A convertible is a type of equity funding round, which provides you with another way to invest in businesses through Crowdcube.
It’s like a regular pitch on Crowdcube, but, instead of the company setting a valuation or share price, investors pledge to invest in multiples of €10.
When you invest in a Convertible funding round, you’re investing in the company in exchange for an equity stake at a later date.
Once you’ve made your investment, the company will close its funding round (roughly after 30 days since the pitch went public on Crowdcube), and your funds will be taken after a 4-day cooling off period.
You’ll then receive your shares in the company, once a new funding round has been completed, or by the agreed long-stop date and at an agreed long-stop valuation.
Hopefully, at a later date, the business you have backed goes on to make an ‘exit’ at a higher value than when you invested, and you will receive a return on your investment and make a profit. Please be aware, investments of this nature carry risks to your capital and you should read our Risk Warning.
Step one: join our community
Joining Crowdcube is free, takes less than 60 seconds and carries no obligation to invest. You are required to take a short assessment to make sure you understand the risks of investing.
Step two: find your inspiration
Once you’ve joined you’ll be able to view the full pitch, including the video and discussions. You will also be able to request access to the company's Restricted Documents. You can also ask for further information or interact directly with entrepreneurs using our discussion boards.
Step three: invest from just £10
When you find a business you like you can invest directly through the pitch page.
You’ll have the option to invest a multiple of £10.
You can then click ‘invest’ and that’s it you’ve made an investment. Payment won’t be taken until after the pitch has successfully closed the funding round.
Step four: we’ll sort the paperwork
Once the pitch funds and is closed to further investment, we will be working in the background to complete the round. At this stage, you’ll receive a copy of the company’s proposed Articles of Association, you will also be notified of a 4-day cooling off period so you can review the Articles and consider your investment. After the cooling off period, your investment will become legally binding and we will capture the payment for your investment.
When your payment has been processed we’ll provide details of the Convertible in your portfolio which will include the long stop date which is the latest date your investment will be converted into shares.
Step five: you’ll receive your share documentation
At a later date, generally within six months, the Convertible amount will be converted into shares, usually when the anticipated follow-on funding round is completed. The follow-on round can be on Crowdcube or it could be a VC round.
If no follow-on round happens your investment will be converted into shares by the agreed long-stop date and at an agreed long-stop valuation.
Crowdcube will then issue shares to investors. You can keep track of the process in your Portfolio within your Crowdcube account.
Some types of convertible investment – known as an advance subscription – are eligible for EIS. As with regular equity raises on Crowdcube, if tax relief is available, it will be shown on the pitch page.