campaigns. We believe that raising capital should be transparent and simple – including nuanced fundraising structures like convertible equity.

The new plain English convertible equity crowdfunding term sheet from Seedrs contains a summary of the key legal terms.

Seedrs convertible investments use exactly the same nominee structure, and go through exactly the same due diligence process, as Seedrs equity investments. For more information on the structure and due diligence process, please see our Term Sheet for equity investments.

Because Seedrs convertibles are a different type of investment to standard Seedrs equity, the investment process and documentation are a bit different. Our convertible equity term sheet summarises the differences between convertible and “normal” equity investments and sets out the key terms of the documentation.

Seedrs Referrals and Fees – An Improved Approach

We are announcing today a significant expansion of our referral fee arrangements, as well as a new, more nuanced approach to our fee structure.

The Referrals, Company Fees and Investor Fees pages on the Seedrs site lay out the specifics, and this blog post gives you some background and context to these changes.

Referrals

Word-of-mouth is one of the most effective ways through which new investors learn about Seedrs, and we want to incentivise people to spread the word as much as we can.

We are therefore significantly expanding our referral fee programme as follows:

• If you introduce an investor to Seedrs, we will pay you a referral fee equal to 50% of the company fees we earn from that investor’s investments over the next two years. This means that on most investments you will receive 3.75% of the amount invested by the person you referred. While this is a bit less than the 5% we offered under our old system, it now covers two years of investments rather than one —meaning that you will earn more from referring a regular investor than you would have in the past.

• We will deposit your referral fees into your Seedrs account as you earn them, and you can choose to withdraw them or invest them at any time. Unlike our previous system, in which promotional funds could only be invested and not withdrawn, you now have the choice to take your referral fees in cash. So go out and buy that new Tesla.

• You can also choose to pay it forward by having referral fees paid into the account of the investor you referred instead of to your account.

You can see more information about these referral fees on our new Referrals page and in our Referral Fee Terms. And if you have any questions about how these referral fees work, please do contact us.

Fees

When we launched Seedrs just over two years ago, we were keen to adopt as clear and simple of a fee structure as possible.

Too many financial services firms annoy their customers with complex or hidden charges, and we were—and are—determined to avoid that. We do not believe in hidden legal fees, payment charges, administrative levies or whatever else our competitors may choose to sneak in.

Instead, we set our straight 7.5% company fee (commission) and 7.5% investor fee (carry) because we felt that, in addition to representing outstanding value for the work we do (see our Company Fees and Investor Fees for an overview of everything that is covered by our fees), they are transparent and easily understood charges.

The Need for Flexibility

We have no desire to move away from that clarity and transparency. At the same time, we have come to appreciate as we have grown that one size does not necessarily fit all, and that an effective fee structure needs to be a flexible one.

This has been especially true as we have started funding larger transactions: while a 7.5% company fee is excellent value for relatively smaller deals, we appreciate that it may not be the right price for rounds above £/€ 500,000.

We’ve also taken on board feedback from businesses that they see funds coming from their direct connections as different from funds coming from investors who learn about their campaign through marketing efforts or by browsing the platform. We are still creating a huge amount of value with respect to the former—by providing a simple and efficient way to aggregate all of those investments—but perhaps not quite as much value as we do for the latter.

On the investor side, we recognise that some large investors want to use Seedrs but hold and manage their shares directly rather than through our nominee structure. The Seedrs nominee structure is designed to offer a full suite of investor protections to those investors who do not have the time, money or inclination to negotiate and enter into contracts with each company on their own. But it doesn’t mean that large angel investors cannot use us as well, and we want to offer a fee structure that works for them. You can read more about holding shares directly in our recent blog post.

A More Nuanced Approach

All of this has led us to adopt a slightly revised fee structure.

Our standard 7.5% company fee can now be reduced in three situations:

• If a business is planning to raise more than £/€ 500,000, we are willing to discuss either reducing the 7.5% or capping the total fee amount.

• If a business brings a pre-identified investor who invests £25,000 or more and holds his or her shares directly, we will charge no fee on that investment.

