Maintain our participation ( resist dilution )

Hi Tom,

It’s quite hard to get a precise handle on what is going on. When you say purchasing £870 or £87 (in different respective cases) to protect one’s initial percentage shareholding, that can’t be the case (unless I’m missing something!). This is because of the interim issue of shares (£4.8m’s worth to Passion Capital), and the fact that in the last round £1m of £6m went to crowdfunding (~16.6%) whereas this round it is £2.5m of £22m (~11.3%), and, further, the (original) Crowdcube investors, 1800 in number, could only purchase £18m worth of shares, if all maxed out their potential allotment. Add to this the reincorporation of the company, share buybacks, issue of restricted stock… It’s quite complex!

Would you be willing to provide some cap tables? Say, at the original Crowdcube investment, after the £4.8m injection from Passion, and then after this coming round?

Thanks!

Hi Tom,

Fantastic news on the new capital raise. TechCrunch let the cat out of the bag on Monday…

Great explanation on the valuation. I’m just having some trouble on the details. For £1,000 I bought 1949 shares which as you say above is 0.0033% of Monzo. Thus, there would be c59.06 million shares issued valuing Monzo at c£30.31 million this time last year.

You later raised £4.8 million which resulted in shares being worth £50 million. Thus meaning that there were c64.62 million shares. This is then the shares were worth £0.7737.

Now as the shares are worth £1.0058 and Monzo is valued at c£65 million there are still c64.62 million shares, which would mean that my 1949 shares would represent 0.0030% of Monzo. However, as noted above those shares comprise 0.0023%, which means there should be c84.73 million shares.

This is where I am confused, as 85 million shares would value Monzo at over £85 million. Can you clarify the total shares in issue etc?

Appreciate it.
Mark

As @billinghamj calculated earlier in the developer’s Slack channel, the pre-money valuation is £65m, then Monzo’s raising £22m so it’s then 87m - near enough :wink:

2 Likes

Legend Alexs.
Knew there was something I missed

1 Like

Exactly right. When I get a second, I will dig out the exact number of shares and price per share at each round.

7 Likes

That would be great. 0.75 * 0.0033 = 0.002475. I guess the difference comes from the extra round with Passion Capital?

@ddevil if the company will do well and will produce returns in the future, non-Crowdcube investors will obviously be in a better position, because they can decide not only to participate in the new round, but to “top up” their previous investment (possibility for now excluded to Crowdcube investors) and avoid dilution.

In this case you could look at pre-emption rights as an “unfair” advantage over non-Crowdcube investors, but as @tom mentioned, this is done because the current setup makes the collection of capital from a disperse set of small investors a burdensome and expensive process (thus, directly affecting all investors).

I understand your point (and wish things will change soon), but we’re talking about £10-1000 individual investments in a company worth millions.

Since the amount of shares will never be enough to grant any individual right (dilution or not), I’m actually not concerned about seeing the % itself diminish, but I still care the fact that others get more “privileged” access to what we believe will be a successful company (and investment).

1 Like

If you read @tom’s comment you’ll see that you will not be diluted this round, and in fact could slightly increase your overall percentage holding, should you choose to invest again. Further, they are working with Crowdcube to make it possible to do automatic pro-rata calculations for Crowdcube investors in future rounds, so you can continue to maintain your overall percentage, should you choose to invest again in those rounds as well.

Don’t worry. Nobody is getting privileged access.

1 Like

depends how you look at it :wink:
you can call it “avoiding dilution”, but at the same time you have to give up on investing in a new round (while normal investors are usually offered the possibility to do both).

anyway, until Crowdcube as a platform will not be ready to offer such an option, not much we can do about it :grimacing:

It sounds like some investors are annoyed their stakes are falling in percentage value and they need to invest more to maintain the percentage stake (so they feel like they’ve lost out somewhere) which shows a fundamental lack of understanding of how equity investments work. :fearful: In an equity investment your % stake is always falling and it doesn’t matter unless you are planning to launch a takeover bid or if the company is diluting you out like Saverin at Facebook. The Mondo investment from march 16 has DOUBLED in value and they’re giving you the option to invest again ahead of everyone else, so it’s a fantastic outcome!

