Saturday, 22 September 2018

Making bespoke office furniture has proved easier for Crowdcube funded Openesk , than making money.

Opendesk raised over £300k in 2014 on Crowdcube and then another £1.5m off platform. It has a long way to go to deliver what it said it would. 

In its 2014 Crowdcube pitch, OpenDesk boldly predicted a profit for YE Dec17 of £2.5m, on sales of £171m. Well the accounts filed for this period show a loss of £1m. We guess the turnover isn't £171m. Mind the Gap. 

In fact had they not chosen an accounting ploy, whereby corporation tax rebates on previous losses are included in current debtors, their balance sheet would be hanging by a thread. Whilst Im sure this accounting is perfectly legal, it makes absolutely no sense to me. This £166k in tax rebates will never materialise as cash; it will merely go against future profits - if they ever get there. Having it in current (ie due in the next 12 months) debtors is a nonsense given its current trading record. At the moment the graph shows the PBIT line heading in the wrong direction with increasingly large losses. 

Recent filings, showing various new Resolutions, one of which removes pre emption rights, suggests a new round is afoot. They will certainly be needing more cash.  

City Unscripted illustrates problem with Crowdcube model

Tour Guide specialists City Unscripted raised £145k on Crowdcube in 2016. It was listed as £200k. Hopes were expressed that they would be operating in over 100 cities by end the 2017. Their current destination list is for 30.

New money raised has come in well below the projected figure and the company made a ~£100k loss for YE Dec17. Although this was against a projected £200k loss, with the extra investment encouraging the missing 70 city expansion.

This is now a common problem with Crowdcube funded companies. They fail to attract follow on funding, this thwarts growth and they just sit there. New investment for 2018 has not yet materialised and the spoken of revenues of over £3m for the year seem unlikely with just 30 cities. 

The CC valuation of £1.7m post money has remained constant over the two years - on paper.

For you own safety please follow the Guide at all times.

Lingerie maker Blue Bella proves that stretching the lycra is easier than making money.

Blue Bella encouraged 664 Crowdcube investors to hand over almost £1m, just 20 months ago. In their lycra filled PD on Crowdcube, they showed flesh and profits for the YE Dec17 of £457k. 

Well the elastic has for now given way and the all pants are on the ground. The real loss for the year was £170k - a very long way from any profit. Is this a mere slip?

We wrote about then before here

There is no immediate reason to panic apart from the obvious one of standing there naked. The company has cash and seemingly a good brand. Like so many pitches on Crowdcube, they seem fantastic on paper but fail to deliver. What some might call pants.

Profits for YE Dec18, so just around the corner, will be £1.4m according to Crowdube. A major slip from this might also be called pants. Enough already. 

Wednesday, 19 September 2018

Mr and Mrs Smith offering massive rewards to achieve funding on Crowdcube - is that good business?

The Mr and Mrs Crowdcube campaign is massive success - £4m raised on day one - most of it in private mode. So what about these rewards?

This campaign is offering all serious investors a 4% discount on spending as a minimum. But if you choose to invest £25k you get a load more. You get your £1000 off the next holiday (the 4%) but in addition you get a permanent discount of £400 pa forever. So lets assume you are a healthy 30 yo and you live to be 85 and go on hols each year (well at least one), then you might expect to get £400 X 55 years as a discount - or £22000. Plus the £1000 that makes £23000 of the £25k you invested. Lost opportunity costs and lack of ROI aside, that is some deal. And of course its not cash - its a discount against expenditure with Smith. But it's still a great deal.

It begs the Q, how is the company going to make a real ROI when it is handing back so much cash - are margins that great and if they are, it would suggest room for undercutting by competitors. And of course there is always the consideration that if the company were to fold, this would disappear.

And then on top of all of this - you get 30% of your investment back via EIS. So in effect a £25k investment now will give you a one off £1000 rebate against your next Smith outing, £7500 off your income tax bill, and £400 pa forever against future Smith outings. The usual vague warning about rewards valued over £1000 and EIS relief is issued. Beware.

So if the total number of £25k investments reaches say 100, it will cost Smith £100k initially and then £40k a year to service. Over 3 years that's £220k. At 8% you could borrow ~£1m for that, retain equity and lose the £40k pa liability. Isnt that a little crazy as a business proposition?

It is little wonder that their 1.5m million members have backed them - well some of them have. 1200 investors on board for £4m suggesting nearly all have taken up the £2500 or better. Or maybe the 1.5m is inclusive of a chunk of not so active members?

Tuesday, 18 September 2018

Bidstack delivers 5X return for 66 Crowdcube investors.

We are not entirely sure what this means for the 66 Crowdcube investors who put in £130k in 2015 at a valuation of over £1m.

Addendum - We got this horribly wrong! Apologies, my stockbroking career was short and ended when I went to watch the Grateful Dead in Buffalo without permission. So it now appears that the CC shareholders exchanged their shares for new Bidstack plc shares at a ratio  - see comments for details. 66 CC shareholders who invested £130k in 2015 have seen a ~return of 5X if they trade their shars out at 6p - current price is under 6p. Which is good  - its not quite carling but it is good. 

