Seedrs expands crowdfunding platform with ‘convertible equity’ service
Future Ad Labs first business to use method which converts investment into shares when another funding round occurs
Equity-based crowdfunding site Seedrs has today announced the launch of the UK’s “first ever” ‘convertible’ investment on a crowdfunding platform, with PlayCaptcha specialist Future Ad Labs the first business to use the new financing method.
The ‘convertible equity’ scheme, common with Silicon Valley businesses, will allow investors to back a business and then convert their investment into shares at a discount on the future valuation, meaning Seedrs investors will receive more shares for their money than future investors.
For the start-up, a ‘convertible’ offers a way to raise finance now and defer to the need to value the company until a later date.
Having successfully raised £60,000 from the crowd in July 2012 and a further $1m from venture capital firms in 2013, Future Ad Labs is looking to use the ‘convertible’ round to raise £400,000 in return for a 15% discount to the price set in its next round of funding.
Future Ad Labs is best known for its PlayCaptcha advertising solution; a product which turns Captchas (squiggly line security forms) into interactive games where the user can confirm their identity by playing a game instead of deciphering distorted letters.
It plans to use the ‘convertible’ investment to develop its PlayCaptcha service and support the launch of “more fun and engaging” alternatives to paywalls and video loading pre-rolls.
Its existing investors, which includes Passion Capital and Balderton Capital, have already committed over £160,000 to the round.
Seedrs co-founder and CEO, Jeff Lynn discussed the launch:
“Convertibles offer a real alternative for start-ups between funding rounds because they are fast, easy and don’t require the parties involved to agree a formal company valuation.
“This technique has been used in Silicon Valley for a long time, and for fast-growing start-ups, it offers a great way to continue to raise money before a significant investment round.”
Howard Kingston, Future Ad Labs co-founder & CMO, added:
“We believe this convertible will provide us with the perfect launchpad before we go to market for a large round.”