Earlybird Envestors pitch is 'postponed'.

Envestors have postponed the Earlybird pitch that we highlighted here

Sensible move in our opinion. If Earlybird really do have sales of 2400 boxes per week (£10,800 revenue) as they claim, then they have enough cash coming in for now. Oliver may have to take a salary cut but hey who hasnt been there if you run your show.

Go away and get some real traction, like you promised you would in the Crowdcube projections and then maybe raising more cash will be easier.

FCA review of Equity Crowdfunding is a farce

The FCA review of Equity Crowdfunding will change nothing.

Why?

We were contacted recently by them about this review. They asked us to give up some time to give them our views.

We replied that we would be delighted but that it would cost something for our time and access to our 5 years of data.

As expected they replied that they dont have any budget to pay for consultancy. So they will, as they did the last time , use the platforms to 'advise' them on regulating the platforms.

Is it any wonder the FCA is held in such high regard?

One word of free advice for you - don't be fooled by the number of closures the platforms will quote at you. Crowdcube are currently pringing that only 23 of their 400+ business have closed - which is strictly true. But they as usual ignore three key facts. Firstly most if not all of the others have missed their targets and are miles off course for any ROI. Secondly it can take quite a while for business to get through its Crowdcube cash and 2015 and 2016 have seen far more pitches completed than 2011/12/13/and 14 put together. And finally it is the nature of the failures not the numbers that is important - cf Rebus and SCC to name two.

So as usual it's a question of how you read the stats. So please do try to be critical.

Crowdcube's Secondary market is pure Myth

One of Crowdcube's key selling points in their latest cash grab, is the creation of a Secondary Market.

So how would this work? Crowdcube give no details and when asked repeatedly in the forum , they give no answers. We know why they have pushed it out there, to try and deflect questions about the total lack of any ROI from 5 years of business. A CC apostle, trying to explain why it was fine for CC to have made 5 years of increasing losses, compared them to Amazon. Amazon made no profits for 20 years. However for this comparison to work, Amazon would have had to spend its first five years taking orders without delivering anything. Like CC have.

A secondary market would be CC's Senokot Max.

As they don't know how it might look, lets have a guess - its likely to be better than their answer anyway.

To create a secondary market in shares issued by successful CC fundraisers, the only essential ingredient is demand.  In this case you have twin demand - the demand to sell shares by those who bought them on CC and the demand by investors to buy them.

There are two drivers for this demand  - a rise in the price or value of the shares since the original CC campaign and a growth in prospects based on the performance of the company since its CC campaign.

We have to tell you that in all but a couple of small instances, these drivers are absent from Crowdcube funded companies. Our data shows only one or maybe two companies that have funded on CC since 2011, that have managed to achieve or exceed their projections. Most have missed them by miles - so why would anyone believe these companies when they claimed future growth? The original valuations, hyped by Crowdcube's business practices, also suggest that companies that fall a long way short in performance will find it very hard to create added value for existing shareholders who bought at these inflated prices.

Now you might get some astute punters who have seen the writing on the wall and decided to jump ship, no matter what the price. But will this create a vibrant secondary market? Will it create this demand?

It seems to us to be akin to Syndicate Room's rather desperate attempt to play in the IPO market, which as we all know has not gone too well.

So its really just a smoke screen to divert attention from their lack of any credible delivery. Amazon indeed.

LSE being used by Crowdcube

We had forgotton about this http://cep.lse.ac.uk/pubs/download/cp462.pdf - a report from the LSE on Crowdfunding and Equity Crowdfunding.

We were reminded of it recently as Crowdcube chiefs keep on using the piece in their latest cash grab forum, as proof that they are not the crazed money grabbing. money burning platform some of us think they are. 

The problem is, as with all things Crowdcube, it's a stitch up. Crowdcube gave the LSE access to two years data and the report works on data only from that platform. So do we think, given Crowdcube's solid history in manipulation, that they did this with an agreement that the results would be published however critical? Do we think the researchers having spent two years working on this report, are going to criticise their host?

And to cap it all, there is no mention, not a thing, about a single failed business that has funded via CC or of the dubious methods sometimes used to get that funding. You have to wonder why?? 

As usual with Crowdcube's management, when they tell people again and again to read the report, they dont tell them that its totally subjective. They're at it again.

As an aside, it strikes us that comparing Crowdcube to Amazon as one existing investor has because Amazon didnt make a profit for 20 years, is like saying Amazon didnt deliver anything for 20 years - they just took orders. Crowdcube have not delivered ROI and do not look likely to. When the business pitches are poor to very poor, is it any surprise? They are funding duds. 

Crowdcube's £40m of pledges turns out to be pure fantasy - Unincrowdable!!

Crowdcube went to town on their rapidly rising pledges before they launched their latest cash grab. Now we know it was all PR

We all used to believe that the world was flat. In those days, we had the excuse that no one knew any better.

Now we find similar fantasies gaining credence through sheer stupidity.  

Crowdcube may be very bad at most things but to give them their due, they are very good at suspending reality - that's Luke Lang's forte. The PR behind this latest cash grab was excellent. Well I'll rephrase that - it was excellent unless you think a company like Crowdcube, which is taking investments from the public under the guise of FCA authorisation, should behave with a modicum of  responsibility.

