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Thursday, 30 July 2015

We are offering entrepreneurs a free equity crowdfunding capital raising advice service.

Over 60% of pitches that try to raise crucial funding on sites like Crowdcube fail. This effects personal morale, the business and wastes a lot of valuable time and effort. We believe we can help.

We have intimate experience in the UK equity crowdfunding market since its inception in 2011. We have invested in, studied and followed over 200 businesses that have pitched on Crowdcube and other platforms  - some successful and some not. We know how to create a successful pitch and more importantly we know how to create a successful and honest pitch. We don't use gizmos and slight of hand - we just present the case in the best possible way for the Crowd to want to be enthused and for the investment to be a success for both entrepreneur and investors.

Equity Crowdfunding will only work long term if both entrepreneurs and investors win. The current wisdom as expounded by the likes of Crowdcube, is that the entrepreneurs should do all they can to con the Crowd into investing - read the blogs to find out how. We dont believe this is sustainable and it will eventually lead to ECF's demise. Its obvious why this has come about - the platforms only make money out of successful pitches, irrelevant of the likely success of the businesses. So help us change it.

Our experience covers successfully founding a retail chain in 1980s and 90's, running a national events company in the trade and consumer markets and consulting for a variety of SMEs and start ups. A Cranfield MBA completes the icing on the cake.

So any would-be entrepreneurs wishing to raise money via equity crowdfunding should contact us for a free discussion and if you wish, free review of your business. From this we can assess if you are ready to ECF ie will it have a good chance of success. If we help with the creation of the ECF campaign and it is successful, only then do we take a small % of the money raised.

Simply go to the contact us page and let us know that you are thinking of using this route for funding and we will be able to help you. 

Wednesday, 29 July 2015

E Sign UK Ltd return to Crowdcube for more cash at a simply crazy valuation

Yet another Crowdcube ''success'' is back for more money. This one is a cracker.

Only a few months ago at the end of 2014 E-Sign UK Ltd raised £50k to get going. At a valuation of around £500k it was probably a punt. Now the company is back asking for £200k for 4.88%. So since the end of last year they must have made some great progress.

No. They appear to have made little real progress, lots pf talk but little action. Sales of next to zero. A major competitor is out there so how on earth can they now value themselves at over £4m - or 8 times the value of a few months ago.

So according to comments from Darren Westlake, CEO of Crowdcube, first round investors have done incredibly well and have seen a ROI of 8X.  

Come on guys. Please.

Powered Now - a typical Crowdcube fudge up

Powered Now raised £580k in September 2014 - so only 9 months ago. This first raise is not mentioned in their new pitch on Crowdcube. The stated target then was only £350k - same as the new raise.

So why are they raising more money so soon when their plans to raise £350k were so oversubscribed? Simple - the projections used in the first raise were the usual Crowdcube nonsense. They spent far more on marketing and made far fewer sales. This is not to say that it wont eventually succeed but it is typical of the naive approach used by pitches and encouraged by Crowdcube, which is verging on the ignorant.

Of course the first round investors will now be diluted and then diluted again when this round proves to be over optimistic. They have not filed accounts since September so there is no way of verifying the numbers used in this second pitch. If they are anything like the first one, then they can be binned.

People are still piling in though - why are we so surprised. Once a gambler starts losing, thats when he spends most of his money.

Proof that Crowdcube are scamming the Crowd

A friend of ours who is Crowdcube 'member' was so concerned about this that they contacted us.

A newish pitch on the platform is asking for £X for Y%. All good so far. However on inspection of the pitch financials, the company showed an inward investment from this round of £X plus 40%. When asked how this tallied with the figure of X as promoted in the pitch, they said they needed £X plus the 40% to pay for their plans and that 'overfunding' would cover the difference.

So here we have a company being advised by the platform to ask for less than they really need and to use the overfunding option to get to where they need to be to execute the plans they have pitched. How open and honest is that? Crowdcube know from experience that overfunding tends to add a minimum of £20% to the published figure and can add as much as ten times that sum. They also know that asking for smaller sums, especially with start ups, is more likely to succeed.

The Crowd deserves a better service than this surely?

Monday, 27 July 2015

Mind the Gap's latest players

More Crowdcube 'successes' miss their financial targets.

