Pre-emption rights for the next crowdfunding round

Which verbal promises?

Are you saying that there is no protection from share dilution for the investors in this round? That makes it seem less attractive as then there’s no limit to how much your shares could be diluted.

I’m sure you’re all aware that early stage crowd funded companies are highly risky and not all come with pre-emption rights. Some companies choose to and others choose not to and will have their reasons for it. I’m personally happy without A shares or pre emotion rights if that’s the decision that freetrade have taken and I’ll bear that in mind when pledging an amount in the next fund raise.

Ultimately you all make your own decisions and if not having pre emotion rights on the shares is a barrier to the amount you would pledge then so be it.

I’m happy that I have the opportunity to invest in a company like freetrade, and the others I’ve invested in, at such an early stage and am happy with the decisions they make. None of my shares in round 2 or 3 have had pre emotion rights.

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Every current shareholder, regardless of whether they hold A or B shares prior, will be able to invest their pro-rata share in this round on the same terms (more, if they want). As existing shareholders, we could facilitate this outside of a crowdfunding campaign if for some reason they missed out. We added a cap of £50k this round to make sure a few large new investors couldn’t take up our crowdfunding allowance as we know there are lots of community members who didn’t know about us last time we raised and any new investors would need to come through Crowdcube for compliance reasons.

In the future, we aim to do the same and look at Monzo as inspiration where they let all crowdfunding investors participate in institutional rounds even when they didn’t do a separate crowdfunding campaign. Crowdcube has a good system for this already.

I don’t think there has ever been a case where someone wanted to invest a certain amount and wasn’t able to.

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Your money certainly is very different from VC money, in multiple ways (quantity, intention, time-frame, overhead, etc). That’s not to say it is worse.

I participated in that round, so I’m aware of how it works :slight_smile:

I was just trying to say that you’ll very likely have an opportunity to invest in freetrade in future rounds (probably more than you want or are able to invest), you don’t need pre-emption rights for that, and often they really complicate things and can actually counter-intuitively restrict the allocation for those who do want to invest (as happened in that Monzo round, in which I would have invested much more if I could) - because there has to be an allocation for all previous investors and most won’t take it up.

@adam just for reference, the way Monzo did that round for previous investors was pretty frustrating, it would be preferable not to cap allocations, or to weed out investors who are not serious before dividing up what is left between previous investors if doing it this way, as the amounts allowed were pretty trivial for the majority of investors. Personally I’d prefer freetrade just tried to regularly provide crowdfunding rounds to keep investors involved, rather than giving exact pro-rata allocations or something based on a previous round, which is complex and not actually very useful for small investors IMO.

FreeTrade will allow existing investors to take part in future rounds

Looks like I have reached to my maximum limit to participate in this discussion. In any case I have shared my views and I am hoping that FreeTrade management will reconsider their position on offering pre-emption right for this round .

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I think this contradicts what the info Alex provided which stated that all investors will receive b class shares. For a share investors in previous rounds, are you saying that only the pro-rata portion is on the same terms (i.e. a shares) and any additional investment will be in b shares? Would appreciate some clarification. Thanks

From my understanding, anyone and everyone who invests in this round will receive B shares. This includes Adam, the team, and existing A shareholders.
If, as an existing A shareholder, you were to miss out on your preemption rights (due to speed of raise etc), and you wished to exercise them, freetrade would sort this out for you (but the new shares would still be B shares).
Again - just my interpretation of today’s answers - so am happy to be corrected.

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That’s correct, thanks.

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The simple truth is that if a company can raise funding without giving any rights they will do it. Why give away something, for effectively nothing?! If they can raise their target £££ without giving voting or pre-emption rights, why should they give those away? After all £££ does not stink and it really doesn’t matter who’s £££ sponsor the company for now.

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