One of the biggest trends in the world of fintech in the last several years has been the emergence (and surging popularity) of startups building platforms that help more people take a more proactive role in the world of financial services. Today, one of the more promising hopefuls building an investing service in the U.K. is announcing a significant growth round after seeing a surge of attention this year in the wake of the COVID-19 pandemic.
PrimaryBid, which allows retail investors (that is, ordinary and not professional investors) the ability to invest in new shares issued by public companies, has raised $50 million in new funding of its own. The funding comes on the heels of the startup working alongside larger investment banks to get retail investors in on 41 capital raising efforts for U.K. publicly listed companies and trusts since April 2020.
"The COVID-19 pandemic demonstrated the effectiveness of the public markets, with companies recapitalising quickly and efficiently," said Anand Sambasivan, CEO of PrimaryBid, in a statement. "Our technology has allowed thousands of retail investors to participate on equal terms with institutional investors, unlocking a large and important source of liquidity and long-term share ownership for corporate issuers. The response from Boards and their advisers to our solution has been excellent: they recognise our digital solution for retail inclusion brings together both good governance and best execution."
PrimaryBid plans to use the funds to hire more talent, invest in its tech platform, build out more partnerships and expand internationally.
Unlike the investors on its platform, this Series B is coming from a list of big-name strategic players and VCs. They include the London Stock Exchange Group, Draper Esprit, OMERS Ventures, Fidelity International Strategic Ventures and ABN AMRO Ventures, as well as previous backers Pentech and Outward Ventures.
The LSE Group might provide a clue to which geographies might be future targets for PrimaryBid: the Borsa Italiana exchange in Italy, as well as the Turquoise pan-European equities market are also part of the group's footprint.
“This investment builds on our collaboration with PrimaryBid and is part of London Stock Exchange Group’s commitment to broadening retail investor access to public equity markets," said Charlie Walker, head of Equity and Fixed Income, Primary Markets at London Stock Exchange plc, in a statement. "Through PrimaryBid’s innovative offering, retail investors have been able to access capital raisings on the same terms as institutional investors, supporting the U.K.’s public companies by providing additional capital and liquidity. PrimaryBid has become an important part of the U.K.’s capital raising ecosystem and we look forward to working with them to further enhance retail investor access to capital markets within the U.K. and globally.”
The startup is not disclosing its valuation with this round, which follows a Series A in September 2019 of $8.6 million. This latest Series B has been the subject of rumors since this summer (and most recently a report last night that the round had finally closed).
PrimaryBid's growth comes at a time when a number of startups have been building investment services targeting niche opportunities, and services for those who are underserved. Rally last month demonstrated that there is definitely money and opportunity in providing a way to invest in (not buy) collectibles; Yieldstreet has built a platform to introduce investors to new investment classes too, like shipping; and companies like Stash, Revolut and Robinhood are also bringing trading and investing to a new class of consumers.
That doesn't mean that new entrants focusing on smaller investors and niche opportunities in the investment market are without their own challenges. Revolut has faced controversies around the conduct of executives (however, these appear to have been resolved: it's still raising hundreds of millions of dollars). YieldStreet recently sued (and won) a case against a ship recycling company, but at the same time it appears to be under investigation for some of its practices. And Robinhood indefinitely postponed its plans to launch in the U.K. after putting its expansion plans on hold earlier this year.
PrimaryBid's recent growth has come on the back of a choppy year in the public markets and the world of investment.
Just as COVID-19 disrupted other aspects of our life, the early months of the pandemic saw a major freeze descend on the world of trading. With many unsure of how future months might play out in terms of local and global economics, the IPO market all but dried up and trading slowed down.
Then, things began to thaw, with activity picking up gradually and effectively under new terms: for now, everything is remote. And what's more, the new playing field means a new opportunity for new players.
This is where PrimaryBid has been stepping in. The startup has built a platform that makes it easier for retail investors to participate in new share issues, and it has been around since 2016, but it has found its groove at a time when companies raising money might be looking to cast their nets a bit wider than usual.
The startup led a big campaign in April to highlight the role that retail investors can play in helping getting the stock market back to active levels. And the companies that have provided access to their new share issuances since the start of the pandemic have included the Compass Group, Ocado, Taylor Wimpey and Segro.
Retail investors are, in essence, a long-tail play. While individually they will invest considerably less than high net-worth individuals or institutional investors, collectively they account for a substantial amount of activity. The latest figures from the U.K.'s office of national statistics, from 2018, estimate that retail investors account for some 13.5% of the U.K.'s share capital, although within the FTSE 250 that is closer to 20%, and in some AIM companies it can be as high as 30% or more, according to PrimaryBid.
There are a number of other platforms for ordinary people to buy and trade shares, but what is different with PrimaryBid is its focus on new share issuances, not sells and trades in existing shares. In theory, a company could also allocate shares to be sold on via PrimaryBid for IPOs, but, as a spokesperson described it, "The real innovation is getting retail involved in ‘accelerated’ follow-on raises (which are around five times the size of IPOs in equity issuance terms), and which have never been open to retail (whereas some IPOs have historically)."
It's a formula that has resonated with investors and strategic partners.
Vinoth Jayakumar, partner at Draper Esprit, said: “Our investment in PrimaryBid aligns with part of our wider investment thesis to democratise retail investors access to public markets as well as modernise market infrastructure software. For us, both our companies are anticipating the direction of travel of the future of finance.”
OMERS Ventures, the investment arm of the prolific pension fund out of Canada, said it's part of the group's focus on fintech. "As fintech specialists it’s been impossible to ignore the rise of PrimaryBid in 2020 and its success championing retail investors in the capital markets," said Tara Reeves, partner at OMERS Ventures, in a statement. "PrimaryBid’s technology sits at the intersection of powerful trends in financial services - regulation, digitalisation and democratisation - and OMERS Ventures is delighted to support the team’s mission to put individual investors on equal terms with institutions. PrimaryBid is now well integrated at the highest levels of the U.K.’s capital raising ecosystem, and we look forward to helping the team realize their ambitions internationally.”
“We are excited to be partnering with PrimaryBid to enhance fairness, inclusivity, and transparency in capital markets," said Michael Sim, vice president, Fidelity International Strategic Ventures, in a statement. "Anand and the team have built unique technology infrastructure that is redefining the way issuers access capital markets; seamlessly connecting everyday retail investors with public companies. As the economy roils from the impact of coronavirus, it is imperative retail investors get a seat at the table as companies recapitalise and the process of economic recovery begins.”