Crowdfunding (Upcoming 2018/19 Round) - Updates


#249

So if Monzo raise £20m then Crowdcube will get £300k from investors in fees?

I’m out! :-1:


(chrisdalziel) #250

Completely agree. Bit of a rip off that Crowdcube are looking to charge investors and the companies raising funds. Especially given that Crowdcube’s track record of generating returns for investors is sketchy at best (often down to a lack of due diligence carried out by Crowdcube).

Maybe Monzo will negotiate an exception to the general rule given the size of the raise…


(Dan) #251

Wow this isn’t cool.

Not sure what costs they’re covering that need to be a % like that?

The company raising funds already has to pay the Stripe fee, and Crowdcube already charge the company 7% ex VAT.

Pretty poor that they’re now charging another 1.5%!


(Nikhil velani) #252

Would be brilliant if we could invest through the Monzo app bypassing CC completely.


#253

Completely unacceptable that crowdcube are charging 1.5% - Monzo need to look elsewhere.


(Rhys Thomas) #254

I hardily think 1.5% is an astronomical fee to charge especially if the investments are capped again…


#255

I couldn’t disagree more. The costs of investing are fixed, they are not proportional to the amount invested. This is a simple money grab.


(Tom ) #256

A lot of conjecture here. Why don’t we wait and see what deal Monzo have struck with Crowdcube?


#257

Instead of a general statement, perhaps you’d identify what you consider to be conjecture?


(Tom ) #258

The assumption that 1.5% will apply to Monzo investment round.


(Andrew Clark) #259

I was thinking about this last night, here are a few thoughts:

To put it in perspective, most people with a pension or ISA will be paying between 0.5% and 1% a year for the management of that fund, even the passive ones that are self managing! Over ten years you’re losing 5% to 10%. If you have a pension for 40 years then up to 40% will have been taken on some of that money…1.5 % up front seems eminently reasonable for the management of my investment. Some pension research I saw (but now can’t find so feel free to ignore this) suggested that 1% fee could halve the value of your pension because of the effect of compound interest.

The cost for investing £1000 is £15. And for that they’ll manage my investment for potentially the lifetime of a company. Pretty good value.

Their big competitor takes a chunk when you cash out. I think I remember it being around 7%. That would potentially be a lot more than £15 on a £1000 investment. To work that through. I invested £1000 in Monzo shares and would have paid £15 for the privilege. They are currently worth, let’s say, £15K so, if I cashed out, I’d be paying 15 *70= £1050 if I’d invested via the other platform. Choose your poison.

Crowdcube provide a valuable service:

  1. They manage a large amount of administration for small companies. Managing shareholders is costly and time intensive, they will potentially be managing this group of investors for many years, in fact it’s open ended. It is fair they are paid for this.
  2. They put investors in touch with companies. How would you have got a piece of Monzo before crowdfunding came along?
  3. The perform due diligence on companies. I’ve been an active crowd investor for a number of years and consider the companies curated by Crowdcube to be better than the alternative platforms.

Here’s two alternative that Crowdcube could consider:
1: Allow users to choose 1.5% now or 1.5% on any profits.
2: Allow companies to suck up the 1.5% charge in their fees.

Crowdcube need to be sustainable so it was inevitable that a new cost structure would need to come into place. It seems pretty fair to me to be honest. I don’t begrudge a company a profit if I’m getting a good service.

Disclosure: I own a small amount of Crowdcube shares but don’t consider this has influenced this post.


#260

How is that conjecture? There is a link where Monzo say they will use Crowdcube and a link showing Crowdcube intend to charge 1.5% on all investments from Nov 12th.


#261

It’s the same thing. Taking 1.5% up front results in your profits being 1.5% lower.

The cost of management of your investment is not proportional to the amount you invest. You are an entry in a ledger, it does not cost any more to make that number bigger.

And saying ‘the other guys are worse’ does not justify Crowdcube making a money grab.


(Andrew Clark) #262

I’m not sure I agree with you on that:
If I invest £1000 and then pay a fee of £15 it’s not that I would have invested £1015. If you want to invest £1015 then go ahead and invest that amount.
If the cost of managing a raise is X and someone took half of the shares in that raise they would expect that half of the fee to be passed to them. I’m not sure that’s particularly controversial.
I have no issue with paying for a good service and it is cheaper with Crowdcube than with their competitor. I have no issue with companies making a fair profit, currently they’re running at a loss. Crowdcube, and Monzo for that matter, are not charities, they have a variety of stakeholders to satisfy including their founders, employees and shareholders alongside the customers. As long as their charging structure is transparent then people can choose to be customers or not.


#263

That is so illogical I’m not sure how to respond. If you add the fee on top, you have invested £1015. You can’t just remove costs from the equation.


(Dan) #264

Actually for this, Crowdcube already charge the business an annual fee to “manage investors”. If I remember right, it’s around £1-£3/investor/year.

For this, the company gets:

  • A (hopefully) up to date list of email addresses to send out important documents, vote etc
  • An interface to send out emails to a large group of users.
  • Responsibility for collecting votes, buying and selling legal docs deferred to Crowdcube’s nominee.

I’ll try and find the exact figure - I think I remember a company posting it somewhere. In my view, it’s expensive already to manage shareholders.

Edit: it’s actually £4/year. Although Tom doesn’t confirm whether the entire £4 is Crowdcube fees - I personally can’t think of where else this money would go.


(Tom ) #265

My point is you don’t know that will apply, thus, conjecture.


#266

Given that both are clearly published intentions, I’d argue the conjecture is that it may not apply.


(Andrew Clark) #267

It’s no different from the fee you might pay your financial advisor for an investment product. It’s clearly not part of the investment and it’s not a failure of logic to state that it is separate.


(Tom ) #268

It might not, but it might.