VP Marketing
September 2, 2020

How investing in this round works

Everything you need to know about convertible investing, the Future Fund and joining Chip’s 2020 crowdfund.

Chip has one of the largest investor communities in the world, with over 11,000 investors. Our investors are the lifeblood of Chip and help steer the direction of the business and decide what we should build next. 

They’ve played a huge part in the meteoric rise Chip and there’s no way we’d have grown to a quarter million users and saved more than £160 million without them.

So we’re very pleased to say we’re opening Chip’s investor community again, and this time it’s bigger and better than ever. See more about this round here.

This year Chip has been invited to participate in the government’s Future Fund initiative. And we’re allowing our savers to take their place alongside lead investors and join this government-backed round. 

The terms of the Future Fund are slightly different than previous rounds, with some amazing benefits for the investors and for the business (not least that the government is offering to match your investment!). 

Convertible investing 

The key difference is this round is a convertible, instead of an equity round, where you immediately buy equity shares at the current share price.

Whilst this sounds technical, this is quite common in the equity investing industry. It effectively enables investors to buy shares at a future valuation when large institutional investors join, but with a discount agreed today. 

This simply means the money you invest now “converts” into shares at a discount in the future, until that point you earn interest on your investment (find more details below).

The moment your investment converts is called the "follow-up" or “conversion point”, this will be triggered by the next equity raise, likely to be a big venture capital (VC) round early next year.

This means unlike past rounds where we announced Chip’s estimated valuation (e.g. £18 million in 2018, and £41 million in 2019), there is no new valuation now, instead our next valuation will be created at the conversion point. 

Convertible investing also brings a number of other benefits to investors... 

8% interest

One of the terms of the Future Fund is that investors earn 8% interest on the money they’ve invested whilst it’s waiting to be converted to shares.

To put it simply, let’s say you invested £1,000 and the “conversion point” was exactly one year after the date you invest, you will earn 8% interest on that money and receive £80. 

Depending on how much you invest you can choose to receive your interest in one of two ways:

  • Convert your 8% interest to shares at the same discount as your investment.
  • Have it added to your Crowdcube wallet as cash (only available if you’ve invested more than £1,000).

We think it’s a fantastic way to reward our investors even more!

Minimum 20% discount on the valuation

As mentioned above the valuation is created at the “conversion point”, when your money is converted into shares.

Firstly, we’ve set the terms of this round's conversion point at an £80 million valuation, whatever a VC pays. 

So for example, if a VC invests at a £160 million valuation, you’re effectively still buying shares at a £80 million valuation. Meaning you’re getting a whopping 50% discount. 

In the event that Chip’s valuation is less than £80 million you’ll get a flat 20% discount. For example if the VC invests in Chip at a £75 million valuation, you’ll invest at a £60 million valuation (20% discount).

Or to put the example in cash terms:

  • Let’s set a baseline where the £80 million valuation gives a share price of £2.*
  • A £160 million valuation by a VC takes the share price to £4, but you’re still buying shares at £2. 
  • If a VC invests at a £75 million valuation, the share price would be £1.88, you’d get shares at a 20% discount price of £1.50.

*Example share price only.

To sum up, you’re guaranteed a fantastic discount when your money converts, regardless of the VC valuation. 

Your investment is matched

On top of these benefits, for every pound you invest, the Future Fund and the British Business Bank will match your investment in Chip (subject to their approval process).

So if you invest £5,000 Chip will receive £10,000 in total, which we will use to grow the business, increase the value of your shares and negotiate the follow-up investment round from a position of strength.

Chip is growing

It is without doubt that this round is the most exciting for our investors ever. 

Not only are we inviting you to invest, but also you get a whole host of new benefits for doing so. 

Chip now has more than 250,000 users and is one of the most popular fintechs in the UK. We have seen incredible growth despite everything 2020 has thrown at us.

We are delighted to offer our investor community a great deal, and feel it’s very much deserved for being at the heart of Chip.

Make sure to pre-register to invest here.

When investing your capital is at risk

Remember your Capital is at Risk and past performance is not a reliable guide to future returns. The value of your investment can go down as well as up and you might get back less than you originally invested.

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