We’ve just raised £71 million, mainly from our new investors Goodwater Capital, Stripe and Michael Moritz, investing through his charitable investment vehicles including the Crankstart Foundation.
In previous rounds, our institutional investors like Passion Capital, Thrive and Orange Digital Ventures, as well as individuals investing through crowdfunding were given something called ‘pre-emption’ rights.
Pre-emption rights allow existing investors to get first dibs on new shares that go up for sale. This means that, if they wish, investors can increase their investments, to keep the percentage of the company that they own the same.
For those not au fait with the intricacies of investments () , I thought I might break down what this means.
I find it helpful to think about Monzo’s share capital as a pie, cut into a certain number of slices. With every new investment, the pie becomes larger, as more money comes in and the valuation increases. When new investors sign on, their money makes the pie bigger, but they also now own part of the pie, meaning we need to make more slices and each slice therefore is a smaller percentage of the overall pie.
Usually, pre-emption rights allow existing investors to increase their investments, to keep their slice the same size, even as the pie gets bigger.
In this latest round of fundraising, we have decided to waive pre-emption rights for all previous investors (including institutional investors), in order to prevent the round becoming too large. If everyone was to increase their investment to the full amount under their pre-emption rights, then we would have taken far too much money. That sounds great in theory (lots of money!), but in practice it means we’d be giving up an even larger percentage of the company to existing outside investors, because the overall valuation itself wouldn’t change. Based on this, as a company we made the decision to waive pre-emption rights for existing shareholders, a decision that was agreed by more than 75% of those existing shareholders.
We do want to make sure that crowd investors are still able to increase their investments as much as possible, and have set aside £1.5 million to allow previous crowd investors to do so. Each person will be given a specific allocation of shares, that they can choose to buy or not. To keep things as fair as possible, this allocation is based on the amount initially invested. For those that invested a smaller amount of money, that will only be one or two shares. For others, it might be significantly more.
Bringing in new investors dilutes the overall percentage each investor owns (that includes employees!) But it also makes the overall pie bigger, meaning the current value of your shares increases. Each share is now worth £2.3566, more than double what it was at the beginning of the year, and four times as much as in the first crowdfunding round!
Waiving pre-emption rights does not affect the value of your individual shares at all.
We’re 100% committed to crowdfunding and we’ve already begun work on a new crowdfunding round for next year. We’ve got a few tricks up our sleeves to make sure that everyone who wants to can get involved. It’s going to be spectacular
If you have any questions, please don’t hesitate to ask. As always, we’re committed to being transparent about why we make these decisions. We firmly believe it’s in the best interests of the company to do so (and therefore the shareholders too)!