Redeemable Preference Shares

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= financing mechanism used by Enspiral to finance Loomio with external investments, but without losing control, also called Capped Returns


Description

Ben Knight:

"We settled on a mechanism called “Redeemable Preference Shares,” which was exactly what we were looking for—a way of providing a fair return to investors while also protecting our social mission. Within two months, we had raised $450,000 from a small group of investors. Our lead investor is Sopoong Ventures, a social venture fund based in Seoul. The name Sopoong is an acronym for “the social power of networked groups,” and the fund is a perfect partner driven by the same vision and values as we are. Our investors have been an amazing addition to our team, providing much more than just money.

Redeemable preference shares are a fairly conventional financing instrument, but aren’t widely used in the startup world. “Redeemable” means that the shares are not traded externally. Instead, the shares are eventually purchased (“redeemed”) by the company with an agreed-on return, after an agreed-on period of time, provided the company is producing sufficient surplus. In our case, setting up the investment mechanism meant creating a new class of impact-investor shares. These shares sit alongside the worker-member shares in the cooperative, which are non-financial governance shares. The interests of the company and the interests of investors line up." (http://www.yesmagazine.org/new-economy/how-a-worker-owned-tech-startup-found-investors-and-kept-its-values-20160426)