Crowdcube were shouting from the rooftops that they had pledges amounting to £40m or was it £50m. Now the raise is live, it is very stuck at below £7m. Hmmmmm. 

The pitch forum is getting a little cluttered with real people asking really very difficult questions. Have a read, it's like some people have finally woken up. You get the odd believer comparing them to Amazon but there is most definitely a move to find out some of the facts - at last. 

To get to the point where they will arrange to facilitate existing SH's selling their shares as part of this offer, they have to exceed £12m. We are watching with interest. When might they get another chance to cash in?

MBJ Crowdcube pitch illustrates the stupidity of some equity crowdfunding

Sorry to bang on about this - but it is important. To go from a £300k turnover to £3m turnover in 12 months you have be pretty special. Spending  £168k on marketing will not do it. 

Apart from the fact that these guys at MJB have no track record of achieving this monumental leap, for the first three years they plod along and then WHAM, it goes ballistic. Then it doubles again just for good measure. 

They are now fully funded and indeed are overfunding to almost double their target - so we must be wrong. Oddly no one has asked them how they are going to achieve this. They dont ask either why the GPM drops next year to 17% and then rebounds back to the 45/55% mark, which is its norm. Or why the personnel figures drop by almost 50% and then go up by a factor of 3. 

Pick a number, yes any number it doesnt really matter. 

I suppose the answer is why bother asking questions about Crowdcube projections as we all know they are total tosh.

Earlybird breaking all the rules

Earlybird have raised money on Crowdcube twice, tried to raise money on Angels Den and are now trying again on Envestors at £2m pre money. We have written many times about them on here.

We have been sent this plea for help from the CEO of Earlybird ( via a friend) -

From: Oliver EB <oliver@earlybirdsnacks.com>
Date: Sat, Jul 23, 2016 at 11:13 AM
Subject: URGENT - Requires Immediate attention. EarlyBird
To: .............................

Dear Shareholder,

EarlyBird requires urgent investment as our large funding round has been unexpectedly delayed.

The EarlyBird business is performing well: The product is loved by the market, customer retention is on target, and we have new board members joining the company in the autumn bringing expertise to help us grow - including the founder of ...............................  However we now face an urgent funding gap as the funds we are seeking will take longer than anticipated to come through.

We are asking our investors to help us bridge this gap in return for a significant stake in the company. Please note we are asking for initial indications by Friday July 29th.

Please read the attached letter and do not hesitate to get in contact with me if you have any questions.

Oliver Pugh

CEO/Founder

Below is the text from the letter - 

Dear Shareholder,    

We need your help.     

EarlyBird’s product is in a great position and is loved by the market, we have significant funding  lined up to grow the business and new board members bringing expertise to help us grow.  These funds will take longer than anticipated to come through and so EarlyBird faces ​ an urgent  funding gap​ .    We are asking our investors to help us bridge this gap in return for a significant stake in the  company. Please note due to the urgency of this gap we require indications by ​ Friday July 29th.    

As I’m sure you’re aware, we’ve been raising a significant funding round that will allow us to  scale our subscriber base and to launch the product into new markets both online and offline.  So far the funding round has been extremely successful with £150k of new money indicated,  and a further ­350k in the pipeline. However this money is insufficient to close the round  now.    

We have also lined up amazing new board members that will help us grow the business and  raise money in the future: .................................... and .................................... These board members are lined up to join ​ assuming  that we raise sufficient funds.    All that said, we are almost out of money and so we are asking our investors for urgent support  (investment). We planned to close our round before the summer July/August, but key investors  have held­off investing due to the current uncertainty in the UK market. This has pushed the  closing until after summer (September/October). In order to get there we need a bridge: We  need more funds now to give us the time to pursue this additional investment. This is why we  are asking our investors for urgent support.    

To reward our investors continued support and encourage investment now we’re lowering the  pre­money value of this round to £660,000. This represents the best value for investment in  EarlyBird. Current investors can buy shares up to their pro­rata investment level at this valuation  and ​ existing investments in this round will be converted to this valuation​ .    

Please see the pro­rata schedule for this round attached below (the number in the third column  means if you invest that amount your % holding will stay the same). For this round, for example, 

a £10,000 investment would yield a c. 0.9% stake in the company post­money. We expect (but  cannot guarantee) the round to be EIS eligible.    

Thank you for your support to date, it has allowed us to build what our customers are telling us  is a truly game changing product not just for the market but for the way people perceive and  consume healthy snacks.     If you have any questions please do not hesitate to contact me on:  Email:​ oliver@earlybirdsnacks.com   Phone: +(44) (0) 7796 193 711    

Please send indications of interest by reply to this email.    

All the best,    Oliver Pugh

................................................................................................................

So Earlybird are offering two different deals at the same time - one here to existing shareholders and one at a much higher price to investors at Envestor. Im sure Envestor members will be delighted by this. Envestors have confirmed that they didnt know anything about this.  Ignoring this duplicity, the facts are that Earlybird do not and have never done well - see review here https://www.youtube.com/watch?v=vaW2SuYrvn0

Yet again equity crowdfunding shoots itself in the foot. This is totally unacceptable behaviour even if it is not illegal. And it all stems from the first two nonsensical raises which Crowdcube facilitated. 

