That’s right. In-App IPO. What does that look like? Just ask the good people at Deliveroo. While countless technology giants have been dashing to join the SPAC world, Deliveroo seems to have taken an entirely different approach. The London-based food delivery service, founded by Will Shu in 2013, recently emailed all its UK customers and invited them to participate in an upcoming potential IPO by earmarking a set number of shares for their potential purchase. This is clever and innovative in that it will likely create a number of retail investor brand promoters (the kind some private companies get when they crowdfund) and off-course then there is the real innovation, the use of their app to promote the investment itself.
Quietly powering this Wall Street to High-Street revolution in the Deliveroo app, is Anand Sanbasivan’s Primary Bid, a company that is working hard to allow retail investors to get access to company IPOs at the same time as institutional investors. This has traditionally irked retail investors, as they haplessly watch the IPO price pop before they are able to trade on traditional and neo platforms for the purchase of equities online. Primary Bid, an alumnus of the Accenture Fintech Lab, raised $50 million back in October 2020 (no mean feat given the world was in the throes of the pandemic). The investors include the London Stock Exchange Group, Draper Esprit, OMERS Ventures, ABN AMRO Ventures, and Fidelity International Strategic Ventures.
Sanbasivan is a smooth operator, having cut his teeth running a hedge fund prior to turning his attention to revolutionising investments for retail investors. Having been an institutional investor he has personal experience of being on the other side of the table. Institutional investors get “first dibs” on company equities that are available when an IPO is first launched. Primary Bid seeks to remedy that by putting retail and institutional investors on the same footing and leveling the early access problem.
The In-App IPO model being promoted through Deliveroo’s application already supercharges their distribution by going direct to the retail investor that also happens to be their own customer. Deliveroo is looking to limit the offer to either £250, £500, £750, or £1000 in shares per customer for when they IPO. My guess is that the offer will be very popular and allows PrimaryBid to become a household name, by supporting Deliveroo with becoming a listed company, as tens of thousands of customers in the capital and across the country rush to sign up for a slice. Deliveroo early investors are set to make a killing when the IPO does take place with investors like Index Ventures and Hoxton Ventures getting pride of place on the returns table, having backed Shoo early in the journey. A number of angels are set to make eye-watering returns too, which bodes well for the London, early-stage investment scene where very early-stage venture non-institutional funding is down to 2012 levels, according to John Spindler from Capital Enterprise. The liquidity shot in the funding arm may once again stimulate further re-investment of some of these returns in early-stage technology startups across the nation.
While this clever move is looking to raise money for an equity instrument (namely shares), clearly the direct to own-customer playbook has played out a number of times before in the world of Corporate Bond issuances where players like John Lewis who have offered customers and employees a chance to participate in fundraises through the sale of bonds before. Whether it is an equity or debt instrument, what appears to be clear is rewarding customers and employees for their loyalty, and allowing them to have greater ownership or a sense of participation in the business is clearly a winning strategy.
Note: Please note that this article is not investment advice. Your capital is at risk. The author and the publication are not investors in PrimaryBid or Deliveroo at the time of writing.