“SyndicateRoom calls itself a ‘next-generation’ crowd-funding platform which enables private investors to invest alongside professional business angels. The company claims it is different from competing websites because the businesses it promotes have already been thoroughly vetted by investors.
“Crowd funding is very much geared up for entrepreneurs, but this doesn’t mean it’s good for investors,” said Gonçalo de Vasconcelos, founder and CEO. “And until it’s great for investors, it won’t grow.”
Due diligence - the vetting process that professional investors put companies through before parting with their money - is key, says Gonçalo, as is the mentoring support that business angels can provide entrepreneurs.
“If someone is putting in £100,000 then they will carry out more due diligence than someone investing £10,” he said. “The crowd doesn’t have the people to dig really deep [and investigate companies before investing]. Crowd funding platforms will tend to ask a few questions online but businesses angels will help companies for a few months before they go onto our platform. They do a lot of due diligence on their ambition and the markets side, calling potential customers.”
The business angels involved with the site also invest their own money in the companies. “This gives people great peace of mind,” said Gonçalo. Firms funded so far include biotech data firm Eagle Genomics, which raised £1m in a fundraising supported by angel investors Cambridge Capital Group, and Psonar, which raised £250,000 to develop its music streaming service.
However, Gonçalo believes one area of crowd funding that needs more attention is regulation, pointing out that on some equity-based crowd funding sites investors do not always receive voting rights with their shares or preemption rights, meaning that their shareholdings could be diluted if a firm issues more shares in the future.
“I think what people are really overlooking is the regulation,” he said. “People are not always aware that protection is not in place. That’s what regulators need to be looking at.”