What to do with Altfi Data's ECf report?

Altfi Data have produced a report on the UK equity crowdfunding sector: Where Are they Now?

What can say about it. Well to be frank not very much that's good. As they themselves admit on several occasions, the data they have had to use is very sparse. Much of what they do use has either been interpreted and or been supplied by the very platforms they are analysing. They have not spoken to a single investor or analysed a single failed business.

Even when they do get down to some facts, they get it wrong. An important consequence of ECf is its abaility to increase employment, escpecially as the whole scheme is heavily backed with EIS and SEIS tax reliefs. This report headlines - ''Headcount increases at Crowdfuned companies''. This section goes on to show how this increase is on average 83% post funding. They even have a nice graphic to explain it.

However, if you read on they state - '' Around 25% of the companies we
surveyed disclosed a change in headcount and of those
the average increase after fund raises was 83%.'' To extrapolate this into an overall increase of 83% for all companies that have crowdfunded is nonsense. In fact it castes serious doubts on the any other conclusion the report might make. It's simply a schoolboy error.

In its analysis of the performance of companies since funding, the report again is floundering. It states that data from 2011 is too sparse and that data since, doesnt really tell us much becasue of the way HMRC have set up SME accounting. Yet it goes on to make what can only be politely described as pure guesswork conclusions.

We know that this part of the report is wrong because we have a large number of the original pitch financials against which to compare the companies' progress. Failure rates at this early stage are irrelevant - they will only start to become measurable in 2017 and beyond. We can state here that very few companies manage to get close to the projections they issued to entice ECf investment.

We believe that these projections should also be lodged with an overseeing organisation, be it the FCA or HMRC and then be accessible to relevant parties in the future. This system, which is part of the new SEC regs in the US, would help investors make sensible decisions and prevent Alice in Wonderland becoming a reality.

Another of the report's obvious flaws is the weighting. As it reveals, Crowdube have funded more than the other 4 platforms added together, yet they are not given any weighting in the analysis. As Crowdcube run a very different model to all the other platforms, this hides the real results.

In its final conclusion, the report does at least acknowledge the need for more transparency, something some of us have been banging on about for years. It does seem a shame that a report, which will go on to be held up by the platforms as proof they are getting it right, is unable to fly.

Addendum - after writing this the CEO of Altfi Data contacted us to say that
they agreed the wording on the staffing levels was confusing but the data was essentially correct. We dont agree - the 83% figure is just nonsense.

Further he revealed that in the data sets used, they did not allow for the companies that had closed. Another clear catastrophic error. Companies that had employed 5 people, then ecrowdfunded, overtraded and had gone bust are not included. The whole report is so strewn with basic analytical mistakes as to make it totally worthless.