As part of EIIS industry profiles series, Chris Burge of Spark Crowdfunding has kindly given some insights into EIIS and Crowdfunding in Ireland.
Tell a bit about Spark Crowdfunding?
"Spark Crowdfunding commenced trading in 2018. Equity crowdfunding is a service which allows a large number of small to medium-sized private investors to invest in early-stage companies in return for shares in these companies.
Established in Dublin in 2018, Spark Crowdfunding is an investment marketplace that connects private investors with companies raising funds for growth. It is the only indigenous equity crowdfunding service provider operating in Ireland.
Over the last 5 years, 38 Irish companies have raised funds on the Spark platform in amounts ranging from €100,000 to €3m. The average investment size on the Spark platform is €3,500.
Spark has a database of over 11,000 private investors, over 90% of whom are located in Ireland.
In aggregate, these investors have declared liquid assets available for investment of €1.4 billion. Of these 11,000+ investors, 1,740 investors have declared liquid assets in excess of €100,000. "
Please tell us a bit about yourself?
"I am CEO and Co-Founder of Spark and is responsible for the day-to-day running of the organisation, in addition to formulating company strategy. I am an engineer by training, with over 30 years’ experience in delivering complex projects across multiple sectors.
I have worked on special projects across the world in countries in Asia, Africa, North America and Europe. I have also worked for the United Nations in Russia and Western Africa. Before setting up Spark, I was an active angel investor in multiple start-up businesses for 12 years and also acted as a strategic advisor to companies in which I invested.
I successfully founded and operated a number of businesses of my own, notably in the energy sector. With over 30 years’ commercial experience, I have a bachelor’s degree in manufacturing engineering and a master’s degree in Energy Management. Originally from the UK, I have now lived in Ireland for the last 23 years."
What is the advantage of Crowdfunding for a EIIS investor?
"There are many advantages of Crowdfunding for an investor. Firstly, you get the opportunity to invest in early-stage businesses that heretofore were only available to investors with very deep pockets who would commit north of €25k for each investment. This meant that the average PAYE worker was omitted from this exclusive club. Now with crowdfunding, everyone who can spare a minimum of €100 can invest in companies in which the state has invested through Enterprise Ireland.
The second important point is that crowdfunding enables investors to easily set up a portfolio of businesses into which they have invested. It is the investors who decide in which companies they decide to invest and over time this builds up a portfolio which they hope is broad and strong that will give them a return on their investment."
How do you communicate with your investors?
"Investors are kept abreast of the companies’ performance through published Quarterly Updates. These outline the various metrics in the businesses and give the investor an overview of the progress for that period. As shareholders in the companies, the investors have the option to attend the AGMs."
Can you give an example of one of your investee companies?
"Our Investee companies are very varied. Quite a few of them are technology-based, but not all; we’ve had retail, manufacturing, medical device and many others – a great cross-section.
Some companies are pre-revenue, some have got great sales traction. Some raise a very modest €100k, but we have raised over €3m for one company. Our mean raise is €650k, our median is €370k.
We recently raised funds for a Galway-based med-tech, AuriGen. Spark investors raised €1.5m for them in 21 days and co-invested with the Western Development Commission and the European Horizon 2020 programme."
Can you tell us about the due diligence steps you take?
"Spark carries out a very thorough level of due diligence on each company. We review every pitch on the site to ensure that all the information presented to the investor is fair, clear, and not misleading. We conduct a robust due diligence on the company, its legal structure and directors. We also verify evidence supporting any claims being made by the business to ensure the information provided is accurate.
But great reassurance can also be taken from the fact that most of the companies that are on Spark have also raised funds from the EU through many of their programmes to stimulate early-stage technologies and these bodies will conduct large levels of due diligence too."
What advice do you give an EIIS investor?
"Spark cannot give ‘advice’ on investments, but many of our investors follow what I believe to be a very sensible approach and that is diversification of their investments across a broad portfolio. A modest amount invested in a wide range of businesses is a very pragmatic strategy. Spark has a ‘Portfolio Club’ where investors can sign up and commit to just 8 investments a year. Within 3 years the investor will have built up a very significant investment portfolio with a number of them approaching an ‘exit’ to start to realise the returns for the investor."
How do you see the current economic backdrop affecting crowdfunding?
"Although there are significant pressures in the macro economy, Spark is finding that investment into early-stage businesses is still very strong. "Although there are significant pressures in the macro economy, Spark is finding that investment into early-stage businesses is still very strong.
The simplicity of investing, the ease of diversification and the transparency that Spark brings to its investors means that investment through the platform is still very strong."
What changes would you like to see with EIIS Legislation?
"There are a number of elements that Spark thinks should be changed with regard to the EIIS, these are:
- Loss-relief on EIIS investments should be permitted – this is the case in many other investment-mechanisms, so it should be rolled out to EIIS too.
- At present there is an upper limit of €250k (for a 4-year retention period) for EIIS investments – this upper limit should be increased.
- The retention period should be reduced to 3 years for all qualifying investments.
- Finally, the EIIS process is not simple and there is a degree of uncertainty for the businesses. The process needs to be simplified and made more certain. "
Thank you to Chris for his time participating in this interview.