We wrote about them before here - not in very glowing terms. Maybe some hat eating to do but the figures will only make sense after tomorrow. 

More to come. Anon if you want to post a polite comment on Bidstack this is the place to do it - not on a post about something completely different. Thanks.

PS - doing a little bit of casual digging - it appears that the smallest SHs in Bidstack Ltd - who came on board around the time of the CC completion, own 122 shares each. The minimum amount that you buy on CC is £10. But the newco IPO share price is 6p. So 122 shares would now cost £7.32 - which suggests that CC shareholders are now considerably worse off than they were in 2015. It's not scientific but I think the theory is correct. Anon would you like to comment?

PS - Ann Gloag - one of Scotland's richest women, has purchased over 3% of the new Bidstack plc today - a transaction involving almost 6m shares. We assume this part of the £3m plus IPO.  Is she a good judge? Price currently struggling at around 6p.

Crowdcube funded Zapaygo continues to baffle.

Zapaygo raised £450k on Crowdcube. They had a signed 10 year deal with NEC Group for their payments system. This all looked very promising.

That was a while ago. We have written about them before - here

The accounts for YE August 2018 or 18 days ago as I write, are out. The company is still pre revenue  - well its accounts show a revenue of £5 - perhaps a refund on paper clips? Losses for the year were just over £1m. Losses for 2017 were £336k. 

Various on line reports place Jamie as a highly successful 18 YO entrepreneur who was shortlisted as one of the Top 20 Young people in the World. He is now aged 26 and a world leading authority on entrepreneurship. We could find little evidence of any of this; just PR. His past companies have done little according to filings. He has one active company listed at CH which is dormant according to accounts filed for Oct17. According to his own PR, he has delivered speaches at over 500 evemts in over 20 countries. Again there is little evidence for this on line. We did find one where he talks about how we spend a third of our time working - as if that's ground breakingly interesting.   He has a Queen's award for being a young success so it must be legit  - we just cant find it. Bit like Jamboy who has an MBE and the Virgin backed Gas Sense whizz kid George Edwards,  who is now repaying all the backers on KS - or is he?

Odd times.

According to Zapaygo - pronounced Za - PAY - go  - they will easily reach their $2m threshold for this ICO and will in fact easily reach their $8.5m initial target. Their contract with NEC group will flourish once they have arranged (negotiated) for the existing systems to be removed and their failure to produce the promised revenues to date is by design as they now have much larger plans. Who would have guessed it.

We look forward to writing up this success.

UPDATE - Well I'll be blowed - the Zapaygo Crowd for Angels (which Chapter is that ?) ICO has passed its $2m marker post. It all happened in a 6 hour window a day ago - $2m just got whacked onto the the total. Well dones in order - now we see if see if the $8.5m target is reached.   

Two Crowdcube brewers struggle to deliver a full pint.

Seven Brothers Brewery and Bellfeild Brewery are both raising new funds - having come nowhere near to their Crowdcube projections. But they dont tell you that bit.

We have been here before  - in fact I think we have been stuck here for several years. When will platforms be forced to declare the full facts about previous raises? Im reminded of a mate's joke when he was served a short pint - he'd say to the barman - '' Do you think you could fit a double whisky in there?' To which the barmen would smile and say ''yes of course' as he reached for the Walkers. 'Well then' my friend would say 'stop passing that off as a pint and fill it to the top with beer'. We wouldnt put up with short pints so why do we put up with short information?

Im fine with companies missing projections - it happens. Although when it happens all the time it suggests something is wrong with the way they are creating the numbers. But then to pass off the actuals as progress, when they are only half of those recent projections - something is not right. You cant tell investors that your company is in good health when your revenue if £1m as opposed to the £2m you wanted. That is simply crazy. 

Both of these brewers know that have come in well short of the lines they set to gain investment previously. But in both cases that is ignored. Existing SHs will know the facts (well some will) but new guys who missed round one, will not. And they are being duped - with the help of the platform. They are being asked to believe the new pitch and the PD that goes with it. Yet they are not armed with the important information that these companies have failed to deliver on their original plans. In fact the picture painted is the exact opposite. 

And what of the valuations. Well Seven Brothers has now put itself out at £8m pre money (they are raising £500k). Back in 2016 it was valued at under a million when raising just £170k. Since then they have delivered around a half of the revenue they set themselves  - according to their own numbers for 2018. Projected profits for 2018 of £500k have now been invested in this progress - so that means losses. They also talk of a new trading platform so investors can sell their shares. Come on guys - who is going to take that seriously? 

We have the real figures and you would be surprised just how far away these two are from them. So be aware of that before you invest. It is entirely possible that teething problems have now been ironed out and they they will go on to be successful. But it helps to know the facts.