#RVoSu – Seedrs, Jeff Lynn
The Real Voices of Scale-up Series.
In 2008 Jeff moved from corporate lawyer to MBA student. During his time at the University of Oxford he worked on a project that aimed to democratise finance. The project developed into Seedrs, the world’s leading equity crowdfunding platform.
Companies who have raised on Seedrs include Revolut, Perkbox and Wrisk.
Listen to the full podcast here.
Last year you switched role from CEO to Executive Chairman. Can you run us through the thinking behind that decision?
Absolutely, it was a very exciting transition and one of the best things that I’ve done for the business.
Shortly after we raised our Series-A I recognised that two things were happening; I was getting pulled in a lot of different directions in a way that wasn’t just busy but was often incompatible. I was trying to manage the day-to-day business while putting in place more sophisticated systems that we needed as we grew. At the same time, the nature of Seedrs is that we pursue a lot of these moonshots, long-term strategic opportunities. Trying to flit back and forth between the two was tough.
I recognised the CEO role had become a big role and it would be helpful for me if we could split it. More importantly, I also realised I was reaching the limits of my knowledge and experience.
As a founder in the early days, you have the vision and the ideas so you’re well placed to lead the business.
After our Series-A the challenges we started to think about were around operations and scaling up. These are challenges that others have faced before and know how to overcome. I learned a lot in my previous career as a lawyer but I certainly didn’t learn how to manage and operate a business. While it may be fun to learn on the job, I want to see the company succeed. I thought we should hire an experienced Chief Executive and then I could continue to do my ‘founder thing’ and pursue areas where I add more value.
It was high risk because if we hired the wrong CEO it could’ve been destructive. The successful candidate, Jeff Kelisky was fantastic but even then we brought him in as COO to see how it went. He was brilliant. He’s now CEO and the business is thriving under him. So it’s been great, and of course it’s good for me because I get to learn from him while pursuing my strengths, so all indicators now suggest it was a very good move.
Seedrs was the first regulated platform of its kind, however, it was a pre-launch business for 3 years. How did the product evolve during that period?
One of the problems with building a startup in a regulated space back then was that it had to be done in a very linear fashion. Nowadays the Financial Conduct Authority (FCA) has a great sandbox programme which provides opportunities to interact at a very early stage. There was an 18–20 month process just to get to the point where we could go to the regulator and say here’s what we want to do. After that, it took another 18 months until we got approval for launch. It was a very linear process, we were building a product over time and that meant we weren’t getting user feedback. The first 3 years were a long slog.
The real changes started the day we launched. It was only when we put it on the market that people started feeding back to us. It was only then that we began to evolve significantly.
How did you prepare the company for sustainable growth?
We have always been focused on doing things ‘the right way’. In the early days we focused on the company structure and laying the groundwork so we would be able to architect on top of it. In some ways, we focused so much on the product part that we were not nearly as good at getting out there, marketing ourselves and making money quickly.
You’ve previously said that hiring people smarter than yourself is one of the most important things a Founder can do. Hiring specialist talent is also widely recognised as one of the greatest challenges for scale-up businesses. How have you managed it?
It’s a good question. Seedrs has hired in the same way as we did in corporate law, which is that you just look for people with strong intellectual and conversational abilities.
In the early stages of a business those are the kind of people you need as you don’t really know what the challenges are going to be.
Mental flexibility and the ability to just tuck in and solve whatever problems arise, even if it’s way outside of your background or job description is critical.
I’ve been very fortunate that in turn, many of those people have gone on to hire the more specialist talent. I’m always blown away by the quality and just how probing our team gets when they’re really digging in.
How has your demographic changed or grown as you’ve scaled?
The key change we’ve seen over time is bigger and later stage business coming to us. The word seed is in our name partially because we initially thought of this as a Seed and early-stage platform. We sort of thought by the time you go to real venture and institutional capital the need for what we do would be less significant, and we were going to own the base of the pyramid for what has historically been Seed and Angel pre-venture investing.
We are doing that, we invest in more private UK companies than any other investor today and we are doing our best to own a very significant piece of that landscape. In addition, a number of later-stage businesses also want to put a part of their funding round on our platform.
We never really expected to be able to serve those later-stage businesses so it’s been a surprise and delight.
On the investor side, it’s worked out pretty much as we expected. We are now starting to work with more institutional and intermediary investors alongside all of our individual investors. We really continue to span the gamut from the archetypal 30–40 year old, professional or high-net-worth individuals but we also see students who are just beginning to learn about the space and making their very first investments. Then we have the silver surfer crowd who are retired and want the opportunity to participate in some of these new businesses.
