In the last 12 months, we’ve sourced our startup recommendations from seven different portals. Eight were from Republic… five from SeedInvest… two each from Wefunder, StartEngine and Equifund… and one each from MicroVentures and Netcapital.
Each of these portals has unique strengths. The companies raising on Republic tend to have early and strong traction. SeedInvest offers high- caliber startups raising under Regulation A+ at a slightly later stage than Reg CF companies. Wefunder is like a super-interesting department store where you can find almost anything you want. StartEngine is always doing something to help their investors — its secondary offerings are one of its more intriguing recent initiatives. Both Netcapital and MicroVentures offer a wealth of information on their companies, thanks to their comprehensive vetting procedures. And Equifund is the baby on the block that makes up in quality what it lacks in volume.
These seven investment platforms are my “startup mall.” It’s where I do the vast majority of my startup shopping. And I like my mall just the way it is.
But the merger announced last week between the two major British startup portals — Crowdcube and Seedrs — is a timely reminder that nothing stays the same.
Crowdfunding in England is older and bigger than it is in the U.S. Crowdcube and Seedrs both grew in tandem with the rise of crowdfunding in England. Now Crowdcube (the bigger of the two) is acquiring all the shares of Seedrs. The combined company will be worth about $181 million. (As a comparison, StartEngine just ended its latest raise at a pre-money valuation of $120 million.)
The founders of the two companies — and longtime frenemies — have been in on-again and off-again talks since 2017. So why now? One fascinating clue: Crowdcube’s CEO Darren Westlake said one of the goals of the new company will be to “attack the global market for equity crowdfunding.”
That could mean Asia, India or Latin America. But it could also mean the U.S. Crowdfunding in the U.S. is on the rise and will likely get a big boost from changes to the Reg CF rules — like (hopefully) increasing the amount of money that can be raised under Reg CF from $1.07 to $5 million.
It will be much easier for the combined Crowdcube/Seedrs company to buy one of the three biggest portals in the U.S. — Wefunder, StartEngine or Republic.
Expanding into the U.S. makes sense on several levels for Crowdcube/Seedrs. They’ve put themselves in a position where they have the resources to buy a major American startup portal — before any of their American counterparts could buy them. And by joining forces, acquiring Crowdcube/Seedrs is much more expensive now. It’s questionable whether an American portal can finance such a large acquisition at this time.
The merger also serves as a warning shot. Competition is getting fiercer. American crowdfunding is about to enter a new phase with bigger stakes thanks to the soon-to-be relaxed (we hope) Reg CF rules. Adding to the stakes is the increasing awareness of global opportunities. And globally, where most startups portals are in their infancy or simply do not exist, the market potential is immense.
As a result, I think consolidation could be coming to the U.S. soon. Three players to keep an eye on are Wefunder, StartEngine and Republic. Those three have generated about three-quarters of the Reg. CF capital raised this year, according to NextPitch.tv.
All three platforms have done a nice job of growing organically. But now that they’ve separated from the pack (and with more at stake), there’s a rising sense of urgency that could lead to a wave of consolidation in the CF space.
Consolidation won’t hurt our deal flow. So that’s good. And it would be a little easier to monitor three or four portals instead of six.
But there’s definitely change in the air here in the U.S. It’s worth keeping an eye on.