The Solar Cloth Company Crowdcube Fiasco illustrates the depths of the problems faced by Equity Crowdfunding.

Today's revelations in The Times about The Solar Cloth Company (SCC), which we helped to put together, reveal a dangerous absence of reality at Crowdcube and the FCA.

Dont get us wrong - we know that all success stems from failure. There is nothing wrong with failing, in fact it is the best proving ground. But its the nature of the failure and your ability to learn from it that counts. It seems, despite many examples of the same repeated problems, that equity crowdfunding is not learning anything.

A good business can fail for any number of reasons but fraud is not one that should be accepted. We and you, the investors, only get to hear about the problems once the company has closed and it can take a while to burn £500k or £1m. By then it is too late and many more pitches would have been funded using often similar deceits. 

SCC is just one case in many that illustrates clearly that the number one UK platform, Crowdcube, is simply not carrying out proper due diligence and never has. You can see the same patterns in other Crowdcube funded pitches that have either failed or missed targets by millennia. Here are few to make the point -

Water Babies the Musical
Front Up Rugby
Ovivo
Crumpet Cashmere
88 Delicious
MASS
Rebus
Pizza Rossa
Droplet
Bookbarn International
Fourex
Shopwave
Rushmore Group
Kammerlings
Righteous
London Distillery
Zero Carbon Food
Brupond
SDL
Kinopto
Wild Trail
PDB
Icomply
Ineed
Stakis Daycare Nurseries
Flavourly
Ubrew
Red Advertising
Green and Pleasant
Get Site Tracked
Seek and Adore
Share and Compare
Glassfit Inc
Hug and co
Bubble and Balm
Lawbit
Solarmass
Playrcart
Uni Fuels
Pixelpin
Dr Jackson
7 Billion Ideas
Jam Vehicles
Frank Staks
Deskbeers
Peach Lettings
My Barrister
Minor Figures
New Galexy
Crowd Mortgage

You get the idea, there are plenty more. Under this pile lie ten times as many, that have not yet filed accounts  to show how they have performed post investment.

Crowdcube, by their own admission, did not check SCC's future £4.5m sales pipeline, which we now know was fictitious. They did not check the immediate sales figures given by the company, which we now know were fictitious. They did not check out SCC's MD and his past record, which turned out to be verging on fraud. All they actually checked was that they had projections enticing enough to fool 400 investors into parting with their cash; a total of almost £1m.

Crowdcube picked up a 7% commission on that, so is it any wonder they dont bother to lift the covers? When the company goes tits up, Crowdcube get to keep their 7%, no matter how negligent they have been. It's a gravy train.   

We first contacted Crowdcube in early 2012, when it became apparent to us that their due diligence was very poor or non existent. We offered a remote service to them, FOC at first, to help them. They turned this down saying they had it all under control in house. Well, we can all now see what a whopper that was. Now they tell us that when SCC pitched last year, their systems were lacking (!) but now they have tightened them up. Haven't we heard that before, several times? 

What is more alarming is that you, the investors, seem to support this platform, whatever they get up to. Incredibly so far, to the tune of £6.6m in their latest cash grab on their own site. Maybe you do not realise that the failures we have seen so far will be as nothing compared to the failures which are backing up. Of course we expect some of Crowdcube's 426 raises to be successful - at some stage, later.....probably......well perhaps, possibly. In fact there is now a pitch on the site which we helped, MindGenius, which if funded could well go on to give investors a good ROI. We know this one has credible forecasts and a great pitch; we helped create them. 

But many of the 426 that have funded, it not all, are doomed to failure for the very simple reason that the platform encouraged them to pitch with totally unrealistic projections, valuations and expectations. And as we now know from the SCC debacle, they dont bother to check these out. Two good current examples are Sugru and Earlybird, both now trying to raise new capital on Envestors - having missed their Crowdcube projections by miles. See here- http://fantasyequitycrowdfunding.blogspot.co.uk/2016/07/why-early-bird-regurgitates-on-envestors.html and here - http://fantasyequitycrowdfunding.blogspot.co.uk/2016/07/are-sugru-coming-unstuck-after.html

If you do not believe what we are saying and clearly many of you don't, then just look at the current case of Verto Homes.

The two founders were involved with Manor Rose, admittedly before Paul Moore took over, but nonetheless it is the same company - see here. You dont get that mentioned on Crowdcube.

Towan Heights LLP is a company so closely linked to Verto Homes that it has the same address and email and Verto own its website and sign off its accounts. Towan Heights LLP have overdue outstanding loans with Funding Circle which get no mention on Crowdcube - the amount is around £1.7m. We are told that if the money is not repaid by the end of July then FC may take legal action to get it back. You dont get that on the Crowdcube Verto Homes pitch, which is now at £1.5m raised of an original £1m target. The loans may well be paid back and yes Verto Homes are legally correct when they state that they have no exposure to FC directly. But in the FC loan documents, Towan Hieghts LLP talks about Verto Homes as the builders of the project being lent against. They are essentially one in the same.

