At Seedrs we aim to be as transparent as possible about everything we do – for both investors and entrepreneurs. To the majority of people who aren’t in the legal or investment profession, due diligence is an unknown, impenetrable area. So to demystify it, we’ve created a concise guide that provides a quick overview and breaks down the process into six simple points.
The seal of approval
For a business to be given the go-ahead to raise on Seedrs is a bit like getting a seal of approval. Although some businesses may find it a little easier to raise on some other platforms, if a founder chooses Seedrs, it demonstrates that they believe that they have nothing to hide from our enhanced scrutiny. And that’s exactly why many investors are so interested in the steady stream of opportunities that are available on Seedrs.
We provide all types of investors with the opportunity to invest in exciting early-stage and growth businesses, structuring deals to ensure that when there are returns, everyone shares in the success – including investors and founders.
Our six key due diligence components
Our approach to due diligence is based on both best practice and our own experience. The team puts a heck of a lot of detailed, painstaking work into this area, but here’s a simplified, quick overview of the six key things that we do as part of our standard processes:
We check all information and claims included in a company’s pitch before we allow the campaign to open to investors. We ensure that each statement’s fair, clear and not misleading. Where there are material statements of fact we require each company to provide evidence to substantiate the claim; or amend or remove statements.
2. Due diligence
We conduct due diligence on the company, its legal structure and its directors before we close an investment. Our investment team performs a number of key checks and searches on every company that raises on the platform, using a combination of public registers, third-party sources and information requested directly from the company.
We provide investors with direct access to the companies and entrepreneurs raising on the platform. This provides investors with the opportunity to request further information that’s important to them. Investors can ask questions, arrange to meet and more. and, we don’t allow pseudonyms so you know who you’re dealing with.
4. Contractual protections
We enter into a suite of professional contractual protections with each company that raises on Seedrs, including warranties that provide a level of legal protection against a business providing inaccurate information. We also generally ensure that the company’s shareholder agreement contains pre-emption rights on the issue of new shares and investor consent rights over the creation of new classes of shares. For companies that already have shareholder agreements, we can usually joint the existing agreement as long as they have the core provisions we need to look after investor interests whilst balancing entrepreneur needs.
Our Financial Conduct Authority (FCA) permissions require us to protect investors in various ways, including:
Verifying the identity of all investors on the platform.
Ensuring that investors’ funds are deposited and held in segregated accounts.
Monitoring investment activity.
Transferring investor funds to the fundraising business only once we’ve completed our pre-completion due diligence.
6. Post-investment oversight
We work with businesses to help them to create regular and insightful investor updates.
What’s more, we also perform an oversight role for investors, so they can easily build a diversified portfolio, without needing to actively monitor each investment or deal with the administration usually associated with holding shares.
If you’d like to learn more about our due diligence and investor protections, see The Seedrs Standard: Guide to Due Diligence.