East End Manufacturing has just reported a £152,000 loss against projected £50,000 profits. These were the projections used for their second raise as they ran out of money from the first - which needless to say had even more ridiculous projected profit levels.

Sole Trader Websites made a loss for the year of £118,000 and is way off its projected targets.

Playrcart has a website still in Beta and is due to file accounts shortly - it doest appear to have any clients so it will most likely be making very little money. It funded two years ago.

Purple Harry reported a loss that is 5X larger than the one projected in its Crowdcube pitch.

Pip and Nut are now 2 months late with their accounts. Interestingly they have taken on board one Fleur Emery - the person behind Green and Pleasant Lager which recently closed having raised money on Crowdcube. The 'brand' is still around as she appears to have sold this to someone who is now operating it as Green and Pleasant London. We understand the original company, 28 Broadwick St, which has closed, did not pay anything to its Crowdcube shareholders - if we are wrong please let us know.

.............27 Aug..... Pip and Nut have now let Fleur Emery go, filed both return and the smallest accounts you ever likely to see and are seemingly back in business. Squirrels eh, I dont know!

Finally Atlantic Kitchen's filed accounts show that the historic data they presented on Crowdcube when they raised £150,000 was inaccurate. It showed a positive balance sheet for the 'previous period' where the accounts show a deficit. Someone clearly cannot count. They have changed their filing date so we will have to wait until September to find out if they have managed to make up this deficit.

This is all just run of the mill when it comes to Crowdcube pitches. The best option is to assume that all the information you are supplied with is inaccurate and go from there. Good luck.

Saturday, 25 July 2015

PRing that back fires.

Daris Zand, the entrepreneur behind telecoms company OVIVO raised two rounds of funding with us during 2013 and stormed both of them. He raised a total of £564,000 from 178 investors who believed in him.

The judges said; “Darius was totally focused on his fundraising, he was committed, organised and this showed in his pitch and his business. His pitch was executed perfectly both times, making him the perfect entrepreneur to work with.”


So reads the Crowdcube 2013 Hall of Fame.

We thought this was of interest as Darius' business Ovivo went bust very suddenly shortly after the awards were handed out. Who you might ask are the judges!! It also shows just how easy it is to fool 178 investors. 

Some good news

Righteous have just filed accounts to Oct 2014 showing a £67k profit. That is ahead of the second set of projections they used to raise their second round on Crowdcube. That in terms of Crowdcube is close to a miracle.

Although they are a long way from making money for the investors who have funded them to the tune of £250k to date, at a value in 2012 £500k and again in 2013 of £750k, it is at least progress.

We had serious doubts but are delighted to be proved wrong. Luckily for investors, this pitch funded at a time when valuations were more realistic than the stratospheric ones used today on the platform.

Just how intelligent is the Crowd and what is the use of Crowdcube's Sprint Programme?

The best way to see if the Crowd is really up to making sensible decisions about investments in ECF sites is to look at examples.

A currrent mini bond pitch on Cowdcube is a good example. Hothca is a chain of Chinese take aways trying to raise £1m for a 8% return over 5 years - no security and no early exit.

So, as we reported here a while ago, you would expect investors to look at the Trip Advisor reviews to see how these guys are getting on. They have one of the worst sets of reviews ever seen on TA - 2.4/5  - some old and some recent reviews. It stinks.

How then can you explain the fact that 52 investors have given them almost £500,000 in the Crowcube pitch to date?  It is beyond reason and shows quite clearly that the majority of people cannot look after themselves and should not be allowed to pass the pathetic excuse for a test that Crowdcube have on their site for 'sophisticated investors'. Crowdcube dont care, they just want commission.

Which brings us onto the next question - how useful is the Crowdcube Sprint Programme. This purports to be a help for start ups and is run by the platform as an incubator service.

You only have to take a look at the current pitches that are in the programme to see what a sham it is. Crowdcube want to be seen as the noble platform helping UK start ups to raise money and build their businesses. Rather than the greedy PR obsessed 'get them on there and take the commission' platform they really are. The business plans and nuts and bolts of running a business, let alone a successful one, simply are not there. We assume this is because the money Crowdcube make is spent mainly on yet more PR rather than employing some mentors who give a fig. Now if the Crowd knew their onions, they would twig that these plans have serious flaws and investment would dry up. But they have proved time and time again that they dont. After all isn't this one ECF's main attractions - lots of people putting in small amounts which they dont really care if they lose especially as they get half of it back from HMRC.

