Spark Crowdfunding
The Spark Crowdfunding platform provides a quick route for EIIS companies to tap into small investors, writes Darren O’Loughlin
EIIS companies are flocking to Chris Burge’s crowdfunding platform as a fast-track route to find small investors
Spark Crowdfunding founder and CEO Chris Burge is on a roll, partly thanks to Covid. Lockdowns and restricted spending have left investors with spare cash and Burge has been drawing them to the campaigns on his online crowdfunding platform. “In the last 18 months, every campaign that’s gone onto our platform has been successful, without exception,” says Burge. “We’re trying to keep the hundred per cent record going and we’re very close to it as well.”
So far in 2021, the platform has attracted c.1,400 investors. The average investment is €3,200, and the largest single investment year-to-date has been €70,000. The fastest was for ASX, a virtual stock market venture that raised €630,000 in 28 hours. ASX then went back for more and attracted another €1m from small investors.
Other recent fund-raisers using Spark include Tacenda, an AI-powered platform to monitor revenue operations in large companies, which exceeded its €600,000 funding target for a 23% equity stake, attracting 105 investors. Oran Rigby’s venture Akkure Genomics, which aims to match patients with clinical trials, was also popular. Rigby launched a €500,000 campaign on Spark and secured €1.2m from over 300 people.
Most Spark campaigns leverage the Employment and Investment Incentive Scheme, which offers a tax rebate of up to 40% on the investment amount, subject to various conditions. That rebate is subject to Revenue formally approving a company’s EIIS status, which is not guaranteed. Investors pay no fees to invest and Spark charges investees a 7% commission. Campaigns usually run for between 30 and 40 days, while the postcampaign formalities are typically finalised after a fortnight, according to Burge.
“That’s the beauty of this funding model – the speed,” says Burge. “A campaign can be completed from start to finish in about 10 weeks. Once investors put their money in, less than 1% withdraw during the seven-day cooling off period. Crowdfunding is just another name for general investing. We do exactly the same thing as angel investor networks or venture capital firms. The difference is that our investors are people whose pockets are not quite so deep, but there are lots more of them.”
Originally from the UK, Burge has been living and working in Ireland for 21 years. He trained and worked as an engineer and gravitated into energy management consultancy. “That ticked a box for me because I am interested in sustainability issues but I kept looking around for other opportunities,” he explains.
“I saw the rise and rise of equity crowdfunding. I had also been a casual investor over the years and I had found it difficult to invest. It always seemed to cost as much in legal and third-party professional fees as it did to actually put the money in. I decided to give equity crowdfunding a go.”
Operating company Slua Ventures was incorporated in May 2018. The principals are Burge and fellow director and shareholder Michael J Foley. An early campaign success was Fleet App, a peer-to-peer car rental service that raised €385,000. “I knew a number of investors and I got them on board, along with some of my friends, to get the first few campaigns running,” Burge recalls.
The crowdfunding platform cannot guarantee any return for investors. “When they put money in, it’s there for the long haul. It’s not something investors can withdraw six months later. They are putting their money in as equity and that money is locked up until the company has an exit. And that could be three years, seven years, or it might be never.”
Many of Spark Crowdfunding’s clients are companies that require equity funding to leverage matched funding from Enterprise Ireland. Of the seven companies that have used Spark in 2021, five are in EI’s High Potential Startups portfolio. This is a comfort factor for small investors, who presume that the state agency has undertaken a level of due diligence.
Burge adds: “The norm with equity investing is that five out of ten fundraising companies are going to fall flat on their faces, or they’ll never secure that big exit. We’d hope that investment number six will wash its face, the seventh will have a 2x return, number eight a 5x return and so on. A portfolio approach, where you invest small amounts into a number of businesses, gives better protection.”
Spark Crowdfunding operates an investor club service, where groups of investors evaluate campaigns to provide guidance to investors. Burge says that he will supplement this in the coming weeks with a portfolio club, where participants pay nominal fees into several campaigns to build a portfolio.
Crowdfunding is currently unregulated, although moves are afoot to bring in regulations by November 2021, after the EU finalised a regulatory regime for the sector in 2020. Most of the provisions concern marketing and the need to fully communicate the risks in equity investing.
Burge welcomes the move. “The regulations will give people more comfort around the idea of equity investing. I think that Spark Crowdfunding has already proved itself in the campaigns that we’ve raised money for. The regulations will open up Ireland to more competition in equity crowdfunding, and we welcome that. On the flip side, Spark will have the opportunity to passport into other EU countries, which is going to be amazing for us.”
Paul Kelly, CEO, Fáilte Ireland
Artist’s impression of the new funicular proposed for Fort Dunree, Co Donegal, which recently received funding under Fáilte Ireland’s Platforms for Growth Investment Grants Scheme for Immersive Heritage and Cultural Attractions
Aerial photography of a bespoke piece of sand artwork commissioned as part of Failte Ireland’s ‘Keep Discovering’ campaign. The piece, over 120ft in length, is an illustration of the many hidden gems there are to uncover in Ireland and the joy of discovering them. The unique piece, by environmental artist Sean Corcoran, was created by hand on Kilmurrin Cove in Co. Waterford