Crowdfunding round seven, Wed 24th Nov 2021 🎉

[bitflip]

@Vincent Except no. Read the earlier thread to understand the ambiguities (e.g the wording around 1 April). Also the wording you have pulled up doesn’t make sense again in the context of many of the points made above which I don’t want to repeat again.

[Vincent]

But everyone agrees to the new terms and conditions before accepting to invest though.

[bitflip]

@Vincent You seem to be either ignoring or not getting what’s being said. It is not my position to be arguing for Crowdcube or Freetrade. And frankly it is irrelevant for you or me to argue for them. I can only state my view and I know what the FCA stipulates about some of these things. With respect, I am not seeking your opinion on this.

[bitflip]

@Lionel Please look up the exact sentence that they use.

[DMDMDM (DM)]

Seedrs only charge carry fee for shares under their nominee.
The recent Daisy Green Collection raise will have no carry as not under nominee.

Daisy Green Collection

Freetrade could use Seedrs next time and avoid investors paying a potential carry.

[bitflip]

@Lionel I am only responding your message after you dragged yourself in.

[Vincent]

Am not disagreeing with you but to my understanding in the current terms and conditions there is no reference to investments after the 1st April so it should superceed what was mentioned prior to it as it’s not stated within the contract.

[Feddie]

Success fees, also known as “carried interest” or “carry” are normal in the private investment industry. All stakeholders in a transaction will seek to obtain a slice of the pie for their services. Most VC funds charge a typical 20% carry on top of an (again typical) 2% annual management fee (known as the “two-twenty”). Seedrs and Crowdcube provide a service (you can read their charter) and charge for that with an upfront fee and a success fee. This is not a “tax” and is perfectly normal practice.

[CashCow (Open to journalist enquiries)]

@Feddie

This not a “tax” and is perfectly normal practice.

Thanks for the insight and reply, I’ll confess I’m new to investing - Freetrade started me off - so I’d not come across this Success Tax before. It’s very disheartening to read that it’s considered normal practice.

Then again, charging upwards of £9.99 per trade for share dealing was considered normal before Freetrade came along so I can only hope that a plucky upstart comes along and wipes the floor with Crowdcube and its normal practices. Seems like its another sector that’s ripe for a shake up!

[bitflip]

AFAIK Carry is applied when the VC itself makes an investment. Crowdcube is not making an investment nor is it carrying a risk.

[Andrea17574]

Hargreaves Lansdown has 12% commission each trades, that is also a normal practice, in fact for this reason we support Freetrade.
I think that getting a commission from Freetrade each round + 1,5% from each investor it’s fair enough, 5% carry fees sounds as an old scheme to squeeze retail investors

[nico850]

Days are passing by, round will be closed on Monday and the cooling off week will start. In the meantime, FT is not actively answering the fair questions that former or potential investors are doing to clarify this situation:

@nico850

Former investor with investments in:

Round 3: 1000 shares
Round 5: 800 shares
Round 7: 500 shares

Investor wants to sell 500 shares “through a transaction (i.e. a secondary sale or an initial public offering) in which Crowdcube is involved”

Who decides which of the shares will be sold (R3, R5 or R7)? Because if the investor wants to sell the R3 or R5 shares Crowdcube won’t receive any 5% fee on profits but if he wants to sell R7 shares the 5% fee would apply.

How will be the process to define those things? To be clearer: wouldn’t like to discover that the decision of which shares to sell will be in Crowdcube’s head and decided by them.

@bitflip

Thank you for the message.

(1) Please can you advise what you mean by “Crowdcube is involved ”?
(2) I apply for and get R7 shares. How does Crowdcube get involved in any subsequent secondary sale or IPO?
(3) Has Freetrade promised Crowdcube any involvement in any secondary sale or IPO?
(4) Is there any assumption that it, Crowdcube, is involved in any sale or IPO by the nature of the crowdfunding platform?

Thank you

Sad to think this way, but this is the first time I feel FT is not actively answering with the transparency we are used to. Hoping to be wrong and @acamp @Freetrade_Team @Viktor or @adam clarify things as soon as possible so potential investors can be sure on all the conditions related to this investment round.

[olivug]

LOL, exactly.

In fact it is doing the opposite. It is promoting all sort of lemons and in case you manage find a gem and invest your hard earned money and it does payoff, they’re like: “Ah nice, can we share the profit on that trade”.

[Coolsmp (Investor R7)]

Juno’s post didn’t get removed because he was asking that question. It got removed because he is a previously banned forum member and shouldn’t be posting at all.

[Feddie]

A Venture Capital fund, known as VC, is normally a fairly complex structure with Limited Partners (LPs) and a General Partner (the GP or the “manager”). In general terms, the LPs (who are third party institutional investors) provide the funds (money) and the GP invests those funds. The GP charges the management fee and the carry without taking any risk (Ignoring for a moment any co-investment requirement), and the LPs are the ones providing the money and taking the risk. So, in essence, the manager (GP) is providing a service and charging the two-twenty without taking the risk (Again ignoring the co-investment requirement that is normally less than 5% of all the funds invested) in the same way as Crowdcube.

[heytokyo]

Freetrade is a private company, they are not obligated to provide a roadmap. Especially as their competitors now have a very close eye on them.

That being said, I do think they need to spend more time replying to investors’ enquiries. This raise has been minimum effort.

[bitflip]

I think I know one or two things about VC’s There are a number of different models. The one that you are talking about is what we sometimes refer to as the American waterfall where the carry is deal by deal. The European waterfall is where carry is applied to the whole fund. But regardless the VC injects the money. The VC takes a risk. The carried interest is an incentive for the GP’s.

The VC takes a risk when it invests. That is the bottom line.

Anyhow - this is not the bone of contention here and is a side topic.

[tbutz]

“I love deadlines. I love the whooshing noise they make as they go by.”
– Douglas Adams

[dscraggs (David Scraggs)]

Surely by your logic then Freetrade also charge a success fee on non GBP stock. For example, I think the FX is 0.45%. So if your Tesla stock goes to the Moon (like mine), and you make £100k, Freetrade are waiting to make a profit. It’s not like it costs 0.45% as FX is presented in the pitch as a source of revenue.

[grievyz]

Agreed, hardly makes sense if they’re trying to convince new investors to join them!