Will this build sustainable, successful UK SME's  - how could it? Sprint? Most of them would find it hard to finish the egg and spoon race.

Friday, 24 July 2015

Is this the true face of UK equity crowdfunding?

This is Simon Dixon. Simon is a conman. He has conned Richard Branson and Vince Cable and whole host of SMEs and small investors. He has moved out of the UK and now operates from Hong Kong via his platform Bank to the Future.

Simon uses the internet to further his image as a modern day banking guru - he has written several books on the failure of the current banking system and made many appearances on video - mainly his own. The internet is littered with his lies.

Dixon claims to have been an investment banker. The facts are he was a junior trader at KBC Peel for 2 years and then moved to the investment section as a trainee. He left or was fired 4 months later - still a trainee. He would have you believe that in these 4 months as a trainee he was a major force in Peel's Investement Banking section, broking numerous highly successful deals. This is what his site says about him -

Simon Dixon

Simon Dixon is the co-founder & CEO of Bnk To The Future, author of the book 'Bank to the Future' & co-founder & Fund Manager of Bitcoin Capital. An ex-director of the UK Digital Currency Association & UK CrowdFunding Association, who regularly speaks on the future of finance to governments, businesses, investors and financial institutions. An ex-investment banker that left corporate world in 2006 to launch his first business (angel funded by billionaire Peter Hargreaves) and an advocate of CrowdFunding since raising finance for Bnk To The Future through Equity CrowdFunding on it's own platform. You will find Simon regularly quoted & appearing in much of the major press & media including BBC, FT, CNBC, Reuters, Bloomberg, Wall Street Journal to mention a few.

He claims to have established a very successful company helping students get into banking - Benedix. With this company he also claims to have enlisted the support and investment from Peter Hargreaves. Facts are Benedix was a failure, students took a while but then saw through his empty promises and the Student Room blog is alive with criticism of his company and the way it ripped off students. Hargreaves is indeed an 'investor' in Benedix, he put in £100 of the £450 paid up share capital. Benedix closed after 18 months.

Following this failure and the failure of his 'trading' companies (which never traded) Dixon set up Bank to the Future (BTTF). This was his equity crowdfunding site that was going to take the banking world by storm. Richard Branson said he loved it. As with all things Dixon, it turned out to be a failure and full of lies. At this stage Dixon conned his way into being a director of the new UK Crowd Funding Association - run by Julia Groves, who must be slightly gullible. This gave him credibility and he manged to obtain a quasi FCA licence. Richard Branson still apparently loves it according to the BTTF site  - even though this site is not run by the UK registered BTTF on which Branson commented. It is now an off shore company not registered in the UK that runs it. More lies.

Bank to the Future claimed to raise money for various companies that now appear never to have raised any cash - Datemy, Marcella's, Satoshi Point Ltd Mimex FS Ltd and his own BTTF, being a few. It also took up front up fees from SMEs to deliver pitches on the platform. When in 2014 the FCA licence was withdrawn, the company failed to deliver these pitches but kept the money, only returning some of it to the more persistent pursuers under strict NDAs. All but two of the companies that actually raised money on BTTF have now closed or ceased trading.

In a belated attempt to limit the damage Dixon might cause the UK CFA, he was removed as a director.  But is the true face of equity crowdfunding?

Take cover, here comes more nonsense from Crowdcube.

A new pitch on Crowdcube is not quite what it seems.

Holly and Beau design a range of kids 'colour changing' rainwear. Its a start up with potential but not the way this pitch puts it.

A quick Google search reveals a major competitor in London who has already been trading since 2009. Whilst small, SquidLondon Ltd's accounts are not too shakey and the product is just as good as Holly and Beau's. Whats more they have ranges for kids and grown ups.

So why we have to ask do Holly and Beau pretend they have somehow reinvented the wheel and are the only people on the planet who know how to create this product. It simply is not true. I suppose the clue is on the fact that they have not applied for and have no patent. There maybe room for more than two in this sector but at least be honest and up front about what you are offering. No its not magic and no you did not create it.

