Crowdcube and Seedrs warn merger critical to crowdfunding survival

The two platforms have become increasingly popular with fintech firms in recent years, most recently helping to raise money for the likes of Curve, Mintos and Snoop.

Crowdcube and Seedrs, the UK’s two largest crowdfunding platforms, face closure unless a planned merger can go ahead, the firms have warned in evidence submitted to the Competition and Market Authority.

The two firms announced in October their plans to merge into a single entity, but the UK’s regulatory body overseeing market competitiveness, the Competition and Market Authority (CMA), is yet to fully approve the deal.

In statements submitted to the CMA last week, both Crowdcube and Seedrs, said the deal would not hamper competition. 

“It is a pro-competitive transaction that, first and foremost, is about the survival and sustainability of an innovative method of equity finance in a David vs. Goliath battle against the established providers of SME equity funding. If the Merger is completed, the market in which we operate—and our particular segment of that market—will become more competitive and dynamic, and customers will realise significant direct and indirect benefits,” Seedrs said in a statement.

Crowdcube meanwhile said the business model was still unprofitable and therefore greater scale created by a new entity would bring about sustainability.

“The activity of each of the parties, equity crowdfunding, has (to the best of Crowdcube's knowledge), never been profitable for any service provider anywhere in the world,” it said a written statement. 

“..following the proposed merger, the best features of both parties' platforms, various synergies of their operations, and a range of efficiencies can be realised which will improve the competitiveness of the combined platform, improve the unit economics of providing services to SME customers and enable more cost efficient operation of the combined business than is possible for Crowdcube's (or most likely also Seedrs') business,” it added.

As part of the proposed merger, Crowdcube would acquire all of the Seedrs outstanding share capital. 

While the CMA is still ongoing in its analysis, which is currently being fast-tracked, the regulator has initially flagged the merger as having the potential for substantially lowering competition (an SLC result).

The two platforms have become increasingly popular with fintech firms in recent years, most recently helping to raise money for the likes of Curve, Mintos and Snoop.