• When a business brings any other investor who is not already a Seedrs member, we will reduce the fee we charge on that investment by 50%.

Meanwhile, we will charge investors no fee where they hold their shares directly rather than through our nominee structure.

We feel this fee this approach maintains our commitment to clarity and transparency while at the same time incorporating flexibility and tying our fees more closely to the value we create.

More details of this new fee structure are set out on our new Company Fees and Investor Fees pages, and please contact us with any questions.

Deposit, invest and create campaigns with euros

Since we opened up to Europe last November, a lot has happened. Investment through the platform has increased more than 4X and we’re averaging just over £1 million per month in funded campaigns. Around 35% of new investors have come from outside of the UK – we are very proud to now have users from almost every country in Europe (although we are still looking for our first investors both from Liechtenstein and the Holy See, but it shouldn’t be long before people there start using Seedrs). We beat the previous equity crowdfunding world record by raising £2.6 million for our own campaign from 909 investors, and are very happy that our record’s since been broken by British winery and craft brewer, Chapel Down. Because we just can’t settle, we also introduced – for the first time ever in equity crowdfunding – convertible equity investment and equity crowdfunding for a listed company. All of these are tremendous accomplishments, but there has been something missing.

We lacked support for investing and raising investment in euros. Not anymore.

We have never been shy about our international ambitions and, in line with that, Seedrs is now a fully multi-currency platform, with support for euros and British pounds (more currencies coming soon).

While it hasn’t put off European investment activity, this has been a feature in high demand from our users for quite some time. With part of the Seedrs team being based outside of the UK, we were definitely sympathetic.

Although hacking support for euros may seem like something that could have been done in less than 10 months, we strongly believe in truly excelling in terms of usability and simplicity for our users. So, quickly implementing a half-baked solution that would make the whole experience clunky and unreliable was not an option. We took our time. We wanted to learn how users from outside the UK were using the platform and we wanted to develop a solution that was simple, easy and reliable.

Any Seedrs user can now deposit, invest and create campaigns in either currency.

More importantly, we have created what we believe is a seamless experience and a smooth exchange between the two currencies. To achieve this, we worked together with our good friends at Currency Cloud (who process more than $7B in payments every year, across more than 40 currencies) to provide you with the ability to instantly, and securely, move funds between euros and GBP.

So, if you login to your Investment Account, you will see that you now have a GBP and EUR balance (at least for the time being, one of them is probably at 0). When you click “Deposit”, we pre-select the account that has most of your funds – but you can choose to deposit directly in another currency. If you already have funds, let’s say, in your GBP account and want to pay for an investment made in EUR (the first EUR campaign is right around the corner!) all you have to do is click “Transfer” to move funds from one account to the other. This action is completed instantaneously and funds will be displayed in your Seedrs account. It really couldn’t be simpler.

Our hope is that this improves your experience with Seedrs – especially for users in Europe.

Choosing to hold shares outside our nominee structure

Today we are announcing a new Seedrs policy that codifies an informal practice we have developed over time:

If an investor invests £25,000 or more into a given campaign, and she wishes to hold her shares directly rather than through our nominee structure, she is welcome to do so provided that the company agrees and the investment terms are the same. Shares held outside the nominee structure will not be subject to our 7.5% carry.

This blog post lays out the rationale for this policy, the practicalities for making use of it and a few other important notes.

Equity crowdfunding term sheet

At Seedrs, we hold ourselves, our startups and our investors to very high standards because we want every company that raises funding on Seedrs to be set up with the best chances for success in the future. Achieving success for a startup often means being able to go on and raise follow-on funding from large angel syndicates or venture capital firms and eventually go on to a successful merger, acquisition, private equity investment or IPO.

The new plain English equity crowdfunding term sheet from Seedrs contains a summary of the key legal terms.

We’ve always set our legal standards at the level needed to be compatible with the rest of the startup funding ecosystem. This means putting in place very specific investor protections, contractual agreements and making sure that all the paperwork is in order.

