Companies are now using online funding platforms to find equity and debt finance. In my own database of business contacts, I have met 188 funding-platform chief executives since 2012, providing or specialising in many types and levels of finance. The issue is, which are the most perti-nent for the type of finance required.As a synopsis, these are the platform types.
1 Crowdfunding: mainly relevant for start-up and innovative people and small companies seeking cash for launching, promoting or producing a product. Investors are mainly retail – not “sophisticated” or “authorised” – investors. These are people who generally invest with many others from £10 to £10,000 ($16-$16,000). A prominent example is KickStarter.
2 Authorised and regulated (by the pertinent government authority): mainly relevant for small and mediumsized enterprises (SMEs) seeking debt or equity capital, mainly £10,000 to £500,000. Prominent examples are Seedrs and FundingCircle.
3 Loans: Secured capital loan notes are placed with private investors. Examples are ThinCats, DB-Capital and LendingClub.
4 Grants: For companies seeking government grants. Examples are GrantTree, for research and develop-ment, and EsmeeFairbairnOrg, for not-for-profit.
5 Invoice factoring: In which professional investors bid to advance funds against the invoices of SMEs. Mainly for well-established SMEs that supply to corporates. Lead-ing examples are MarketInvoice and PlatformBlack.
6 Equity trading: A marketplace for secondary transactions, connecting qualified investors, shareholders and owners of UK private companies. Not a stock exchange. A leading example is Liquity.
7 Secondaries: Limited partners (investors) and general partners (fund managers) transfer their interests in private funds. Leading examples are Secondcap and the new London Stock Exchange’s equity primary markets platform.
8 Private market: Approved-members-only private platforms for authorised and regulated investors, such as private equity, venture capital, merger and acquisition (M&A) firms, to find due diligence capital investment oppor-tunities and undertake the main part of the deal investiga-tions and terms. Almost exclusively well-established high-growth and/or well-established SMEs or large enterprises. Examples are Dealmarket, ClosingCircle, AxialMarket, (and perhaps my own initiative, which I hope will do well next year, and from which I resigned recently due to lack of personal cashflow) and IntegrityCapital.
9 Real and virtual deal rooms: These are now under threat from the emerging private markets. They were designed to help process very complex and compliance heavy deals, involving multiple users per deal. The main clients are M&A firms and corporates. Prominent examples are Intralinks, which recently bought M&A private market MergerID, Imprima and Datasite.
Ensure any platform, its processes and its company are properly authorised and regulated. Obviously, find a financial adviser who has not just knowledge of, but active experience with, the three or four platform types most rel-evant to your size of company, and the amount and type of finance required.
Using these platforms can incur upfront and continuing fees, plus commissions, and you should also consider costs in ensuring your documentation is supplied by an approved financial adviser, lawyer, accountant, intellectual property agent and others.
If you are a well-established company, you should not be making your documentation available to more than 100 potential investors, otherwise your documentation can be considered to be “in the public domain”.
There are some useful reports on the above by inde-pendent providers accessible from my website, www. SimonGall.com, and visit the links on the Etc page, which I will make available until end of this quarter.
If you run a corporate or university venture fund, or need business development, I would welcome your contact.
Seeking a business development troubleshooter?
Contact serial entrepreneur Simon Gall, who is helping corporate venturing units and their portfolio companies. www.SimonGall.com