All Crowdcube have to do is mention these facts - they are facts after all, so why hide them? Then investors can quite rightly make up their own minds. So why dont they do this? It seems that the urge to complete pitches, which is their main or only revenue source, is over powering. They just cant help themselves. They tell The Times that they have beefed up their DD since SCC; well here we find out otherwise. Unless of course they chose not to reveal these facts. Crowdcube's own DNA gives us a clue - they have dressed themselves up in some rather exaggerated claims - see here

When you build a company that is burning over £8m a year on its very existence and is backed by a GP of around £2m, then you need to cut corners. Ever since they started in 2011, the founders have ducked and dived like a couple of wide boys. Massive expenditure on PR is seen as far more important than any expenditure on the due diligence. Crowdcube employ interns to run their show; we know as some have spoken to us.

The conclusion has to be that Crowdcube is not fit for purpose. But the FCA are unwilling to touch them and now both Governemnt and large VC's have far too much at stake to admit it. Only the 285,000 investors can make the required change happen. Oh no wait, Crowdcube have corralled them into their own stable by making them shareholders as well, so they wont do anything either.

The arrogance of the Crowdcube founders is indicative of an era where arrogance has replaced the truth. We face the chance of being removed from the EU by the arrogant lies of Bojo, Dan Hannan et al and the chance of seeing a US President so arrogant in his ignorance, it beggars belief.

Just read the posts on this blog if you need convincing. 

WHY?? Early Bird regurgitates on Envestors

Earlybird is a snack best eaten cold. 

The company is like a bad lunch  - it keeps on repeating on you. 

They managed to raise twice on Crowdcube, the second time at a value of £1.5m only a few months ago. This raise was farcical, having had to change the end date several times and increase the equity to squirm over the line. Now they are back on Envestors with an increased valuation! They are apparently worth £2m. They have been on Crowdcube, Angels Den and now Envestors - see here . Where to next govner?

The revenues on Crowdcube were due to go from £11,000 to over £1m in 12 months. Need we say more. 

As they have changed all their dates, from the Crowdcube raise to now, its almost impossible to tell if their projections are realistic. Our bet is that they are worse than most, which means they are not great - CAVEAT IPSUM EMPTOR. 

We love the line in the pitch (again sent to us anon) about the Exit strategy. 'Exit is most likely via a trade sale'. In our opinion the exit is most likely out the back door. 

Are Sugru coming unstuck after Crowdcube raise figures are missed?

Sugru, glues answer to post-it notes,  raised £3.4m on Crowdcube in 2015 at a pre money value of £24m.

Now they are back - but this time on Envestors, valued at £30m. Why stop there, why not £40m?

So how have they preformed against their sensational Crowdcube success only a year or so ago.

Well if you believe what Envestors tell you; brilliantly.

However if you check the figures as we have, the answer is not quite so good. YE Dec 2015, which we were sent in an anon tip off as they failed to file them early to be helpful, shows that they have missed their Crowdcube targets by over £1m in revenue or a shortfall of over 25%. Obviously they also missed their loss target for the year. Further, all  the future years projections have now been tightly cut back.

What's also clear from these figures is that, yet again, we find the actuals, published by Crowdcube only after their OTL Dept had scrutinised them, are wrong. As we have said before here, when we find these actuals to be wrong, its always on the side that helps the pitch sell its equity.

We do think that Sugru is a good product and the team they have is credible. Clearly though the ideas behind the Crowdcube raise have not all come to fruition - a £1m shortfall in revenues is large. So why would you believe their figures now?

As ever, none of this is mentioned in Envestors glowing pitch. The only glimpse of past raises is given in Envestors' Sugru document claiming that previous investors have seen a 9X growth  - which, as we all know, is total nonsense in reality.

What's up with Verto Homes' overdue Funding Circle loans???

Verto Homes have crashed through their Crowdcube £1m total and heading for £1.5m.

IMPORTANT - Verto Homes Ltd, the company raising money on Crowdcube, does not have any direct exposure on Funding Circle. The company with £1.7m exposue is Towan Heights LLP, based at Verto Homes and with Verto Homes signing off their accounts. Further Towan Heights LLP was incorporated as Verto Group Developments Towan Heights LLP with the two founding members being the founders of Verto Homes. Hope that is clear!

We wrote about their background here - http://fantasyequitycrowdfunding.blogspot.co.uk/search?q=+verto and the founders involvement in Manor Rose, which resulted in the main director being banned for 14 years.

Meanwhile at Funding Circle they have loans outstanding - well over £1m from the chat here and they are, or at least some of them are, well overdue.

You wouldnt get that impression from reading the Crowdcube pitch. In fact when asked about Funding Circle loans, the founders answer was that they didnt currently have any - maybe he meant live on the platform? Anyway it certainly wasn't a very helpful answer!

It strikes us that these loans were supposed to have been repaid before the CC pitch went live - in which case they would need to be mentioned. But as the repayment is delayed, for reasons that vary from construction delays to final paperwork delays, surely a mention of this fact would be the only honest and upfront message to send investors? It's not like Verto don't know the repayment is late.If we know about it' why doesnt the brand new Crowdcube Out to Lunch Department; that is according to Luke Lang 'World Class'  - which BTW rhymes with ar......

