Equity Crowd Funding for Tech Transfer

…based on a bit of experience!

Brian McCaul Director of Innovation

CEO Qubis Ltd Queen’s University, Belfast

Why?

And especially why for universities & commercialisation activity

And why it needn’”⁹t hinder later-stage rounds and may even help you

could be the biggest shift in our sector

Research Development

Tech transfer

Commercialisation

Market Entry

Valley of Death

Prof

it / L

oss

time

Crowd Equity *has* focused on smaller seed rounds

Nearer to the TTO…

This is - at the *moment* an early stage phenomena

…but that’”⁹s what we tend to do!

Mainly Startup and early stages

Crowdcube

…there is increasing activity at venture stage…

Crowdcube

Mainly Tech

Technology was the sector with the highest number and value of investments, in line with its performance in the wider market

“”

Equity Crowdfunding in the UK: Evidence from the Equity Tracker

Technology and intellectual-property-led firms make the most successful crowdfunders, the report showed, representing the lion’”⁹s share of both deals and investment, with 50

deals between 2011 and 2014 and totalling £13.7m.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11494394/Fifth-of-UK-equity-deals-now-use-cash-from-the-crowd.html

At least 1/ 5th of seed market

EIS & SEIS Angel Cofund

Displacing Angels which were themselves displacing VCs in this space Investor Friendly: generous tax breaks

…or EII here

Centre for Entrepreneurs Report

Crowdfunding has been credited by some with bringing equity investing into the mainstream and has been described as a catalyst for the creation of a new funding landscape.

To their minds, they are buying shares at half or a third of the price the pre-money valuation would

suggest.

If the company goes bust, they get 50% or 30% income tax loss relief;

if it succeeds, they will scoop the gains CGT free.

Accessible Tax Breaks for the Crowd

“

”

Founder Friendly deal terms and re-balancing the power

A successful crowdfunding campaign can serve as a positive signal for other funders and can help you attract more

funding or funding at better terms. Liam Collins, Nesta

“

”

Fast-growth crowdfunding companies platforms are parting with less equity

…even removing all sub-£100k deals crowdfunded companies are on average giving away lower equity stakes.

Beauhurst

lower equity stakes than counterparts raising capital through more traditional routes.

The largest early-stage seed market in the UK

The Seed Market

In 2013, angel networks were replaced by government-backed funds, followed by crowd funders, as the top funders

More than the next 2 together…

More scalable funding market

More scalable funding market

growing at 580% last year

spreading the investment regionally…

Investors By Region

Will it drive crazy valuations ? Will it complicate investment ? Will it fuel a ‘series A cliff’ . .?

No… it may not just expand but improve the equity market…

There is a correlation between the rise in crowdfunded seed activity and increasing seed deals in general

Could be reducing early dilution - but that won’t protect against down rounds

…or it could be used to test valuations

Better Terms Completed Round Agile Valuation De-risked

Hit target in 48 hours!

Testing Valuations - Pre-IPO…?

Technology from MMU Over-raised £700,000 from 37 angel investors

..it may even change the way that valuation is done!

…as more data is collected

It’s leaner Tests demand

Early Validation & Fast Failure

Get the feedback your product deserves, not the feedback your pitch earns

It’”⁹s more than just funding…

Equity based crowd funding increase revenue 351% - not inc funding

Not only tests demand but creates demand

Survey of several hundred firms randomly tested that used crowd or other forms of finance for sponsored by Ellenoff Grossman and Scholes LLP

…could help testing the value proposition and helping with customer discovery…?

Raising funds with SyndicateRoom was quick & efficient and it also helped us to raise our profile through

press coverage on Forbes and TechCrunch.

Lord Douglas Dundonald: Chairman, Radio Physics Solutions

“”

Completing rounds… Quicker rounds …

Either nominated equity holder or A,B shares or just on-line Angel syndication

Nor is it inherently complex or unmanageable… in fact it may help manage complexity

“32% thought it was the most likely funding choice in the next 12 months.

Figures from Irwin Mitchell suggest that crowdfunding has come a long way since being regarded as just a niche option for funding a business.

Entrepreneurs are doing it…

”

Venture capitalists are doing it…

£750,000 £750,000 == £1,500,000+

=£3,800,000 £1,200,000 £5,000,000+

£6,000,000 £1,420,000 £7,420,000=+

Publicly-listed, winemaker and craft brewer Chapel Down (listed on ISDX) launched a £1.6M crowdfunding campaign on Seedrs. In three weeks, they overfunded to almost £4M, from around 1,400 investors

Even PLCs are doing it…

the largest equity crowdfunding campaign ever. http://blog.seedrs.com/2014/09/26/crowdfunding-public-companies/

Crowdcube has set up a venture fund, managed by Braveheart Investment Group, in which the ‘crowd’ can invest as a Limited Partner.

Seedrs offers the option of investing in a fund or an incubator programme.

both means of spreading the risk across a group of companies that are chosen by more experienced investors.

Crowdcube has also started providing debt-based ‘mini-bonds’

So…

What next?

this will grow it will migrate to later stages

it needn’”⁹t complicate future investment

we should get on board

That’s it!

Thanks go raibh maith agat

@brianamc b.mccaul@qub.ac.uk