Wednesday, 22 July 2015

Crowdcube's newest pitch - no added salt.

Mara Seaweed or Celtic Sea Spice Company is looking for £500k on Crowdcube  - valuing itself today at £3.65m. So in order to make investors a good return they aim to be worth £25m plus in 5 years.

We like the idea - using seaweed to make condiments. It ticks a lot of the right boxes in today's world, has good branding and the Scottish angle is all the rage.

However firstly the valuation suggests that since the company started trading in 2011 they have made considerable progress. Unfortunately the figures do not back this up. Annual losses have escalated to the point where for YE 12/2014 they made a loss of £375k on a turnover of next to nothing. That's the year Harrods launched the product. So why is the company worth so much now?

Secondly, expenditure of the nearly £500k investment to date has not been on assets or building sales - it has just been burnt. We dont know what on but suspect the ship is not very watertight. For example the accounts filed for 2013 show a large £250k cash balance which when the following years accounts were filed has become a debtors balance. Debtors are not cash.

With growth set at the usual Crowdcube stratospheric levels, investment in this business is very high risk. When you balance what they have achieved in 3 years compared with what they have to achieve in the next five just to break even let alone make investors a return, it looks unlikely.

The pitch talks about being stocked nationally by M&S  - which may well be the case. However the brand doesnt appear on the M&S website (or the Harrods one) and M&S are not listed on the company's own website as a stockist. The list of stockists is very small considering the very large spend that they have used to build it.

Finally, Mara Seaweed has been very cunning. The pitch launched today and already has £236k of the £500k raised. This is indeed impressive and makes the crowd immediately very interested. However on closer inspection, one person/organisation has invested £200k of this and we have to assume this was pre arranged as so often happens on Crowdcube.

Given the burn rate, the poor performance to date and sleight of hand, we'd take this pitch with a pinch of salt.

Addendum - The largest single investment just went up to £275k (from £200k) as the pitch seemed to have got stuck.  As this is clearly the same person/VC who put up the original £200k this all smells a bit fishy - which you might say is a good thing. Still very few other investors so maybe better if this person just puts in £500k and be done with it!

Saturday, 18 July 2015

St Vibes - the only Crowdcube business running on projections, slips a little.

Up until now, St Vibes, a new restaurant in Shoreditch London, had been the only Crowdcube funded business that had met its projections - the ones used to sell the crowd equity.

Latest accounts show a small slip from the sensible targets they had set themselves. Nothing to worry about  - reviews are still excellent and although the business is not going to make anyone a millionaire on current execution, it is at the least steady and doing what it stated it would do. Bravo.

Wednesday, 15 July 2015

E-Car Club investors take a 3X return.

The word is that investors in E-Car Club received 3X, when the recent purchase of a majority stake was agreed with Europcar Lab.

This is of course speculation as the real figures have not been confirmed and it is as described by Crowdcube, a multiple return and their first. Very few investors will make any real money though - only 4 took A shares and invested £15k - so a tidy £30k will be a great return over 2 years. A few more invested over £5k and likewise this will see a healthy return but those at the bottom end, about half the of the 63 including both Westlake and Lang, will only make enough to buy a new gadget.

Based on this example of what Crowdcube can produce for investors how does the Crowdcube advice of spreading the risk amongst 10 investments work out. Clearly if you have one in three making this return you would be roughly BE. However this seems very unlikely. To date we believe that investors have lost more than £3m with Crowdcube punts, so this return of £300k is a drop in the ocean.

A question which is at present unanswered is just why the 63 Crowd investors agreed to sell their shares at the rumoured 3X? With the aid of Europcar, we feel pretty sure that the value of E-Car Club would be far greater than the deal's suggested £1.5m in a very short time. E-Car Club had struggled to get open in London and the South East - their stated aim and clearly the most lucrative market. You could claim they had lost focus with deals like the recent one in St Andrews - where the hub is a good 30 minute walk from anywhere, on university grounds that are empty of students for large parts of the year. In one move Europcar solves this problem and opens up the whole European market.

Institutional investors have always said that having large numbers of tiny investors would put put people off doing deals with crowdfunded businesses. Crowdcube have always claimed the opposite. Is this evidence that the former opinion is correct? Could the Crowd investors have been offered this deal or no deal ie take a good 3X return now or take pretty well nothing later as E-Car Club either closes and is reborn or just closes. Certainly B shareholders would have had little choice - especially as the company had a drag along clause in its articles which would have forced all B holders to follow the a holders decision.

