Friday, 13 November 2015

Crowdrating too dilute to be of any use

We hoped that would be a useful tool for investors in ECf.

However it is really very disappointing. Its opinions are way over diluted to be of any real use.

For some reason, most probably political, it is unable to call a dud a dud, instead opting for the more fluffy gold, silver or bronze categories. Of course this may all have something to do with its revenue stream - which has to come from the pitches it reviews.

To take one very recent example - MPB Photographics.

Crowdrating do not mention the valuation which is based on a multiple of turnover. This when the GPM is only a small % of this turnover, taken as it is from the commission on sales. In this instance a fairer multiple would have been that of EBITDA. Costs to achieve the current and future EBITDA are relatively high, leaving a small net profit margin and consequently a very large breakeven or profit turnover. This clearly up scales the risks involved; as the figures illustrate.

Crowdrating also oddly ignores the company set up. Shares are being sold in the new holding co - MPB Holdings Ltd which owns the UK operation and a US incorporated company. No mention of how this is US co doing, when it was established etc is given on the Crowdcube pitch. As the new growth is projected to be coming from the US, then this must be an issue.

The idea behind Crowdrating is a good one but in order not to create offence with its paying clients - the pitchers - it seems to have shot itself in the head.

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