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Saturday, 30 April 2016

ECF Solutions can help prevent your Equity Crowdfunding campaign from crashing out.

We were contacted recently by an Equity Crowdfunding pitch that was live on Crowdcube.

You don't want your campaign being derailed.
You don't want your campaign being derailed.
The pitch wasn't doing very well and it was immediately obvious to see why. They asked us for advice but why would we give them a freebie when they hadnt bothered to contact us beforehand?
Nothing essentially wrong with the company but they had made a couple of fatal errors in the way they had presented it.
As we write they are almost certainly going to fail to even get to 50% so they will get nothing and this failure will sit on the internet for years. Crowdcube clearly had given them no advice about what are very obvious flaws in their plan - but I'm sure you will not be surprised by that.
So don't take the chance; we offer a free service with the payment only due after you have raised the money. What have you to lose?

Powervault is yet another Crowdcube success that is returning for more cash.

Powervault raised £150k in 2014 on Crowdcube. They raised another £700k in 2015.

They are now looking for another £750k on a valuation of that has greatly increased despite their failure to get anywhere near to their 2014 or 2015 projections.They need to raise another £1.5m next year. Although that is only a Crowdcube projection, which almost certainly means it's wrong.

In 2014 the plan was very different.

Why bother with these projections and plans Crowdcube? They are merely an amuse-bouche with no relevance to the business they are tagged to.

Looks like the good investors at Crowdcube are desperate to throw away all their cash as this one is just about to complete.

Crowdcube are re writing the business manual. Mind you, they said that about CDS's!

Monday, 25 April 2016

Crowdfinders hits most of the wrong notes

As promised, here are my thoughts on the latest fintech event held last Thursday in the Royal Institute, Mayfair.

The opening scene was set in the historic auditorium, where almost 100 years earlier, Faraday had begun his journey. He would have been a little surprised by the raging montage of Wall St and WoWS images, projected and accompanied by thumping cocaine infused mussak. This was like Johnny Rotten serenading the Queen on her birthday. Mixed into this mayhem of the worst abuses of capitalism, was the message that Equity Crowdfunding is a to be taken seriously.

Somehow it was not very convincing.

This was closely followed by the Crowdfinders' resident comic with the odd hair and eventually thank goodness, some slightly old fashioned sense from Lord Bilimoria. My initial thoughts were that I should get a grip and move with the times but on talking to delegates, the overall opinion was that this preppy style was passe and slightly desperate.

The first panel event didn't make things any better. A question about the recent Rebus collapse, was met with a completely false statement from one of the panel of 'experts', that this company was definitely fraudulent. This went unchallenged by the chair or any of the other panellists, most of whom I suspect had never heard of Rebus. Rebus may have been fraudulent and then again it may not  - we have no evidence yet either way. This was just grandstanding of the worst kind. It is also highly irresponsible - a theme that reoccurred throughout the day.

Walking the sponsors rooms revealed tables staffed by people who made me feel positively geriatric. As we have said here before equity crowdfunding requires experienced business people to run its portals, not interns just out of the university bubble. However The Mingling proved very useful. There are plenty of sensible investors and angels out there, I just wish they would stick their heads above the parapet now and then before it becomes too late.

A quick diversion of a culinary kind. I may have been out of the system for a while, but when did ramekins half filled with mini sausage and a teaspoon of potato get called 'lunch'? Then again is was on the house so one shouldnt be ungrateful - especially as it was hard to find anyone who had paid for their ticket.

So what can we learn from Crowdfinders 2016?

Equity Crowdfunding, being a new internet based industry, has attracted the young guns and shunned experience - in the main. It will not last this way - investors who are now happy burning £1000 on a punt in order to feel they are part of the entrepreneurial elite, will become disillusioned with the crass way this is all being handled.

On the way home I watched the film The Big Short. As a holder of a substantial number of AIG shares in 2008, I knew what to expect. However I was not prepared for the multi layered denial that led to the crisis. Equity Crowdfunding is not another 2008 crash, but it has some close similarities and it's time we learnt some lessons instead of making the same old dumb mistakes.


Tuesday, 19 April 2016

Road Trip to Crowdfinders

We are travelling. Going to London for the Crowdfinders event and to meet with clients.

The hope is that the gathering of most of the UKs ECf sector in one space will give everyone a chance to find out what is really happening - not the PRing version but the real one. And of course we will be letting you all know what we think next week.

Meanwhile, it looks as though another Crowdcube success story maybe in trouble. Jam Vehicles raised £165k but are now very late with their accounts and have had a GAZ1 stuck on them. Of course this maybe just because they are so busy that their accounts are now 3 months overdue.

