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.
The aim of this guide is for investors to understand what steps Seedrs undertakes in the due diligence process and, equally as important, what steps we do not undertake.
The Seedrs Standard
Our standard due diligence process requires the fundraising company to disclose and help verify information both before the campaign launches and again before the investment transaction is completed. 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 investor protection components
Due diligence is just one aspect of the steps we take to serve investors on the platform. The team puts a heck of a lot of detailed, painstaking work into this area, but here’s a simplified, quick overview of the five 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.
Please note that Seedrs do not require evidence for aspirational statements or statements of intent or belief, although we will ensure that any such statements are phrased appropriately in light of their speculative nature. Seedrs also do not audit company accounts or financial information, nor do we review the discussion forum or any additional documents posted (including pitch decks or financial 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.
Please note, Seedrs do not conduct an exhaustive legal or commercial due diligence process on all aspects of a business and we cannot provide personalised due diligence (in line with your personal motivations for investing). We therefore encourage all investors to do their own due diligence before making their investment decision.
For more details on the limitations of our Due Diligence process, please refer to The Seedrs Standard: Guide to Due Diligence.
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.
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. Please note that although we encourage businesses to regularly update investors, the provision of updates is not Seedrs’ responsibility.
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.