You also have to ask just how far the FCA and HMRC are willing to bend over for Crowdcube when Verto - very clearly a house builder - is allowed to utilise EIS - very clearly not for house building.

As an aside we found this brilliant Q on the Crowdcube Verto forum - it really sums up the sophistication of Crowdcube's 285,000 'members'!

Hello Verto team,

Congrats for the project and the funding campaign!

I wonder how shareholders who have invested via Crowdcube will get the potencial dividend payment.

Will it be via bank transfer to each one of us? Does Crowdcube know our bank account?

Thanks in advance.

Crowdcube prospectus reveals lack of any planning or sense of value

So here we are - Crowdcube has yet again blown away all the rules and has as of an hour ago raised £6m from 2400 investors.

We had no doubt that the £5m target would be reached - there seems to be no end to people's blind faith in this company.

When we advise companies on using ECF, we always stress that the money should not be used to plug large gaps in the current cash flow - it must be forward looking and for growth. As CC write their own rules, that is precisely what most of this raise will do - a prop job. When you are burning almost £9m a year on a gross profit of around £3m (2016 projections c/o Fantasy ECF - why not, we are just as likely to be right as they are!), it comes as no surprise that the cash has run out. 

Reading through the Prospectus we learn quite a lot about their ambitions, but very little about how they are going to achieve them. Current losses for 2015 are £5m pa and rising on a slowing revenue growth and shrinking GPM. Increasing competition from Seedrs, a better platform all round and newcomers of the size and scale of Indiegogo is going to make life very tough. 

They talk about making ROI for investors a key metric. Yet again they dont talk about how they are going to achieve this. The three areas they will concentrate on are -

-  Getting more large established businesses to raise via them - on their way to an IPO. 

-  Getting involved in IPOs and public offerings  

-  Operate a secondary market.

Yet again we get no idea from the pages and pages of praise and success stories, as to how they are going to deliver these aims. The Secondary Market looks like the most ridiculous, although recent experiences from Syndicate Room would suggest that public offerings are also impossible. In fact only this May, Luke Lang descrcibed the economics of public offerings as 'god awful' - what's changed we wonder? Why would people buy shares on the secondary market in companies that are miles off the projections used to sell the original CC equity? Mind you why would people buy shares in CC for the same reason?? 

They are right that ROI has to be the key metric but they ignore the fundamental reason why they have delivered so little to date. The quality of their own due diligence and one assumes the staff who select the businesses, drives the very poor quality of 99% of their offerings. Neither founder has ever achieved anything of note prior to Crowdcube, despite the claims they make. Crowdcube is a vehicle for any old company to raise funds - stuff the investors. The company is  largely run by interns - we know as they come to us afterwards! 

The prospectus is full of what they have achieved to date in terms of investors gathered, money raised, awards etc etc. It's a classic sales document. No mention anywhere of the failed companies, losses to creditors, loss to investors, losess to HMRC and lack of any credible ROI. No mention either of the fraud issues that keep bobbing their heads above the water at regular intervals.We can tell you, there are still more to come.

One more lighthearted moment comes in Part 1 of the Registration Document. It really sums up why this company is no good. Under the picture of Darren Westlake, there is a bio - claiming he launched and exited two companies. Darren actually knows this isn't true, we told him so on this blog a while ago - one went in to administration with a pre pack and the other did virtually nothing. Then under the face of the other founder Luke Lang, we have the same Darren bio but without the claim made above. Luke doesn't get a bio. You can make up your own minds how this gaff might have come about. Going to out to lunch is sure to have something to do with it.

People are investing at today's value of £65m. This for a company that is likely to get hammered by Brexit and has shown no signs of getting close to a profit; yet still pays its founders around £300k a year . The FCA are reviewing the way the ECF market operates and they know what we have uncovered on this blog - they quote us in one of their recent documents. 

It's going to be an interesting ride!  

Syndicate Room didnt withdraw Fitbug Offer - the time just ran out.

CORRECTION - Our last blog was inaccurate when it said that SR had withdrawn its Fitbug offer.

The offer was due to close today.

Unfortunately it doesnt alter the fact that this is the third failed attempt by SR to launch public offerings.

We note that in the Crowdcube plan to get into profit by 2018, they lead with the plan to start offering similar deals. Hmmmmmm.

More on Crowdcube's offer next.

Syndicate Room withdraw Fitbug offer

We would have to think this is our fault but the day after we posted on the Fitbug public offer on Syndicate Room, the pitch has disappeared from their platform.

Oh well if you dont succeed then try, try again and again and again .................. might help to have offers that make sense! Rumour is Fitbug will collapse if this funding isnt in place shortly. 

Syndicate Rooms Fitbog Public Offering looking ridiculous

So when is it a good idea to buy shares at 0.25p on Syndicate Room when you can buy them at 0.24p on AIM?

Never.

The shares fell to .22p last week.

Can anyone come up a good reason to invest via SR? According to the platform they are offering the public a chance to play with the big boys, as the big boys special price. Eh? 

Look, the idea isnt a bad one in principle but you do have to be able to offer a discount or you just look very foolish.