Heartbleed security update

The web has been taken by storm by a new security issue that affected more than half a million widely trusted websites. The Heartbleed bug is a new vulnerability that allows attackers to access confidential information, like passwords, web site certificates or personal data, from web servers with SSL support.

The Seedrs platform was not directly affected by the recent Heartbleed security issue.

Seedrs has not been affected by this issue. We take security extremely seriously (I was a security auditor and security advisor for major financial institution before starting Seedrs) and the way our systems are implemented limits our exposure to these kinds of issues. Even so, we are always on top of new vulnerabilities and immediately tested all of our servers, and we have confirmed that we are not vulnerable to this issue.

Feature news: Simpler deposits with Stripe

Having to set up a bank transfer after you’ve made an investment into one of your favourite startups can be a pain. That’s why we’ve spent the last few months looking for alternatives.

Stripe payments processing on Seedrs

When it comes to our investors’ money and user experience with the site we couldn’t be more demanding. We wanted a provider that not only complied with but surpassed the most demanding of security standards, was fanatical about simplicity and user experience, and that had a fair pricing scheme. And we were not ready to compromise with any of those three.

Feature News: Social sign-in and display names

We have just updated the Seedrs platform with a few new features that we couldn’t wait to share with you. Our focus recently has been on speed and simplicity to make everything we do easier and faster for you.

It isn’t nominal – Why a Nominee Structure is Vital in Equity Crowdfunding

One of the most important features of Seedrs is our nominee structure, whereby we hold and manage the shares of startups on behalf of the underlying investors after an investment is completed.

Using a nominee structure makes equity crowdfunding easier to manage.

While it may seem like a technical point, this type of structure is actually essential to any equity crowdfunding model: it is necessary not only to enable startups to raise follow-on funding but also to ensure that investors’ interests are protected.

Feature News: Make Deposits with GoCardless

We’ve made depositing funds into your Seedrs account easier by integrating with GoCardless – an online payment platform for setting up direct debits.

GoCardless is a fantastic business that is transforming the way people make online payments, and we’re very glad to be working with them.

Feature News: Simpler Navigation, Gravatars and Improved Search

The Seedrs team has spent the holiday season doing what we most enjoy doing: trying to make the Seedrs platform even better. So, for New Year’s, we’ve made a few significant improvements.

First, we have simplified the site’s navigation. We removed the Dashboard and have added the ability to browse through other Trending, Top Funded and Recently Added listings directly from the Browse Listings main page. Now, rather than having to click See More to view other listings in each of these categories, investors can now click the arrows that appear when you move your mouse over a specific row. As for the Dashboard, we don’t expect it to disappear for good. As the platform evolves, a much leaner and more useful dashboard will certainly return.

Feature News: Investor Referral Programme, Leedrs Club and Listing Presentation

We have just made three exciting improvements to Seedrs, and we wanted to share them with you.

Referral Programme: Cash-Back When You Refer New Investors
We’re extremely thankful to all of you who over the last few months have been sharing the gospel of Seedrs to your friends, family and colleagues, and we want to make sure you are properly rewarded when you bring new investors to the platform.

Expanding Startup Eligibility on Seedrs

Until recently, we have restricted Seedrs to pre-revenue businesses which hadn’t yet made money from their core business model. We imposed this restriction because we believe firmly that there is a profound gap in funding at the very earliest stages, and that seed-stage businesses can represent exceptionally attractive investment opportunities due to their valuations, growth potential and tax advantages.

A Few Improvements to the Platform

We never expected to have nearly as strong a start as we’ve had in the two-and-a-half months since launch. We are thrilled that over 5,200 investors and entrepreneurs, have joined Seedrs to allocate or seek capital, four awesome startups have been funded and others are getting great traction.

Seedrs FSA Authorisation

After two years of preparation and a year-long application process, Seedrs was authorised by the Financial Services Authority (FSA) this past Friday, 18 May. Our application had been approved in March, but now the final technicalities are all wrapped up. You can see our entry in the FSA Register by searching for Seedrs.

FSA is now known as the FCA.

I want to say a word about why we see FSA authorisation as so critical, especially given that there are other platforms in the market that have been operating without it.