Thursday, 17 September 2015
Crowdrating just a me too.
The latest me too venture to hit ECf is Crowdrating. The idea is that this company will help remove the uncertainty of obtaining real information on pitching companies by producing a report for them before they pitch. They charge £2000 for this service although it is not clear if you get a poor report what you can do about it - see this article http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11868437/Crowdfunding-charlatans-to-be-named-and-shamed-by-new-rating-start-up.html
The problems we have with this are many -
1. In their own PR, Crowdrating do exactly what they claim they are trying to stop others in ECF doing - exaggerate. Mr Heath's stories are fictional or at best highly glossed.
2. The current system in this country allows SMEs with a turnover of less than £6m to file a single page balance sheet for their annual accounts. This is filed nine months after YE (even later for start ups) and is for the purpose of due diligence almost worthless. So Crowdrating will have to rely on the honesty of the information provided by the companies who agree to take up their services. This is pretty well where we came in.
3. What happens to companies that do not agree to pay for the service is not made clear - do they get a bad report and what could the legal position be if the company were to suffer commercial damage as a result. Likewise if you are being paid to produce a report, which to be of any worth to investors must be rigorously independent, what are the chances that it will be? What happens if you find the claims of the company are not quite as they might be - interpretation is a wonderful screen for hiding the facts? The site doesn't tell you if the report you are reading is paid for or not.
4. From 4 years of research, it is clear to us that it is almost impossible to be sure about any 'facts' at Companies House, on the internet or at any of the other information points Crowdrating will use. So given the need to produce data for their clients - who is going to guarantee its truth? Certainly not Crowdrating I will bet.
5. Finally you might expect one of the founders to have a real grounding in start ups and SMEs - consulting does not count! They appear to have none.
It just isnt possible to offer this service at any meaningful level - not doubt it will be a resounding success.