You have offices across Europe in Lisbon, Berlin and Amsterdam. What has the take up been like in other ecosystems compared to the UK?
We’re in the early days of our truly pan-European play. We’ve been in Lisbon from day one because that’s where my co-founder Carlos built our tech team.
We’ve organically taken investors from across Europe for a while but it was only at the end of 2016 that we really hired commercial teams. We’ve since opened offices in Amsterdam and Berlin and began real commercial efforts in Lisbon.
It’s too early to draw any conclusions but the data is encouraging. About 30% of our investors were based in Europe last year and that number continues to grow.
I think there is a big opportunity across Europe not just because of the ecosystems, but because of the interconnectedness that we have. In the US there is such concentration in Silicon Valley but here we have this multi-polar system where entrepreneurs from all over go to conferences and meetings across Europe. I think we can be part of that from a funding perspective.
Have you had to alter your approach when entering any of those ecosystems?
Yes, from a regulatory perspective. It is much more restrictive in continental Europe than in the UK.
There have been some minor differences in terms of operations but more than anything I think that entrepreneurs and investors are alike anywhere in the world. The value proposition we offer here is the same fundamental value proposition in most places.
What is your potential reach and do you think crowdfunding can expand to the mass market?
Absolutely. I think our reach is any private business, potentially some public businesses that are seeking capital and any investor who has both the level of understanding of the risks and the profile of the asset class to invest and the desire to do so.
From a finance perspective, we see that at the lower end of the spectrum lots of our investors are mass affluent. The minimum investment is £10 and median is about £300. So we have loads of people investing £10, £50, £100. For an investment product, that is about as mass market as you can get. We want to continue to expand that significantly. In time, we think there’s every opportunity for a £1m+ institutional investor to sit right alongside the £10 retail investor. We want to be the London Stock Exchange equivalent for the private market.
Part of the reason we don’t often refer to ourselves as crowdfunding is because we think of ourselves more broadly than that. Crowdfunding is a big component of what we do, but ultimately we want to be a full-service marketplace for big and small investors so that people are able to invest in the business as they like.
It’s been just over a year since the secondary market launched, how is that going and where is that heading?
The secondary market has been one of our great surprises. It was not something we intended to build in the medium term as secondary markets for SMEs are notoriously hard to make work. Those who have built them on a standalone basis have almost uniformly failed at doing so. We weren’t really prioritising it but we found that investors were doing it anyway using the post-investment pages on our platform. We thought that’s a kind of cruddy experience for them, why not at least build a basic product that allows them to trade directly through the platform and we’ll see what happens.
You always know that there will be sell side liquidity in a secondary market because it’s an illiquid asset class and there will be people who invested who want to get out. Getting enough people to come in during that weird midpoint in a company’s life is the hard part. So we’ve been surprised and delighted to see so much buy-side demand as well. It has grown quickly and we’ve seen a lot of activity, we are well over 2000–3000 investor exits at this point. All these investors have had the opportunity to sell their shares even before the company exited and many have done so with very significant profit so it’s been great.
Is this a winner takes all market or will a range of platforms work?
This is not a market that is going to sustain 20 platforms. Whether it’s truly winner takes all, whether there’s room for 2–3 differentiated players or whether there will be a regional winner, I don’t know. I would love to say to our business and shareholders that it’s winner takes all but there are other people out there doing really good stuff.
We’re definitely in the top bracket globally and I think that we’ll be one of the winners. There may be other companies who do well too as it’s a huge market with great opportunities.
If you could have a conversation with your former self, during the pre-launch days, what would you say?
I would certainly counsel patience. I think I’ve proven to be patient by need.
In the early days, I thought that building a business was a very binary thing. You either rocketed to the moon and everybody made a fortune, there was a 0.01% chance of that but that it all went in that direction, or you wound up face down in the gutter. For some crazy reason, that was a trade-off I was willing to take. I didn’t understand the notion of strong and effective linear growth and in many ways, that’s been the Seedrs story.
It’s also been the story for so many other businesses that we have worked with and that we continue to work with. Which is that, we’re not Facebook yet but we have been able to solidly build on our foundations year in, year out and continue to accelerate our growth. As I say, we see so many other businesses doing that.
Understanding this isn’t an overnight thing, and one way or another this is building a business and like anything of value, building it is usually a long slog, a lot of hard work. Maybe if I’d known that information I wouldn’t have shlepped through it. I think that’s probably the biggest gap in knowledge that I had.
To find out more about Seedrs, go here.
To learn more about the Real Voices of Scale-up series and listen in to other episodes, go here.