According to this  from the LSE website, the institutional offer is at 0.15p not the 0.25p stated in the SR offer document. Wonder who has got it wrong??

Beauhurst recommend Droplet as fintech success

We found this published by Beauhurst here - supposedly a fountain of knowledge in the fintech sector. They selected only 5 to write about. They should have known that Droplet had failed to raise funding before they wrote this in March 2016. That failure indicated Droplet's demise and ultimate collapse just 3 months later.

If you are still watching the space as they recommend, the telly has been turned off.

Just goes to show you cant trust anyone or anything - except your own judgement!

Back in June 2013, Mashable published a list of the UK's top 25 tech startups, notably highlighting that the UK’s innovation ecosystem was not solely confined to the then burgeoning London startup scene. But which ones made the cut?

Droplet 

What does it do? 

Droplet is a mobile payment and loyalty app which allows indie businesses to build better customer relationships. The app allows users to pay without queuing, and to collect rewards as they do. But businesses are winners too, as Droplet operates on a fee-free transaction basis.

Where was it then?

Droplet was a pretty savvy bet by Munford, considering the startup had then completed just one unannounced equity deal for a paltry £50k. That said, it was at a relatively sizeable £1.1m post-money valuation. 

What’s changed?

The fin-tech startup has gone on to secure a further 4 rounds of equity finance since June 2013. And this doesn’t include the company’s second Crowdcube campaign, which is currently live and set at £450k. 

Who’s funding?

Ascension Ventures, Finance Birmingham, Crowdcube

What does the future look like? 

Stephen Aquarone, Droplet founder and CEO, says: 

“We’re at the stage where we’re very nearly ready to raise the sort of money that powers the likes of Deliveroo. Once the growth is predictable, larger financiers come in to speed it up, which is how challenger banks like ours get so big, so fast”. 

Well, you heard him – watch this space…

Another Crowdcube 'success' closes

Droplet raised over £500k on Crowdcube and has now closed

We are honestly finding it hard to keep up with the failures funded by the Crowdcube platform.

Droplet had a blog here before as they tried to raise more money on Crowdcube ealier this year but the pitch was suddenly pulled. So in 12 months they have burnt the cash and buggered off.

Isnt this becoming a little repetative?

Luke Lang, never short of a few words, stated on Droplet's failed 2016 raise - 

''Tech businesses, like Droplet, are always popular with our crowd of 245,000 members who have invested £45.5m in the sector, so it’s great to see the business return for a second round of funding on Crowdcube.”

He does love his large numbers.

Droplet's website has the following ambiguous explanation - 

“We started Droplet in 2011 with the hope of making payment simpler, friendlier and mobile-first – and more recently to allow merchants to offer better loyalty rewards to their customers. But sometimes things don’t work out. We always knew it would take significant investment to give Droplet the scale it would need to succeed. In spite of being well supported by our investors through thick and thin and having tens of thousands of customers and hundreds of paying merchants, we never got to the scale to make Droplet viable as a profit-making business.”

The 2015 raise had this in the pitch - 

Already more than 600 businesses have joined including coffee shops, hair salons, bars, restaurants, lunch venues and taxis. These businesses will soon be able to pay a monthly subscription to use the new loyalty product based on how many of their customers are collecting rewards.

Rather than using expensive advertising or a sales force, we market our products through ambassadors inside the communities Droplet helps support.

Droplet is registered with the Financial Conduct Authority for the issuing of Electronic Money. The the app averages 5★ in the App Store and has already has grown to 16,500 users.

Really?????

The financial projections used to sell the equity were as usual complete nonsense - even the actuals proved to be wrong. Maybe the FCA could start their new approach to ECF by looking hard at this case - it has all the hallmark errors you would expect from a Crowdcube raise. They might also like to check the way these iffy companies tart themselves around the platforms - this one appeared last month on Syndicate Room - http://fantasyequitycrowdfunding.blogspot.co.uk/2016/06/droplets-mirage-now-appears-on.html

Need any help boys you know where to find us

Crowdcube offer to buy back their shares!!

We had this posted on the Crowdcube pledge story - 

''On the pledge page they gave you an option to sell your existing holding (no guarantees of course), if you have one.

Upon investigation, I was delighted to discover my 2013 investment has almost quintupled in "value", and is now "worth" 29p a share!

This page is now showing 404Error...'' 

Seems odd??

Crowdcube pledges are a joke

Further to out last post - it now appears that Crowdcube pledges that amount to £39m are a joke

We have been contacted by several 'investors' who say they have no intention in putting money into CC but they pledged £1m anyway just to see what happened next.

Is this a sensible way to carry out business investment? Is this a sensible way to carry out anything?

Crowdcube get £39m in pledges for their own pitch

Crowdcube have had pledges amounting to £39m for their own raise, without any plans or financials being published.

We have to say well done - whatever it is you are selling, there are a lot people who still want to buy into it.

Despite the now numerous examples of the platforms legendary lack of DD and its cavalier attitude to ROI, people are literally piling in; knocking each other over in the mad scramble to hand over their cash.

