Types of Campaigns

Explain what equity, fund and convertible campaigns are

Samuel de Oliveira avatar
Written by Samuel de Oliveira
Updated over a week ago

Seedrs allows you to invest in the shares of early-stage and growth-focused businesses and to benefit as they increase in value. We provide five types of campaigns that allow you to become a shareholder in these businesses.

1. Equity Campaigns

Investing in a regular equity campaign is the simplest and most common way to invest in a startup. You decide which business you want to invest in, and if the campaign hits its funding target then you will become one of their shareholders. As the company becomes more valuable, so do your shares; allowing you the opportunity to share in the future success of the business.

For example, if you invest £1,000 into an equity crowdfunding campaign, you will become the owner of a certain number shares in the company depending on the share price.

These campaigns are often eligible for SEIS/EIS tax breaks and the minimum investment is just £10. Check out our equity campaign term sheet to learn more.

We have two forms of equity campaign, either a primary or a secondary campaign, the vast majority of which on the Seedrs platform are primary campaigns. A primary campaign is where equity is issued by the business by issuing new shares. A secondary offers equity from existing shareholder(s) (sellers) - you can learn more about secondary campaigns here.

2. Convertible Campaigns

Convertible campaigns are often used by businesses when there is a large fundraising round on the horizon, but they want to raise a smaller funding round in the meantime. By offering a convertible, the business doesn’t need to put a valuation on their company now and therefore avoids potentially affecting their negotiations with the future investors.

When an investor purchases equity in a business, the purchase price of the equity implies a company valuation. For example, if an investor purchases a 10% stake in a company and pays £10,000 for that stake, this implies that the company is worth £100,000.

Investing in a convertible campaign allows you to invest today, with your investment converting into equity in the future, at a discount compared to other investors. This is a very common structure used by angels and VCs all over the world.

Convertible campaigns avoid the need to agree a specific valuation on the company and instead offer investors a discount (referred to as the “Discount”). When the convertible converts to equity in the future (usually when there is a new round of funding), it will be converted based on the discount to the valuation at the time of the new round of funding, sometimes subject to a maximum valuation (referred to as the “Valuation Cap”).

While this is the standard approach to convertibles, each one is unique which is why we attach a document to each convertible campaign on Seedrs outlining exactly what the specific terms are for that particular campaign. We strongly suggest that a potential investor familiarise themselves with this document before deciding to invest.

For example, if you invest £1,000 in a convertible campaign on Seedrs, and a new investor invests £1,000 at the time of the new funding, you would receive more shares than the new investor.

Check out our convertible campaign term sheet to learn more.

3. Cohort Campaigns

Investing in a cohort campaign allows you to invest in multiple businesses with one click of a button. When you invest in a cohort campaign on Seedrs, you will become a shareholder in each of the underlying businesses that the campaign organiser chooses.

The campaign organiser (who may run an accelerator, for example) identifies the businesses and often provides them with advice, support and mentorship.

The key to successful equity investing is diversification, and a cohort campaign allows you to easily diversify with the added benefit of the businesses receiving additional support and help. For example, if you invest £1,000 into a cohort campaign, each business will receive a portion of the cash invested and you will receive shares in those companies.

4. Fund Campaigns

Fund campaigns offer you the opportunity to invest in an investment fund via Seedrs. Seedrs will invest in the investment fund as a limited partner and your interest in the fund will be held on your behalf by Seedrs. Unlike a cohort campaign, you will receive an interest in the fund itself rather than shares in the underlying businesses.

5. EIS Fund Campaigns

An EIS fund pools money from different investors and invests in a portfolio of companies that meet the strict EIS eligibility criteria around size, age and financial status. Like any other venture capital fund, the fund manager will be on the lookout for businesses that have strong business models, value propositions and fundamentals for sustainable growth. However, unlike normal venture capital funds, investors will be directly investing in the underlying companies rather than becoming Limited Partners (LPs) in the overall Fund. A full description of the different types of venture capital fund can be found here.

6. VCT Campaigns

Venture Capital Trusts (VCTs) invest in early-stage, high-growth businesses. VCTs are funds that raise money from investors across the UK, who, in turn, benefit from a series of tax reliefs for committing their money to back riskier high-growth companies. Not only do investors receive 30% income tax relief on their investment, providing the shares are held for a minimum of five years, but any dividends paid by VCTs are tax-free and there is no capital gains tax on the disposal of the shares. Further information on VCTs can be found here.

7. Secondary Campaigns

Investing in a secondary campaign allows you to purchase shares in a company that is not currently fundraising. Unlike other Seedrs campaigns, you will be buying shares from existing shareholders rather than investing into the business.

Some secondary campaigns have been initiated by the seller(s) alone. For these campaigns, the business is not involved in the campaign on the Seedrs platform, and if the share sale completes, Seedrs will not enter into the standard contractual arrangements that Seedrs usually does as nominee. As a result, Seedrs will not have an ongoing relationship with the business outside of its role as a shareholder. In these instances we will highlight in the campaign that the business will not be involved and the post investment experience after purchasing these shares will differ from our standard nominee service. For more information on how secondary campaigns that are not led by the business may differ from other campaigns available through Seedrs please read this help article.

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