An increasing amount of what we read on the UK ECF scene shows a distinct split in attitudes. Two totally different and non convergent views are emerging - it all depends at which end of the telescope you are standing. Those in the industry seem unable or unwilling to be frank about its very obvious flaws and those who view it from the outside with scepticism seem equally unwilling to see the enormous potential benefits if we can get it right.

Somewhere in between is the answer. Time to open up some minds.

Sunday, 17 April 2016

Seedrs says it will only handle US investors under Title II rules for now............ but not yet..

So now we know.

We had hoped that Seedrs would be operational in the US by now. However we did expect them to be tackling equity crowdfunding using the SEC's retail Title III bill, which goes live in a few weeks.

However an on line public conversation we had today with a Seedrs Director revealed that they will be going live in the US but under Title II rules. This makes a huge difference.

Under II, only accredited investors can put money into an ECF pitch. In SEC terms accredited means something rather different than the self assessment tick box joke we operate here. Put it like this - you need to be very rich or you cant play. So the massive volumes of cash from the American public pumped through Crowdfunding sites like Kickstarter or Indiegogo will not be appearing in a Seedrs pitch any time soon. In essence Title II is not equity crowdfunding as we here understand it - its an elitist club for the super rich to get even richer.

Can anyone else open up this goldmine?

Wednesday, 13 April 2016

Rebus case calls into question ECF platform's credentials

Rebus was a Claims Management Company (CMC).

People we have spoken with in the industry and indeed the ombudsman, FOS and the official bodies have all acknowledged that CMCs have a problem. They are in the regular practice of issuing false claims against IFAs. In 2015, the FOS received 2,707 complaints about advisers, 494 (18%) were upheld but only 113 (22%) of these were made by a CMC. This meant 78% of cases brought to FOS by a CMC were declined compared with 34% of cases against advisers in general. This data shows that the quality of CMC claims is disproportionately low. 

Given that this has been an issue since at least 2013, you have to wonder why a site like Crowdcube, which claims to turn away 90% of applicants to the site, chose to run with Rebus. Rebus was not innovative, it was not cutting edge technology, it was yet another CMC - whose reputation in the market was far from good. Indeed Rebus had instigated the highly dubious practice of publishing a list of companies it was investigating even though many had not had and would not have the claims upheld. 

You only have to look at the eventual price the administrator received for Rebus' claim's book to see how they went about their business.

So we have to put this down to a lack of experience or nouse or both on Crowdcube's part. Not only did the platform not know, by its own admission, that Rebus was in financial trouble, they did not know that Rebus was employing an FCA banned Director, Richard Rhyse or that the whole industry had a reputation that was far from perfect. 

It rather neatly emphasises what we have been saying for 4 years - Crowdcube is not fit for purpose. We shouldnt let this platform endanger the future of equity crowdfunding. The only way this gets sorted is by investors using their power to call for change. It's clear in this instance and many others that the due diligence carried out by this one platform was not good enough - they expect investors to carry all that burden. The UK system just isnt set up to allow this - it has to be a collaborative effort. Other platforms manage it. 

Tuesday, 12 April 2016

Crowdcube provides the road kill for the vultures

This piece from the FT Advisor makes interesting reading - here.

You have to wonder if it is sensible to allow the same company involved with the management of Rebus before it failed to be in charge of the administration? Certainly Resolve will be tracking Crowdcube road kill for the next juicy scraps.

From the same article this is a telling indictment of Crowdcube's claim to turn away 90% of the pitches that apply because they are not viable -

Gareth Fatchett director at Regulatory Legal Solicitors, said many(claims management co's) find it difficult to make enough money out of mis-selling claims as they try to move on from payment protection insurance (PPI) complaints.

As we said before Rebus was not viable so why were they allowed to pitch?

Sunday, 10 April 2016

The Mess the FCA are Sharein, Share-In or Share In

Carrying out due diligence we are told by the likes of Crowdcube and the FCA, is an essential part of being able to invest via equity crowdfunding. We would certainly agree. To do this we all rely on official records.

We came across this company ShareIn Ltd recently. They claim to be one of the UK's leading ECf companies. We could find little evidence to back this up but that was not a surprise. They now offer a dual service  - a white label ECf platform creation service and a direct from your own website ECf campaign service. Both are fully compliant with FCA regulations, as the company is FCA authorised. It's a neat idea, although unless they are providing a free service it would seem that the ECF platforms' offer of pay only on success, must be a better option.

This is were we became confused.

Taking a look at the FCA register, there are two companies under similar names to the one here - one is called Share In Ltd and the other is called Share-In Limited. Stay with us. Both have the same address and lead person. The list of trading names is no help(there isnt one) and ShareIn Ltd has not had a name change.

So the company registered at CH no SC408803 is called ShareIn Ltd and this is the one that runs the website. However according to the FCA register this company is NOT FCA authorised. This is from the register regarding SHARE IN LTD -

Current status

No longer registered as an Appointed Representative  This is an appointed representative (AR) that is no longer an agent of an authorised firm. Do not start to do business with an AR that is listed as 'former'.

