In recent years, equity crowdfunding or crowd-investing has been one of the fastest-growing segments when it comes to models for the financing of early-stage ventures. According to Statista data, the total transaction value of equity crowdfunding deals is about $1.7B per year, with that amount expected to grow to $5B by 2022.
On a related note, equity crowdfunding platforms bring benefits to all involved parties. On the one side, investors get to diversify their portfolios and can easily compare a large number of startups that have passed an initial due diligence process. On the other side, pre-seed and seed-stage startups get the opportunity to not only receive faster access to capital from multiple backers but also use the platforms as a marketing tool to get international exposure for their projects.
While the very first equity crowdfunding platform launched in Australia all the way back to 2007 and soon a significant number appeared on the maps in the US and the UK, the concept is quite new to Southeastern Europe.
This is changing, though. In 2019, SeedBlink was born, an equity crowdfunding platform based out of Bucharest, Romania. In a little over a year, 29 startups have used it to fundraise more than Є10.6M (56% of which crowdfunded) and co-investors like GapMinder, RocaX, Sparking Capital and TechAngels have joined the community. Now, SeedBlink founders show ambition to scale across mainland Europe, so The Recursive team talked to Andrei Dudoiu, CEO and Co-Founder at Seedblink.
The Recursive: What inspired you to create the Seedblink platform, and what gaps in the funding & investing space are you aiming to bridge with it?
Andrei Dudoiu: Our core team gathered around two ex-banking executives and two high-profile serial entrepreneurs / business angels, totaling years of expertise in banking, technology, and venture capital.
In our experience as part of various startup investments, we have noticed that the problem is twofold: from the investors’ perspective, there is limited access to pre-vetted startup opportunities, from early-stage to Seed, unless the investors have either deep pockets, or have access to limited membership clubs, or are able to do extensive research and manual paperwork. From the startup’s perspective, founders have a tough time connecting with communities of investors & business angels, able to support their growth and fuel their ambitions without imposing restrictive conditions.
Unlike in the US or the UK, in mainland Europe, there are only a few options for regular investors to finance and diversify their portfolio with early-stage startups. This is partially due to the fragmented regulatory landscape (the rules for operating crowdfunding platforms across the EU single market will come into force only this year – 2021).
We were also inspired by the proven track record of innovation originating from Romania, with the most prominent recent example being UiPath, the first European cloud Decacorn, which proved one more time that today’s access to financial and human capital is no longer dependent of geographic location. The accelerated globalization allows investors to be more efficient and to access investment thesis from all over the world.
The solution we’ve chosen is to combine equity crowdfunding, syndicated business angels groups, and VC (Venture Capital) partners, negotiating the same conditions for the community of retail or accredited investors, all in an online investing platform specialized in sourcing, vetting, financing, and scaling tech startups. The minimum ticket size on our platform is 2,500 EUR.
What are the main lessons learned in your first year on the Romanian market?
During 2020, our first year of activity, we were involved in 40% of the early-stage investments from the Romanian market. Seedblink bridged the local tech ecosystem with more than 3,000 investors, and some of the strongest VCs partners, business angels and business influencers in the region. We also made our first steps towards expanding outside Romania by listing 4 international startups and adding active investors from 15 countries.
To date, after 29 successful campaigns (out of 30), we have noticed a growing interest in digitalization, E-Health, Ed-Tech, and Artificial Intelligence. These verticals are highly supported by our community of investors, in line with worldwide trends associated with COVID-19. There is also significant ongoing interest in the development of SaaS and Deep Tech solutions.
In terms of startups selection, we’ve focused more on the teams’ and products’ quality than on the vertical to which the startup belongs, having an approach based on the opportunity the startups represented. When it comes to financial instruments, startup founders opted for equity crowdfunding or convertible notes.
Recently (Jan 2021), two US companies with Romanian roots were listed on the platform, both with Convertibles (SAFE type Y Combinator). They proved to become remarkable success stories, as both had their funding rounds reaching their goal in only a few hours. The mix of high-net-worth investors and technology experts from the community, proved they are ready to support ambitious goals and enthusiastic teams, beyond investment, by continuing the dialogue to help the companies scale.
What’s your long-term vision and immediate goals?
We aspire to shape Europe’s tech future by creating an online investment platform at the power of three: crowd reach, angel flexibility, and VC structure. Our plan is to add to our offer funds managed by us or by external business angels / VCs partners (aside from the deal-by-deal investments), to grow our portfolio and partnerships in Europe, and to optimize the investment process beyond funding, along with the growth of the companies.
How will the upcoming new European Crowdfunding Regulations change the equity crowdfunding market and your role in it?
The EU Crowdfunding Regulation aims to protect the investors by providing access to relevant information and raise their awareness that, investing in startups involves high risks. This regulation, planned to enter into force on 10 November 2021, builds a unified framework for all European countries, meant to stimulate this alternative type of financing for startups and SMEs, to enforce cross-border passporting for equity crowdfunding, as well as to establish the exemptions from the MiFID rules.
Each country will adapt its specific legislation to implement the EU Crowdfunding Regulation as practical as possible. For example, the UK did an excellent job of introducing the nominee’s model. Another change is that the new framework raises the investment maximum threshold from 1 million euro per project per year to a unified limit of 5 million euro per year and project, hence allowing access of investors to startup stages beyond Pre-Seed and Seed.
Seedblink welcomes startups and investors from around Europe by creating and managing an SPV (Special Purpose Vehicle) based in Romania, for each successful project. We’re anticipating and working closely with the local and EU regulators to understand and apply in advance the new regulatory conditions of authorization, investor protection rules, and regulation of internal governance regarding passporting cross border readiness.