Criticisim of regulator for US buyout of British fintech Seedrs goes too far


Some results are difficult to predict.Sale of FinTech in the UK Seedrs to US buyersEight months after the British competition watchdog blocked Domestic alliance, Was not.

Seedrs operates an equity crowdfunding platform. This matches investors who want to start up with those who want to be entrepreneurs who need cash. The problem was that Seedrs shared some characteristics with the companies that used it to find supporters. It was a relatively small business that was still burning with cash.

In search of growth and profitability, we turned to our closest rival, Crowd cube. Not surprisingly, the UK Competition and Markets Authority had something to say about the merger, which controls more than 90% of the domestic market. As a result, Seedrs was a foreign buyer in the form of the Republic, a private investment platform in the United States, with a valuation of $ 100 million. Crowdcube has secured sound funding from a US cryptocurrency company.

It’s easy to caricature the results as an inevitable result of the non-contact regulatory delusions about giving tech companies a free pass. In that story, Seedrs is another UK tech business that sold too early to foreign buyers, and the suspension of trading with Crowdcube gives the opportunity to create a national champion in a niche but growing sector. I lost it.

And CMA tends to give critics ammunition. It chose some unusual battles. The acquisition of the small British sneaker chain Footasylum has been blocked twice, not once, and has a long-standing obsession. There was also a decision to fight Facebook over buying a library of stupid graphics.

The decision on the Seedrs-Crowdcube merger is on the list, CMA critics say. Seedrs co-founder Jeff Lynn told the Financial Times at the time that regulators had an “old-fashioned academic view.”[failed] Recognize the reality of how the innovative sector works. ” Tim Revene of Augmentum Fintech, an early investor in Seedrs, points out the “vision and flexibility” of the Financial Conduct Authority and the Bank of England in promoting the prosperity of the country’s fintech community. “In the future, there will be other fintechs seeking scale from the merger, so second-tier organizations will need to get a match fit,” he said.

But the problem is that the sale of Seedrs seems to support some of Watchdog’s dissent. The two companies justified the merger because it is the only real option for growth. Seedrs’ $ 100 million sale and Crowdcube’s $ 13.5 million funding round last month suggest that other options were available after all.

It also seems wrong to criticize CMA for failing to promote future fintech champions. It is doubtful whether the government should do business to choose the winner. Competition regulators certainly shouldn’t. Isolating a British company from foreign ownership is not its job either. The openness of the UK capital markets has long been one of its strengths.

It does not prove the first intervention of CMA. Seedrs and Crowdcube dominate 90% of the market only if they define the market in the narrowest possible way. That is, they are almost completely competing with each other to fund their business, ignoring venture capitalists and angel investors.

Many in London’s fintech community do not consider the market to be so limited. Instead, they envision equity crowdfunding as one of many options for early-stage businesses seeking help. The risk is that neither Seedrs nor Crowdcube will eventually survive by fighting each other rather than competing with rival sources of funding. That’s obviously bad for competition.

But in the meantime, there is new support for both businesses. Due to regulatory changes, markets are also open in Europe. It makes it possible to expand both ranges.

It remains to be described by one FinTech founder as “a long-standing criticism of British scale-up.” .. .. It’s too early to sell. ” But, as its founder points out, the criticism “partially reflects the investment climate, management ambitions, and the relative size of the UK economy.” Not all can be placed on the CMA door.

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