The equity crowdfunding phenomenon has continued to grow in September. Stelios Haji-Ioannou, the founder of EasyJet, is raising money for a new venture via a crowdfunding site, and a company that already has a stock market listing is also crowdfunding.
Let’s start with the listed company. It’s Chapel Down, an English wine producer with vineyards in Kent. At the time of writing, the company has already raised £2.6m via the Seedrs crowdfunding platform up to a maximum of just over £3m.
The money will be used to plant more vines and improve the facilities at the company’s headquarters. As well as acquiring shares in the business, investors will get some other rewards such as a tour of the main vineyard and a free wine tasting.
Until now, all the companies raising money on crowdfunding platforms have either been start-ups or relatively young businesses. So, I must say I was very surprised when I heard that Chapel Down wanted to raise money on Seedrs.
I was also rather sceptical. After all, if a company is listed on a stock market, it should be able to raise cash via an issue of new shares. Why does Chapel Down want to go down the crowdfunding route? Can’t it raise money in the conventional manner for a listed company?
Chapel Down’s response is that going on Seedrs is a great way to bring in some new shareholders who can then become ambassadors for the business. And anyway, at the same time as the crowdfunding campaign, Chapel Down is raising some money from a conventional stock market placing.
What’s more, Chapel Down isn’t listed on the main London Stock Exchange or on the Alternative Investment Market (Aim). Instead, it’s on ISDX, formerly known as Plus, which is a bit of stock market backwater.
A lot of the companies on ISDX are pretty illiquid and are infrequently traded. So you can make a case for saying that crowdfunding will raise Chapel Down’s profile with private investors.
So, on reflection, I can see that Chapel Down’s move may make sense. Although, I’m still not 100% convinced.
If you’re tempted to invest in Chapel Down, but would like more information on the company, then take a look at this week’s edition of MoneyWeek magazine. If you’re not already a subscriber, subscribe to MoneyWeek magazine.
At the time of writing, Chapel Down has already raised more than £2m on Seedrs. And this listing is certainly a nice boost for the Seedrs business. (I should declare that I own a very small shareholding in Seedrs.)
So what about Stelios?
Over on the Crowdcube platform, he’s raising money for his new EasyProperty venture. It’s basically an online estate agent. As a start-up, this is riskier than Chapel Down, but you may be comforted by Sir Stelios’s involvement. Just remember that not all of his businesses have been roaring successes although EasyJet clearly has been a big winner.
My biggest reservation about the EasyProperty fundraising is that the new shareholders will only have a 1.5% stake in total in the business. So an estate agent start-up is being valued at £66.66m. That’s a pretty steep valuation for a business that currently only really has one asset – the Easy brand. I won’t be investing.
Back on Seedrs, a company called Peerindex has caught my eye. It enables businesses to find out what their customers are saying about them on social media.
So let’s imagine that Peerindex is working for a sports team with a large commercial operation. Peerindex can help the sports team figure out who are its biggest fans on the web. And, in particular, which fans have the most ‘authority’ with other fans.
Once Peerindex has helped the sports team pinpoint those fans, the team can then butter up those fans with targeted offers. Then these fans will hopefully become even better ambassadors for the team and its brand.
Peerindex is hoping to raise at least £500,000 on Seedrs and it’s already pulled in £315,000. This follows investment from venture capitalists (VCs) in 2012. Peerindex hopes to raise further cash from VCs in the next couple of years.
The business is already operating and customers include Unilever, Coral and the Financial Times. Sadly, Peerindex hasn’t released any revenue figures so it’s clearly very early days, and the risk level is very high. But it’s a more substantial business than many of the companies you see on the crowdfunding sites, and it’s one of the more attractive ones too.