Launching to the public this week is Seed Equity Ventures, an equity-based crowdfunding platform and licensed US registered broker dealer. Similar but different from platforms like Kickstarter and Indiegogo which use crowdfunding to match early adopters for the backing and first issue of new products, equity crowdfunding platforms provide access for companies to raise funding for their firms through the sale of equity or debt.
Created by the former founder of IBFX, CEO Todd Crosland, Seed Equity uses a social approach to discover new investments and to become funded, as well as combine the service with its broker-dealer license. As equity crowdfunding involves the sale of securities in the company, providers of such services fall under existing financial guidelines for issuing debt and equity. In the US, investing in equity crowdfunding is limited to accredited investors and requires platforms to be registered as broker-dealers.
Although a new industry, equity crowdfunding has become somewhat of a crowded space over the past year thanks to soaring valuations of startups and a resurgence of technology IPOs, as well as shows like SharkTank which have created a new ‘cool factor’ being tagged to startups and to angel and venture investing. In addition, regulation around the world has been put in place in certain regions making it easier for companies to raise money using crowdfunding
Speaking to Crosland about how Seed Equity aims to distinguish itself, he explained to Forex Magnates that their goal is for the platform to go global in connecting investors and entrepreneurs. As an example, Crosland mentioned IBFX’s social trading product, IBFX Connect, which he stated, “Connected traders from around the world.” With Seed Equity they plan on using a similar model, “casting a wide net of entrepreneurs and investors from around the world.”
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For investors, opening the platform to a diverse range of countries provides additional sources of deal flow, beyond just local markets. Entrepreneurs are expected to benefit as Seed Equity would connect them with investors with whom they may not have been able to access being domiciled in their home countries. Upon launching with 100 investors and users already on the platform following the product’s beta period, Seed Equity has presence in the US, Australia, Brazil, China, Denmark, Egypt, Hungary, Israel, Japan, Philippines, Poland, Russian Federation, Romania, Singapore, South Korea, Honduras, Cyprus, Mongolia, Nicaragua, Turkey and United Kingdom.
Another differentiator is the platform’s social aspects. Users can follow other investors or companies learning from them. Within this format, Seed Equity provides entrepreneurs the ability to float ideas for potential startups. The idea is that upon gaining followers and ‘virtual investors’, the entrepreneur can then take the next step to use Seed Equity to initially fund their project, having the knowledge that the idea has an existing group of interested parties potentially ready to back the project. Once funded, Seed Equity provides closed groups which can be used by firms to contact their investors privately, such as to provide milestone announcements or gain feedback on ideas, leveraging the ‘wisdom of the crowd.’
Upon launching this Tuesday, the Seed Equity has its first startup using the platform to raise funding, Studio. Aiming to raise $1M on a $19M valuation, Studio is a mobile-based image design platform. The startup falls within Seed Equity’s target types of companies where it aims to provide funding for technology oriented firms.
Looking towards the future, Forex Magnates asked Crosland what his thoughts were on the arrival of an exchange driven model arriving to equity crowdfunding and whether we may see a liquid secondary market take place. On this, Crosland noted that it could come to exist in the industry, and part of Seed Equity’s registration as a broker-dealer provides flexibility in the future to have the opportunity of offering new services.