To all JustPark investors,
Thank you again for the support you have shown in JustPark.
While Crowdcube finishes their due diligence and documentation I wanted to respond to an article that appeared in this mornings Sunday Times with the title: “Start-up gives venture capital better deal than crowds”
http://www.thetimes.co.uk/article/1933d490-f815-11e9-ab03-a3e13965f71b (behind a paywall)
I spoke to the journalist, Peter Evans, on Friday and I am disappointed that he still went ahead with the story despite being made aware of the facts as it clearly distorts the efforts we have made to fairly treat our Crowdcube investors who have been so loyal and supportive of our journey.
Let me first state some important facts overlooked by the journalist.
Index Ventures and LocalGlobe, our two institutional investors, have invested a total of £3.15m across multiple different investment rounds and were granted preference shares.
Preference shares are extremely common place for institutional funds as they reward two key factors:
- Early risk-taking in the form of a large ticket investment
- Significant support to the company in the form of:
- regular board meetings
- utilising their extensive networks
- helping develop large strategic relationships
- hiring and attracting the best talent
- advising and guiding a company during an M&A/IPO process.
- on-going networking and training for the exec and senior management team
It is hard to place a value on the above, so instead, companies regularly offer downside protection in the form of preference shares rather than a lower share price or other forms of payment.
Additionally, the vast majority of Crowdcube investors will receive EIS tax relief, providing material benefits including immediate tax relief of 30% and further Capital Gains tax relief that is not granted to most institutional funds.
The whole JustPark team (including myself) and our new strategic investor, Itochu, have Ordinary shares and therefore would be paid out at the same time as Crowdcube investors.
In JustPark’s case, like the article only mentions in passing, the company would need to sell for less than £18.7m (a fraction of our current post-money debt-free valuation of £86.5m), for the preference shares to have any impact and less than £3.15m for myself, Itochu, the JustPark team and crowd investors not to receive anything.
A total of £7.34m was displayed on the Crowdcube progress bar with an additional ~£170,000 raised from a few external investors including one of our existing institutional investors. The article, critically, failed to mention that only £50,000, less than 1% of the ~£7.5m raised, was invested for preference shares.
We were asked a question about the impact of preference shares during the campaign and my financial controller, Ben, answered it thoroughly. As many of you have commented, we have been extremely open and transparent throughout the campaign and have been happy to answer all 108 of the discussion posts we received.
In my view, JustPark and all our shareholders are getting great value for money by bringing these institutions into the company.
All investors will shortly receive a “cooling off” email early next week, which will have all of this information and will form part of the formal legal closing process.
As always, I am happy to continue this discussion on the Crowdcube forum where I will do my best to reply in a timely fashion.
I look forward to working together with you all over the coming years.
Founder & CEO, JustPark