We may know more in October when they file their latest A01.

Wednesday, 8 July 2015

A seriously bad investment idea.

The latest mini bond investment opportunity on Crowdcube is interesting.

Its a Chinese takeaway that wants to become a national chain. They have been in business for several years and have a turnover of £1m plus out of 10 or so units.

So wishing to see what the customer thought of this venture, we looked at TA. WOW!

The reviews are truly dreadful for both the food and service. There are current and old reviews; so clearly the company is slow to learn.

It might be an idea for them to get their existing units working at a level where customer satisfaction exceeds the current 2.4/5 before expanding. What were Crowdcube thinking offering this nonsense to investors?

Why Crowdcube and ECF is not like being in the Dragon's Den

Crowdcube based their original marketing on the idea that anyone could be Peter Jones or Kelly Hoppen off Dragon's Den. They still use the idea on the site - have a go, be your own dragon.

It is of course complete nonsense. The TV show is mildly interesting and has made a lot of money for Jones et al. What it has that equity crowdfunding is missing, is the key ingredient - the help of a real Dragon with very very deep pockets and very very important friends. Joe Blogg's dragon puts £200 into the Great British Sauce Co and has neither. He is also expected to take a back seat - no right at the back please and allow the business owners to run things. With real Dragons, they have a much greater say, are listened to for obvious reasons and use their experience, skill, money and contacts to improve their own investment.

When the money is tight - as in nearly all early stage businesses it will be at some stage - real Dragons can loan the company money or bring in new investors. Joe dragon just has to sit  and see either his investment fold or be asked to pay in more with the threat that if he doesnt his original stake will be diluted.

Really the two are as about as similar as the Moon and Uranus - they are both planets out there but that is where it ends.

Various scams for would be entrepreneurs wishing to use equity crowdfunding

What are the ways that equity crowdfuding as practised by Crowdcube could allow pitchers to scam investors?

The key to a successful raise is to have at least 35% of your money in by the time you are half way through your allotted window. Research shows that this will very often lead to a completion and then overfunding will get you considerably more cash very quickly. 'Investors' like to see an active pitch - one where the pitch is constantly being bounced back to the top of the pile as more investors put money in.  This appeals to the herd mentality - if they all think this is good then maybe I should try it?

So what is to stop a cunning entrepreneur pre loading his pitch - its been done before on Crowdcube. The pitch opens with a very impressive large sum already invested. For example Water Babies pitched to raise £1m and opened with £800k already pledged. When asked they admitted that this money was nothing to do with Crowdcube and had been raised separately. Crowdcube continue to claim that the company raised £1m - they made their target easily. Since then they have gone bust.

If this cunning entrepreneur were to set up a whole team of 'investors' to pile in say 30% of the money at an early stage, what is to stop them? Once a pitch completes and overfunds it nearly always gets another 30-100% extra. All investors then have a cooling off period once the pitch is complete, when they can cancel their investment. So all of this entrepreneur's mates could cancel and the pitch would still be over its target and would be funded. All created by some highly dubious tactics.The business can then be 'run' and salaries taken until the cash runs out and oh dear sorry folks we are closing. Crowdcube have no way to prevent this.

We know this goes on - you just have to look at either new or older struggling pitches that get sudden large investments - hmmmmm. When we invested in a Crowdcube pitch we put in multiple small amounts to keep the pitch at the top of the pile - something Crowdcube allow. This 'action' encouraged other investors follow on. Easy money.

Saturday, 4 July 2015

Who really founded Wildcat? Certainly not the person on Crowdcube!

Wildcat Automotive are attempting to raise £1.5m on Crowdcube  - we wont even go into the eye watering valuation.

In the pitch, they claim all sorts of things  - but we were not sure they were quite right. So we thought we should check. Wildcat as a marque was created by Bowler and then sold to QT Servives - see here - http://www.newspress.co.uk/public/ViewPressRelease.aspx?pr=22716

So Mr Mitchell's claim to be the founder is a little misleading. Two Mitchell's (father and son?) joined the QT team in 2013 some six years after they had started making the Wildcat and 17 years after the company was founded. As soon as they joined, all the founders, the designers of the Wildcat, left.

