Globally, the banking sector is undergoing a paradigm shift with the entry of numerous fintech platforms as their formidable competitors. Riding on the wave of innovative technology, most of the fintech companies are focusing on delivering personalised services and customer experience. As a result, investors’ urge towards funding innovative fintech platforms remains strong.
Raised €6.6M funding
Based out of London, Ziglu, the personal money app platform, is the latest startup to get funded. Recently, the digital platform successfully closed its crowdfunding campaign, having raised over £6M (approx €6.6M) from over 1250 investors.
In a blog post, Ziglu mentions, “After a 2-week document review period, Seedrs nominee investors will have access to a dedicated investor relations/discussion area on the platform where they can receive updates from Ziglu, and they can communicate directly with other investors. Then they can expect to receive the representation of their share and, depending on the level of investment, Ziglu’s raft of membership perks and rewards will be rolled out.”
Exceeded initial target
The company has exceeded its initial £1M (approx €1.1M) target and went on to raise 500% more due to very high investor demand. As per the company’s claims, the average investment amount was £4,800 (approx €5,301). The campaign, the largest Seedrs equity raise of 2020, was more than five times oversubscribed. The company has now raised £11M (approx €12.1M) during 2020, including the initial seed funding round.
“Thanks to Seedrs’ monthly trading cycles, buyers who wish to invest outside our funding round (or buy more shares in Ziglu) can purchase share lots from sellers who are looking to convert their investments into returns or sell their shares to free up funds. As with any other investment, once the paperwork is completed, funds are released directly into the seller’s investment account, and the transfer of shares reflected on the Seedrs platform and those UK taxpayers eligible for EIS or SEIS tax relief can download their tax certificate (from Seedrs) once issued,” says the company.
2M customers by 2024
The UK company will use the proceeds to fund the technology and product development teams, international expansion, and meet the growing demand for Ziglu’s personal money app.
“This round of crowdfunding investment will accelerate our growth through feature and development. Using innovative marketing channels, dynamic campaigns, organic content, and an intuitive referral process, we hope our exciting roadmap will take us to 2M customers by 2024 across the UK, Europe, US, and Asia,” says Ziglu.
Easy access to digital currencies
Founded by Mark Hipperson, and Niall McConnell, Ziglu offers a platform where both traditional & digital currencies can be managed seamlessly in one app. The cryptocurrency platform gives everyone easy access to digital currencies, including, Bitcoin, Bitcoin Cash, Ether, Litecoin, and XRP.
As an innovator in the fintech space, Ziglu has been classified as a Knowledge Intensive Company (KIC) by HMRC, enabling KIC investors to claim tax relief on investments up to the value of £2M (approx €2.2M).
The firm also recently launched its limited-edition power pink Mastercard debit card by enabling Ziglu customers to support their community through FareShare – a leading charity in the UK that fights hunger – with a donation every time they use their card at a supermarket.
Main image credit: Ziglu
So, this is what we want to do: we have this idea for a voice-based social media for mobiles, with a couple of crazy features in there, and a new way to look at monetisation.
Thing is, because it's departing so much from the standard experience, we cannot judge whether people would actually like that.
We've talked to friends, they like it, but they might be too kind. We decided we want to post on a crowdfunding platform, laying out the concept in full, listing options for a couple of new BPs we cannot choose from. We get people to express themselves and, if they like the idea, to buy into it with a small sum, an advance on their future user fees.
Brilliant! But what platform would be best for this?
We have no prototypes designs, nor wireframes, no imagery. Just a concept laid out in words. We've been on Indiegogo or stuff like Chuffed or Fundly, but all seem inappropriate. Indiegogo campaigns too hardware focused and too ahead in development. *We just want a simple service, mostly text based, where people can express a preference and buy into the idea for a very small amount, e.g. 1$ \* Hugely grateful for any suggestions 🙏🙏
ps. We thought of reddit, ofc, we'll post here too, but feel we need something ad hoc!
With the advent and growth of crowdfunding over the past few years, many entrepreneurs have predicted the demise of those demanding angel investment groups and venture capital organizations. In fact, the latest figures show that crowdfunding globally is expected to reach $ 114 billion by 2021, exceeding the amounts contributed by either angel groups or VCs alone.
Early crowdfunding successes have been undeniable. Way back in 2015, the Kickstarter Pebble smartwatch raised $ 20.3 million, smashing the prior Kickstarter record of $ 13.3 million. Worldwide, almost fifty campaigns since then have exceeded the $ 10 million dollar mark, despite targets as low as $ 20K.
But don’t be misled – these are just the cream of the crop. According to more recent statistics, fewer than a quarter of all crowdfunding operations end up being successful, and the rest have to return anything they do collect. That’s not as high as the failure rate with professional investors, but it should convince entrepreneurs that crowdfunding is still no panacea for funding.
Most of the experience so far has been cash versus the equity feature defined by the JOBS Act – Equity Crowdfunding (Title III), introduced back in 2016 with 685 pages of rules. Now there are dozens of online equity portals, including WeFunder and Microventures, already geared up to help regular people buy equity in a startup, without qualifying as an accredited investor.
Have you ever wondered what professional startup investors think about all this? As an accredited angel investor, I claim to be one of those professionals, and I’ve talked to many more. I’ve also perused much of the published material on equity crowdfunding, including a detailed book, “The Crowdfunding Handbook,” by former Wall Street lawyer, Cliff Ennico.
I would summarize the qualms and feedback from professional investors as the following:
- Crowdfunding platform costs trickle down to angel groups. The new audit, due diligence, and liability requirements from the JOBS Act, now levied on equity crowdfunding portals, could dramatically increase the costs and restrictions on angel groups. These groups are now largely run by volunteers at no cost to entrepreneurs.
- Lack of checks and balances on startup valuations. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation. Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated.
- Investors cannot verify accountability or governance. In equity crowdfunding, no investor is representing their own interest. Board seats can’t be negotiated, and even informal mentoring in decision and governance processes is unlikely. This means less capability to ensure that invested funds are spent wisely or as planned. Risk is increased.
- Later funding rounds can’t deal with a thousand shareholders. Very few successful startups need only one funding round, and venture firm offerings, as well as the IPO process, will go up in cost, complexity, and risk, as the number of current investors goes up. Even if the additional rounds are also crowdfunded, the same considerations apply.
- The impact of “dumb money” versus “smart money.” By definition, investors from the crowd have less experience and differing motivations from professional investors. This can hurt the company, and jeopardize all investors. Most public company executives today decry the short-term focus of conventional shareholders on profits versus strategy.
At the same time, we all recognize that that there is never enough money to satisfy the needs of entrepreneurs, so more sources are always welcome. Smart angels and venture funds have already begun to integrate equity crowdfunding as a step in their investment strategy. Increasingly I’m seeing startups in talks with bigger investors after a successful crowdfunding campaign, as fund managers scout platforms for interesting ideas and teams.
Crowdfunding is here to stay, with the major types focusing on pre-orders, rewards, goodwill, and equity. If you are an entrepreneur, I recommend you find the right platform, a good handbook, and go for it. Your options for funding just increased, or at least you have a new way to get some real market feedback on the demand for your solution.
As a professional investor, I recommend continuing to capitalize on business experience and financial acumen. It shouldn’t be that hard to stay ahead of the crowd.
Startup Professionals Musings