The decades it has taken for Hargreaves Lansdown to become a FTSE 100 company is a warning sign for retail investors considering signing up for Nutmeg’s recently announced crowdfunding campaign.
The digital wealth manager announced on Wednesday it will be letting “eligible customers” invest in its business via crowdfunding platform Crowdcube so they can join the ranks of Goldman Sachs in terms of having a stake in the company. Nutmeg did not reveal an exact figure it was targeting from the fundraising except that it would be “seven-figures”.
The crowdfunding was pitched in a press release as a chance for Nutmeg to take its democratisation of wealth management to the democratisation of its company ownership.
Currently, ownership of the business is limited to institutional investors and venture capitalists with Goldman Sachs the headline investor from the most recent fundraising round.
In January, the investment bank led £45m series E funding round into the robo adviser that valued the business at £245m.
Hargreaves took decades to reach its current scale
Fundscape editorial director Gavin Fielding said the investment horizon for a scale-up businesses like Nutmeg is extremely long, pointing out it has taken Hargreaves Lansdown, founded in 1981, 38 years to get its current position. It became a FTSE 100 company in 2011 and today has £91.6bn assets under administration, according to its 2018 results.
“Any backers to firms like Nutmeg need to realise this, there are no short cuts and backers will have to pump money in for years until AUA is, say, £20bn plus.”
Nutmeg currently manages £1.5bn on behalf of over 65,000 customers.
When it comes to D2C platforms, Fielding estimated money put into client acquisition ranged from £200 to £600 a head.
Eligible customers
Nutmeg defined eligible customers for the crowdfunding as any investor with a Nutmeg account who is also signed up to the Crowdcube website.
The bulk of Crowdcube users are categorised as “everyday investors” by the business or “restricted investors” by the Financial Conduct Authority. They must commit to not invest more than 10% of their net assets in unquoted shares or debt, like the investments on offer via the crowdfunding platforms.
Advised clients, self-certified sophisticated investors and high net worth investors are also eligible to use the platform.
Nutmeg chief executive Martin Stead (pictured) said the robo adviser had transitioned from a trailblazing start-up to a scale-up business. “Nutmeg was the first digital wealth manager to launch in Europe and now we’re opening up ownership of our business to give eligible customers the opportunity to invest alongside institutional investors, venture capitalists and leading entrepreneurs.”
Investors will be able to buy as little as one share but Nutmeg has not yet determined the price of each share, telling Portfolio Adviser that information would be finalised before the launch of the crowdfunding campaign in summer 2019.