When they raised a year ago it was known they would be needing to raise another £15-20m before launch. That meant they would be diluting by about 60% unless they grew the value of the business in the meantime, which was a concern to many investors.

They have grown the value a lot and have raised more money for less so the gamble has really paid off for crowdcube investors.

Being offered first dibs on this crowdfund is also amazing. £87m seems very cheap for a bank on the cusp of full market launch and affordable for mere mortals like us as it includes £20m in the bank, enough to grow to a million users with revenue coming in - whereby the company will be worth a lot more.

6 Likes

read this a while ago by Mark Suster I found it quite an informative article -

  • there will of course be further rounds of fund raising as the business grows and inevitably further dilution of a much bigger pie -should I shouldn’t I put more money in ? for everybody to individually decide depending on their circumstances
3 Likes

A very sensible answer

Hi Tom,

I received the in app notification earlier today to pre-register (which I have done again, as I missed out last year). However I wanted to ask -will Mondo Beta users who missed out in 2016 get pref access this time or is there a chance we will miss out again?

I put my entire disposable income into my Monzo account each month and have done since last Spring. Is there a guarantee that loyal users will be rewarded or not? Feel the barrier to entry with you guys is always too high and ends up pissing people off rather than building FOMO. For example are you giving primary access to users who ‘share’ with their audience and if so how many contacts are we expected to share with? I don’t want to hassle my remaining friends to sign up (I have already onboarded about 50 contacts to Monzo) to then not get access.

Lastly - re this debate on pre-emption for CC investors…#shouldhaveraisedonSeedrs!

Good luck with the round and fingers crossed I get in this time round!
Lucy

The short answer is no -

I could make a case for being preferential access for myself too (though probably not as articulately as you) but I’m glad that Monzo isn’t favouring anyone in particular (apart from existing investors for - hopefully - obvious reasons) because once you start down that path there’s always someone who loses out.

2 Likes

So my friend who did invest in the last round has asked are all (multiple hundreds) of the Crowdcube investors in Monzo’s first round actually guaranteed participation (to combat dilution) since the platform doesn’t actually ensure pre emption rights?

I wasn’t clear - based on this comment on the stream:
“we, as past investors are entitled to invest again. But what I noticed is that we are not entitled to maintain our participation”

Can you clarify? Thanks, Lucy

Yes, the blog post confirms this -

If you invested in our crowdfunding round last year (in March 2016) you’ll automatically be eligible to invest again this time if you’d like. You’ll still need to pre-register and pledge the amount you’d like to invest, but you won’t enter the random ballot. On March 14th, we’ll email you with full details on how to complete your investment through Crowdcube.

Since there is a cap on the amount that existing investors can invest (£1,000), they will not be able to use up the total 2.5m set aside for Crowdcube investors.

Awesome! Thanks for letting me know :slight_smile: good news

1 Like

@alexs has given you a great reply. I’ll also refer you to @tom’s answer from the top of the thread, which goes through the grubby details, and additionally this reply of mine from another thread where I worked out how much Crowdcube investors got diluted in the intervening 4.8m round (details of all rounds can be found on Crunchbase under “Funding Rounds” here.

Here’s a summary of each investment round over the last year or so:

|                      	| Series A    	| Series B    	| Series C    	|
|----------------------	|-------------	|-------------	|-------------	|
| Pre-money valuation  	| £24,000,000 	| £45,200,000 	| £65,000,000 	|
| Investment           	| £5,987,618  	| £4,800,000  	| £22,250,000 	|
| Post-money valuation 	| £29,987,618 	| £50,000,000 	| £87,250,000 	|
| Price per share      	| £0.5133     	| £0.7737     	| £1.0058     	|
11 Likes

This topic was automatically closed 180 days after the last reply. New replies are no longer allowed.