Note the final sentence.

The other company Share-In Limited which has the same registration number at CH as ShareIn Ltd, is authorised. Who's who and what's what?
So how are we to be sure that the company running the website, which is called ShareIn Ltd is in fact the same company as the FCA registered Share-In Limited and why do we appear to have one company with several different name styles  - one authorised and one not?

Clearly being allowed to create new ECF platforms and facilitating ECf campaigns on companies' own sites, should require the highest standard in due diligence. Surely then, it might be a good idea for Share-In Limited/Share In Ltd or Sharein to get its records with the FCA sorted out. If you wanted to set up a bogus FCA authorisation, it does look like it would be pretty simple.

It certainly makes you wonder when the ShareIn website states that they can raise money in the USA when anyone with even a moderate knowledge of the ECF scene would know that this is not possible currently. This from a FCA approved company is worrying. From the website - 

Reach an International Investor Audience

We can facilitate investments from the USA, UK and the EU.

Saturday, 9 April 2016

Crowdcube try to make excuses for Rebus failure

Crowdcube's blog now has this posted - a so called explanation by you know who - on Rebus

“As clarification, Rebus had two meetings with ReSolve in May 2014, a corporate finance advisory firm unrelated to Crowdcube, to discuss potential funding options prior to Rebus’ raise on Crowdcube, we were not aware of these meetings and it was not disclosed on the company’s pitch. However, it is normal for businesses to explore different funding options in their early stages, so Crowdcube would not have been surprised or alarmed by the ReSolve meetings. As many entrepreneurs and investors will appreciate, raising finance is difficult and not every conversation with an advisor or investor will result in an investment. Disclosing details of previous fundraising attempts is not standard practice even in traditional fundraising.”

Now there are various problems with this 'clarification' - if that is what it is.

Firstly it may not be general practice for 'fundraising attempts' to be disclosed - no one is looking for a published weekly list of them . However you can be sure that savvy professional investors, VCs and banks will have their ears wide open to the market where these attempts have to be made. So they would have known, as should Crowdcube. Crowdcube didnt know simply because they have no interest in their investors.

Secondly the wording they have used for these failed meetings is very different to the wording issued by the Administrator. He stated that Rebus was in financial difficulty - Crowdcube just say here that the meetings were run of the mill, to look at 'potential funding options'. The two are not compatible.

Given that the Administrator has no axe to grind and Crowdcube do, who are you going to believe? The proof seems glaringly obvious.

Interestingly the Chairman of Rebus made a telling comment when he said that the Administrators' 'interpretation' of events was not helpful.

It seems that the truth can be a right pain in the arse sometimes.

Friday, 8 April 2016

Crowdcube admit they failed to check Rebus investment

So now we have it. Crowdcube have admitted they had no idea that Rebus had tried and failed to raise capital through Resolve only months before they launched their Crowdcube scam. Or that they tried and failed again only months after raising £800,000 on the ECF platform.

See here for the full article we helped the The Times put together -


Luke Lang, Mr PRing from Crowdcube, goes on to say that Crowdcube's lack of due diligence into Rebus's financial state was not a serious issue! We think this proves beyond any doubt that the traffic at Crowdcube is all one way - in favour of the companies raising the equity. Fudge the investors.

Crowdcube, as anyone who reads this blog will know, do not have a due diligence department or if they do, they are always out to lunch. If they had a working version, they would surely have picked up at least one of the two signals flashing red from Rebus's plans - one the comapany's crippling cash flow or two the fact that the front man for this Crowdcube scam was a currently banned company director.

Well they failed to see either of them. This means they are either blind or worse still that they connived with Rebus to hide the facts. Either way, we end up with another .........

Wednesday, 6 April 2016

News on Rebus debacle proves Crowdcube model is flawed

Crowdcube now need to answer some very serious questions.

In the 2.17B just filed today at Companies House, the administrator writes -

''In May 2014 Resolve were engaged for one month by RIS (Rebus) to seek and identify potential investors, however no investment was received. Following this exercise the directors (of Rebus) sought to raise the required capital through a crowd funding scheme.  The Directors successfully raised about £800,000 which allowed RIS to continue to trade''

So it is clear that as early as May 2014, Rebus was in trouble. Again it is stated in the Administrators report that Rebus found it hard to generate enough cash to continue trading.  Of course the Administrator could have replaced the word 'scheme' with 'scam'.

The report goes on to identify that in November 2015, so just a few months after helping themselves to £800,000 via Crowdcube, Rebus was again asking Resolve to find new investors on the back of their intention to file for administration.

