The lack of activity in the public markets over the past 18 months has led to more interest in the private markets from those incumbent public market players. Growth-stage companies have also had a tricky time navigating the frozen funding landscape and are turning to alternative solutions for both primary and secondary liquidity.
Central to our mission at Crowdcube is the democratisation of access to private market investments, for both retail and mass affluent investors. For founders, they see the opportunity to raise capital or deliver a liquidity event for employees whilst creating a diverse community of investors who will support a business’ growth.
Take, for instance, Chip. They just closed their latest funding round with us in November, raising £5mn from 5,000 investors. Having completed multiple funding rounds with Crowdcube they have built up an audience of 66,000 retail investors in total. They want as many people as possible to profit from their success. From a commercial perspective, raising funds from their customers significantly enhances each customer’s lifetime value – Chip’s shareholders are 500% less likely to churn than non-shareholders.
Similarly, newer kid on the block, Kroo Bank, raised £2mn from 2,000 of our investors in late 2023. By inviting their growing customer base to be shareholders, customers will have a voice in how the Kroo team runs the bank – from their services to their products.
Historically, our focus was on primary capital, but the ongoing trend of limited new listings in public markets and the contraction in venture markets have led businesses to seek alternative liquidity solutions for employees and early shareholders.
At the same time, founders are challenged to retain and motivate top talent, individuals who have been integral to their growth journey and may wish to release some equity.
These two trends are creating more opportunities than ever before for both buyers and sellers of secondary shares.
This is why we recently acquired the leading secondaries platform, Semper. We are creating for the first time the opportunity for founders to reward high-performing staff and early angel investors, while simultaneously building a community of shareholders within their customer base.
The acquisition opens the door for investors to participate alongside sophisticated institutional investors in secondary transactions with some of Europe’s most promising late-stage private companies. It provides unique access for retail investors to invest in private businesses outside of traditional primary fundraising windows, offering the opportunity to share in their future success. Until recently, secondary transactions were primarily the domain of professional and institutional investors, but now companies can involve both institutions and their community of customers in a secondary liquidity event.
Additionally, we partnered with RetailBook in early 2023 to allow retail investors to participate in IPOs. Public markets have been subdued throughout 2023, but they will bounce back. When they do, our RetailBook partnership will be primed to ensure that our retail investor community reaps benefits equal to those enjoyed by institutional investors.
Momentum in private markets is unmistakably building. The UK has led the charge in understanding the benefits of enabling retail investor access to the private markets, but Europe is hot on our heels. More and more governments, regulators and companies across the continent are waking up to the benefits of this approach. Private venture-backed companies are staying private longer, and investors are increasingly looking to private markets for sources of return and diversification. Those investors that were previously excluded to the benefit of institutions will be those that reap the rewards of this revolution.