For a company that last filed accounts showing a £4m loss on a £2m turnover, operating in a sector that is now in limbo with regards to Brexit, with no substantial ROI's of note to date, this is truly awesome. For the company to get to just BE they have to increase their last year turnover several fold and on this market we cant see that happening. In fact we cant it happening full stop. One consistent item is that they, like all of their successful pitches, are nowhere near to the projections they published in their last cash dump.

We really must be missing the point. Time To Surrender.

East End Manufacturing getting closer to profit

In rare good news for Crowdcube funded businesses, EEM only made a small loss

East End Manufacturing raised money on Crowdcube back in early 2013.

Since then the projections have as ever been shown to worthless. However the good news for investors is that things are heading in the right direction. the reported loss for YE October 2015 was only £30k, considerably better than the previous year. 

The projections showed a profit of the period of over £400k but then who reads the projections anymore?

Verto Homes due diligence on Crowdcube

Investors looking at the new Verto Homes pitch on Crowdcube should do some digging

Verto has two directors, both of whom were directors of a company that is being liquidated - Manor Rose Ltd. The company dealt with development land. Both directors had left the company before it appointed the liquidator but it would appear from the liquidator's report that 5 members of the company, which appears to be all the directors past and present, have been under investigation for fraudulent trading. This investigation has now concluded with various outcomes for the 5 individuals.

It appears that Paul Moore, the only active director when Manor Rose went into liquidation, has a history of fraud linked to land deals. Paul Moore joined Manor Rose after one of Verto Directors was in situ there. Moore is now a bankrupt and barred from taking directorships.

Verto raised £900k recently on Angels Den for 75% of the company here and are now looking for another £1m for 11.76% on Crowdcube. Of course there is no mention of Manor Rose on the Crowdcube pitch.

It is entirely possible that the Verto Directors are not amongst those named (A,B,C,D & E) in the report but they were most certainly directors of the company. So now you know. Id suggest someone asks them on the Crowdcube forum. Those interested might find this illuminating here and here is an exert -

The company www.manor-rose.co.uk marketed land and other investment opportunities to the public including the sale of shares in MR Investment Club Limited. The investigation revealed that its land banking business had raised at least £370,000 from the sale of land at the Cross Keys and Flax Lane sites (of which Mr Moore received £158,376); further that the company was also marketing carbon credits.
It appears that some £3,379,724 was generated by the company from the sale of carbon credits before being closed on 28 February 2012 as a result of the Service’s enforcement action. Further investigation revealed that in all Mr Moore received payments from the company totaling at least £478,995 between 15 March 2010 and 14 February 2012 and that an additional £576,703 was withdrawn in cash by him between 11 January 2011 and 28 February 2012.

The grounds for winding up the company (which were not opposed by the company save that it was asserted by its director Mr Moore that the company was unconnected with the Dakota companies and with Betta Build (NW) Ltd and or MRT Land Holdings Ltd or Boldacre Ltd) and did not cold call potential investors and should be wound up as unabale to pay its debts and not on grounds of public interest) were trading with a lack of commercial probity and operating an unauthorised collective investment scheme contrary to the prohibition in section 19 Financial Services and Markets Act 2000.

Addition 20 July - it has been brought to our notice that Verto schemes in the South West had some issues with Funding Circle loans being repaid on time see here 

Desk Beers fall short

Desk Beers raised £120k last year against a £80k raise on Crowdcube

Year one projections showed a loss of just £1600. Filed accounts now show a loss of £63,000 - so in terms of Crowdcub, not too bad. They have half the cash still in play.

The figures for this year were much more ambitious with a 3 times hick in turnover and a projected £400k profit. For the sake of the 184 investors lets hope this is a good guess.

Cgon takes the Crowdcube Prize for seismic gaps

Cgon raised £160k on Crowdcube in October 2014

The Crowdcube financials show a profit for YE March 2015 of £1.1m and for YE March 2016 of £5.9m.

Now presented with these figures people who didnt know any better might invest - and 115 of the so called sophisticated investors who inhabit the Crowdcube virtual world, did do just that.

The real accounts show that the company made a £70k loss in the YE March 2015 and a mere £320k loss in YE March 2016. 

We spoke to the company and they told us that there were two main reasons why this differential came about. Firstly the company had only applied for a UK patent and had discovered after the CC raise that it needed worldwide patent cover - this stopped them selling the volumes they had projected. Secondly the product has changed, considerably. So what the CC investors put their money into is now something else. The good news is the management now say they are on target - which target we dont know. 

In the pitch document the company claimed that TAG Global Distribution Ltd had taken a 14% stake in the company for £200k by buying owners' shares. We are not sure this ever took place, records show no evidence of TAG as a shareholder or any of TAG's directors.  TAG itself appears to do little or nothing, despite the write up the pitch gave it. So the fact that the pitch stated they would distribute Cgon's product for a minimum of 12 months after funding seems like another moment the CC Out To Lunch Department went to sleep. They have no website. 

As we have been saying for many years now, something needs to be done to improve the way platforms use financial projections to sell equity in companies when these projections have no basis in the real world. The explanations here seem to us to be rather flimsy. Of course no one expects the projections to be met exactly but you do have be on the same planet or there is no point in having them.

