Freetrade's crowdfunding round 📈

Hi Alex,
Can you please tell me how investors of your crowdfunding get their return.
Many thanks,
Jihane

We don’t get any return. It’s a high risk investment that hopefully will give us a huge pay day if someone else buys the company or it floats on the stock market. Many companies start out with one or two guys. Old way to get funding was go to a bank and slowly grow. Nowadays you go to the public and ask them to fund your (perhaps crazy) idea. Many fail. Some make millions.

Most people here hope that in 5-10 years the owners will float on the stock exchange and we all get a mega pay day. Maybe 100x our investment. Who know? maybe its money down the pan.

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Dear Ben,

Thanks a lot for taking the time to reply to me. So if no one buys the company at some point and if it does not float on the stock market we will never get our investment back ?

Kind regards,

Jihane

Ways to get your investment back are probably:

  • company A is bought by company B, and then your shares will be sold to B
  • the company A floats on a market, and then you can sell your shares whenever you want
  • you find a private buyer for your shares in company A eg here maybe
  • company A decides to pay a dividend to its shareholders (nb FT has never said they’d do this!)

But yes, it’s harder to get a good liquidity event when investing in private companies, compared to ones that are already public.

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Absolutely I was merely keeping it simple for someone who may have been a potential investor. Along the lines of you might lose it or you may never see it for years.

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Here’s a quick summary of the situation:

  • We’re waiting for confirmation (aka ‘advanced assurance’) from HMRC of our EIS eligibility. We don’t expect any issues, but we just want to be transparent here.
  • Crowdcube are still working through the initial investments & confirming how much has been invested so far - it looks like less than our potential EIS cap!

Assuming we get the good news from HMRC, & that less than £2 million has been invested by people who’re eligible for EIS (the latter looks very likely), you will get EIS allocation.

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The way I look at it is you aren’t buying stocks or shares in the company or getting anything in return, but rather donating/giving money to Freetrade to help them grow.

In 10 years time (or however long) you may get some money back (by way of one of the ways discussed by @Rollingskies above), but this is not guaranteed.

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I don’t see it as a donation at all, I’m hoping for a profit. If I want to donate I’ll donate to a charity.

It is a risky investment and I could lose the lot, but I’m not “giving” them my money

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That’s 100% true, but in terms of ‘beginner’ investors who might be thinking they are due a big payday and quickly, the likelihood is that won’t happen (for a while anyway).

I just find it easier to think of it as a donation at this time with the potential to payout in the future

You’re buying a small share in the future profits of the company, but it is still a private company so you can’t sell the shares easily at all. You should not expect to see a return for 5-10 years. Outcomes could be:

  • Company goes bust - you get £0
  • Company is sold - you hopefully get some return
  • Company goes public (IPO) - you hopefully get some return

So it is a risky bet on the team executing and you won’t know the results for a decade say. It is possible you get 0, it is possible you get up to 20x say (much higher seems to be me unlikely over that time-frame).

Any news on how somebody invested 60k ? @Freetrade_Team1 @Viktor

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For anyone who had the “investor assessment” problem, they fixed it for me after I sent in a support request. I was able to do a test investment with another company on their platform (and will cancel it later).
Worth checking your own account to see if it works, and if not put in a support request.

Possibly A-share pre-emption rights?

When you look at a company such as Deliveroo that are doing really well and i know James Storer previously worked there. They’re still listed as a private company and there’s no gurantee they will go public. Also there’s been numerous news reports about other companies trying to buy them out. There’s no gurantee you’ll be getting returns and there shouldn’t be an expectation for this as well!

Yes - its worth emphasising that most crowdfunding investors lose all their money and should be prepared to do so. Its one of the main reasons Crowdcube or Seedrs are subject to regulation to make you fill in questionnaires.

Even then, I think many recent Fintech raisings have targeted the financially naive who don’t realise the potential risks.

Best to think about it in terms of risk and reward. Freetrade is high risk but there’s a massive potential reward.

You don’t need to put a lot on crowdfunding investments to get a good return, as you could be getting 10x return (in many years time) :+1:t3:

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Thank Rob !! It’s very helpful x

2 posts were merged into an existing topic: Let us know if you invested more than once in our crowdfunding round & you want to keep them all!

I thought they were gonna reopen the funding round today?

Can’t decide if I should take a leap of faith with this one or not :tired_face:

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