QT filed for striking off late last year but this has been withdrawn - and the  company is now owned by Mitchell's Wildcat Automotive Holdings. Why you have to ask would such a successful company - as described in the Crowdcube pitch, want to close? Why does Mr Mitchell claim to have founded this marque?

To be honest this is all so far fetched we dont expect even Crowdcube followers to invest. Do we?

Friday, 3 July 2015

How often can this happen - really??

Earwig raised money on Crowdcube in 2014. The projections used showed no indication of any further raises - growth was purely organic.

When sales fail to materialise as too often happens with Crowdcube pitches - the cash runs out. You can only cut overheads so much before the company stops operating - sales and cash are key. Its the commonest reason for early stage companies closing. That is the case here - turnover was under a tenth of the one predicted for 2014 and 2015 was supposed to see an 8X uplift on the 2014 projection; which we can only assume has not materialised. Costs were cut and the overall loss was in fact smaller than projected but the cash has run out. The now ex Director talked on the forum of a 20X return for investors in 5 years.

So how is that Earwig are now claiming this is their 2nd tranche as if this was planned? No mention of the massive sales shortfall  - only very optimistic future sales promises.

And the valuation on the company has in the space of 14 not very successful months almost doubled. Still people - presumably those already tied in - have piled in. You really couldnt make it up.

This may well be a great product and its run by people who know their market - so why let Crowdcube make you look so foolish? Tell the truth please. For a start why not tell us why the real founder has recently left the company along with his brother?

Yet another Crowdcube pitch misses its projections

Little Brew raised money on Crowdcube in 2013. Micro accounts just out for YE August 2014, show virtually zero activity - tiny bit of cash, no creditors and no debtors. Not exactly the picture painted by the projections for this year.

The pitch plan aimed to be sold out with a 7X ROI by year 5. We think this is unlikely! Nothing wrong with setting up and running a micro brewery to earn yourself a living - its just not an investment opportunity. Unless of course you run it out on Crowdcube, when its all singing and dancing projections make it the next Brewdog.

Wednesday, 1 July 2015

Flavourly would need to hire Bob Beaman to jump this gap.

We promised to report on Flavourly Ltd when they finally filed accounts. YE 08/14 shows a loss of £75k. Projections - not date aligned as usual, show profits somewhere between £360k and £1m - some gap.

Flavourly first raised money on Angels Den, then latterly more on Crowdcube - having claimed the Angels Den raise would be the only one......heard that one before here. Its a simple aggressive customer subscription model - so why isn't it working? We suspect that the over use of cheap deals via sites like Groupon maybe the answer. Gaining customers by offering them a virtually free deal with no commitment is not necessarily going to lead to customer retention - see our piece on Cornerstone. It can prove an expensive mistake as bargain hunters use the system and then cancel their subscription. Flavourly openly applauded their own Groupon Christmas 2013 campaign.

Customer service may also be problem - scaling up an operation like this requires skill and experience - customer reviews continue to suggest Flavourly have neither.

Graze it is not.

Another Crowdcube success disappoints.

E-Car Club funded initially in 2013 on Crowdcube, then received a £500k investment from Ignite early in 2014.

Plans according to the CEO were to open hubs across southern England and London  in 2014 - adding to the ones in the Midlands. These plans appear to have come unstuck as they have only one London hub and non open south of here.

The latest accounts show a loss of £330k to YE 9/14 - not part of the plans presented to Crowdcube investors.  The £500k 'investment' appears on the accounts as a long term liability and the company has a negative book value of £(182,500).

This peach of Crowdcube PRing appears on the Crowdcube website - it helps us understand how they have managed to get where they are today - certainly not through any knowledge of business valuations! This a direct quote from Darren Westlake - one CC's founders. It should really worry you.................


''E-Car Club raised £100,000 in January 2013, the company was valued at £500,000 and they gave away 20% equity. This funding round means that those 58 Crowdcube shareholders have seen their shares in E-Car Club double.

Looking to raise finance to grow your business? Talk to the equity crowdfunding platform that has raised the most for businesses.
Call us on 01392 241 319
Email start@crowdcube.com''