At a time when Crowdcube are bigging themselves up with national adverts applauding their success, in order to help their forthcoming, much needed, cash dump, dont you think it would be nice if they could address this issue head on? 

FCA recognises Make you Billions

The FCA are calling for input into the future regulation of ECF

Referencing this blog http://www.fca.org.uk/your-fca/documents/call-input-crowdfunding page 24 note 20, the FCA are looking at what can be done to minimise the carnage that is building up in the ECF sector.

We know what they have to do -we have the data sets to show them. So when your ready FCA, do get in touch.  

88 Delicious Boss sentenced

The boss of 88 Delicious which raised money via Crowdcube is sentanced

Alan Colton was found guilty of fraud and has the following sentence passed down at Basildon Crown Court 

                24 months imprisonment, suspended for 24 months.                300 hours of unpaid work.                £100 fine to be paid within 2 months.

This will be little comfort to those whom he managed to con with the help of the Crowdcube platform. Still it is a warning to those who will try to abuse the system that if caught, they will get their just desserts. 

If you want the full story, see here 

MindGenius opens its Crowdcube campaign

MindGenius has just launched its campaign to raise £1m on Crowdcube

ECf Solutions helped them put the campaign together, so we know its sound. 

A great team with recent experience in building and selling a similar business for £20m. A clear and costed marketing plan to push their newly launched Barvas SaaS product, make this one of Crowdcube's more attractive current pitches. 

Worth a look  - www.crowdcube.com/companies/mindgenius/pitches/qDwyrb 

Indiegogo about to launch an Equity Crowdfunding offer

Indiegogo have announced they are to launch an Equity Crowdfunding offer - so you'd better watch out

Following the passing and enactment of the Title III section of the JOBS Act in the USA, things could look very different for ECF in the future.

Indiegogo have been helping projects fund for years and have a very large army of followers - or potential investors. They were instrumental in the JOBS Act, so it has clearly been their intention to enter this space. When they do, it will be a bit like dropping a baby elephant into your bath - the rubber ducks may get shot out the side.

Whether they have what it takes to complete the rigorous SEC paperwork and create investible pitches remains to be seen, but we wouldnt bet against it.

UK platforms eyeing up the new US market will now have to think again. In fact it is entirely possible that Indiegogo will use its UK operation to cover ECF here. 

Interesting times ahead. 

Syndicate try going public again - with Fitbug!

Syndicate Room have a deal with the LSE - the only ECF platform to be able to offer shares this way.

To date the two attempts to get this new version of equity crowdfunding off the ground, have gone off with whimper rather than a bang. Two tries and two failures.

In what we see as desperation they are now offering shares in Fitbug. This company has a colourful record on AIM - their two year share price graph would be banned from Centre Parks due to its dangerous G forces.

They are now apparently in a remodelling process. However they cant wait for this to return some evidence of traction, so they have resorted to, as one publication put it, scrapping the bottom of the crowdfunding barrel.

We dont see attempt three being any better than one or two.

Are HMRC asleep?

We wrote about Videogram before - here

They have filed accounts that are beyond a joke. You have to go onto the HMRC site to believe it.

Probably better that we just dont bother with annual accounts as these are clearly made up just before popping out to the pub.

They make minimalism look extravagant.  Paid up share cap £1, Profit and loss account £3, cash at bank £3.

How many Crowdcube claims are untrue?

Crowdcube claimed to have raised money for Peach Lettings back in 2014  - here 

Some time ago we asked Peach why their AR showed no evidence of this raise - they told us that this was a mistake and that they would re file it. They havent.

Accounts just published show that they have no share capital. Everyone is lying.

Fools rush in - Crowdcube's new £5m raise.

We have been saying for a while that Crowdcube must be short of cash.

When you are running a company that spends £6m and only brings in £2m , the results are obvious. 

Flying in the face of the obvious slowdown that the Brexit vote and its uncertainty will bring, Crowdcube seem to have pushed the big red panic button. They have announced a £5m raise on their own platform. You can enlist along with others keen to kiss goodbye to their money right now, with the event opening in two weeks. We wont have details for a couple of weeks, but it's fair to assume that only a fraction of the £5m will be crowdfunded - this is their normal ploy.

So what are people being asked to invest in? Crowdcube started in 2011, set up by two PR guys. Since then, it has helped to fund hundreds of businesses. But the returns have been almost zero and the losses are mounting  - into the tens of millions already. A variety of scandals have trickled out showing the platform to be fairly useless (that's us being nice) at its due diligence. There have also been and continue to be, a number of highly dubious pre pack administrations that have stemmed from the Crowdcube raise and it cant be long before the FCA has to take some action. As to their projections, well if they are as ridiculous as the ones for their last raise, then we can all at least have a good laugh. 

Crowdcube has built up a powerful and very expensive PR machine. To get close to reaching a profit the number of completed pitches has to increase 3 fold - this at a time when most people will be holding back on this type of investment waiting for a more certain outlook.

You would have to certifiable to invest in this company now.

Although there is another possibility. Let's assume Crowdcube are not as stupid as we think they are. They must know that to fail to raise this money on their own platform would be suicidal. So they must have this £5m underwritten by their backers. Time will tell.