So the obvious questions for Crowdcube are -

1. Why when the company had failed a year earlier to raise any money from professional investors, did you allow this pitch on your site - without making ANY MENTION of this failure?

2. Why was this cash flow problem, identified very clearly by the the Administrators and the directors of Rebus, not part of the Crowdcube pitch to investors. In fact why was this flaw in the business plan, known as it was at the time to the directors of Rebus, hidden from investors.

Finally a question for the FCA -

Why are you not taking any action against this kind of malpractice?

Here we have a clear example of a FCA regulated platform chosing either through its own negligence or deceit to offer investors a deal that was very clearly not as described. The result, a total mess for all concerned. All of which could have been very easily avoided by Crowdcube simply refusing to allow Rebus to pitch.

Crowdcube are very simply not fit for purpose.

Monday, 4 April 2016

My Barrister files £200k losses

My Barrister raised £190k on Crowdcube back in 2014.

Accounts just filed show they continue to be loss making, with YE July 2015 losses of just under £200k.

The company is now technically insolvent (or was in July 2015). There are no signs that new cash has been raised. We doubt this is as per the Crowdcube script.

More basic errors by Crowdcube due diligence - What a Mess!

It does seem hard to believe that the Crowdcube DD department can be so utterly useless - but it's true.

DW Clothing raised over £876k on CC just last year.

In the Crowdcube thoroughly vetted projections they stated the following for the previous 12 month period (ie historic verifiable data) - to YE May 2015

Total FA                    £694,000
Paid in Capital           £  70,000
Acccum Profits         £220,000

The CH filed accounts for YE May 2015, filed 7 March 2016 show a very different picture - 

Total FA                   £241,239 
Paid in Capital        £    1,000
Accum Profits          £155,497

Someone is not telling the truth and someone has a lot of questions to answer when it comes to publishing complete tripe on an FCA regulated website, which is taking money off the public.

The upshot of this mess is that DW Clothing's claim to have £296,000 on its balance sheet, on 31 May 2015 when it asked for funding, actually is nonsense. It only had £156,000 or just over half its spurious claim.

Clean up your act will you, please Crowdcube.

Saturday, 2 April 2016

Crowdbnk might be worse than Crowdcube

The New Craftsmen initially raised cash on Crowdcube, hopelessly failed to meet its projections so decided to raise another £1m on Crowdbnk - see here -


This attempt on Crowdbnk was a complete flop - despite some interesting Crowdbnk PR which pushed hard up against the fence of transparency.

Now the same company is on the same platform with another 60 days to go raising £750k. It has the already pledged £530k from only 14 'investors' from the last failed campaign in place. No mention of the fact that this is the same failed raise or of the change of target.

You might call this a total con - we couldn't possibly comment!

Friday, 1 April 2016

Syndicate Room's new public offerings

We wrote this piece before the Healthcare Royalty Trust IPO was cancelled and the Scancell offer was heavily under subscribed. We decided not to publish it before both had 'completed' so as not to cause any distress. Looks like this has some way to go before it becomes a force to be reckoned with. Scancell's share price is as we read it below the 'offer' 'discount' price (as we predicted below). 

Syndicate Room is breaking new ground - changing the face of SME investment. Or that is what they claim.

The new IPO/public placement deal they have set out makes for exciting reading. You as a member of SR can partake in the sorts of deals that only well connected City types, VCs and Angles usually have access to. IPO's, new placings and offerings.

So what can we make of the first two deals on offer?

One is a slightly dull Health Trust IPO and the newest one, announced today with a royal fanfare, is part of a private offering. SR have called this second, incorrectly, the first Public Placement to be crowdfunded. It is not a public placement unfortunately. Oops.

Scannell Holdings PLC recently issued 20m new shares in a public placement on AIM. This was fully subscribed and none of it has gone via SR. They then offered existing shareholders a private offering - a kind of Rights Issue. As part of this offering, they have invited SR investors to tender for shares at the offer price of 17p. However this is not quite as good a deal as SR would have you believe.

1. SR investors will only get the scraps of what is left once all existing shareholders have decided to take up their allotment or not. So they may get nothing at all. Regarding EIS, SR say that if you buy £10k plus, then you can claim back EIS. However, again, that is not quite true. Scannell's brokers say that only if there are left over EIS funds, will SR be able to utilise them.

2. OK the offer price is the same as as institutional and existing shareholders, but it is hardly at a fantastic premium and given that the company is due to talk about its future as a US convention in two weeks time, an event which often brings the share price down, it may not be at a premium at all.

3. It strikes us that looking at this deal from the brokers side, they are happy to have SR investors clean up any morsels which may be left. SR investors are not standing side by side with the big boys or even existing shareholders. In fact they might get a better deal if they waited for the price to dip in April. The premium is so small as to make it almost irrelevant.

So at the moment the earth is not moving for us. But it is early days.