Sunday, 18 September 2016

When reading Crowdcube pitches do please be a little critical!


Birdsong are about to complete their £75k Crowdcube campaign - Congratulations. 

If you look into their pitch you have to wonder why people are investing - maybe just love the luuv this ethically correct company are spreading.

A headline claim is that they have Bethnall Green Ventures behind them. Now this is true but if you check just how far behind them, they are using just one thumb to assist. Two tranches of £15k each to be precise - although to get this information you have to do some digging at CH. Why not just be up front guys? Do venture companies really invest that little??

Then there is the confusion over the number of 'customers' the business has/has had. In the pitch it states that they have 300 customers which for an on line retailer over 18 months is small. This fits with the equally small turnover for the period - they call this traction but we wouldnt. An avarage spend of £33 is not exciting. Also why is the financial projection using projected figures for YE March 2016? That'll be the Crowdcube OTL Dept. 

Back to those customer figures - in a post by the founder, she states 'We have attracted over 35,000 users to the site since November 2015, and customers in 14 different countries.' Hmmm. This number is then used to verify the company valuation. What is a 'user'? Whats more, the founder then goes on to compare her company to Wool and the Gang, which if you remember was featured here for exiting at a 1% ROI or more if you accepted gift tokens instead of cash!

Yet they have run a successful Crowdcube campaign valuing their company at £850k. Stop the world, I need to get off. 


5 comments:

  1. investing with passion
    or
    faith based investment
    or
    post-truth investment

    pick your own phrase

    It seems we are in an era where many politicians in the us and uk (and no doubt the eu but there is a translation hurdle) simply make things up that are plainly silly, and have not suffered for that.

    Why wouldn't some entrepreneurs pick up on that zeitgeist?

    In a rational well functioning market, the platforms that sell losing propositions will eventually cease to trade.
    Unfortunately you wont know which one that is for a long time - though it is clear you have suspicions.
    The other issue is memory, I do not know what pattern of investment a CC/SR/Seedrs user follows but if they make a make a few investments, see them fail and move on to other things, as long as some of the investments succeed (and those will be publicised) then the platforms will always have a pool of new mugs/victims/investors to draw on.
    This is the same sort of pattern as Spreadbets/Binary Trading but slower.

    In other words absent some major change

    this is the brave new world that has such people in it.

    ReplyDelete
  2. Crowdcube would do well to think a bit further ahead. Even a sincere start up is turned. Taught by crowdcube to manipulate data and dazzle the crowd- giving unachievable projections and massively over valuing itself, in the process.

    The instant gratification, that comes from the very easy cash raise, soon kills off both investor and entrepreneur anyway. That is crowdcube ACTUALLY expedites a business to failure in my view.

    It not only encourages an easy come easy go attitude to spending, but makes it impossible for the business to ever hit its projections paving the way for future down rounds, if the business makes it that far.

    ReplyDelete
  3. You should check the wave pitch. If I ever saw a crash it was that one. Huge numbers of discussions, ridiculous overzealous statements by the founder, with a focus on vanity metrics.

    Any numbers of users in any market of value? No. Just 10s of thousands of users bought cheap from cheap countries using facebook ads. It's literally like Silicon Valley on HBO. The exact same thing happened.

    ReplyDelete
  4. Bethnal Green Ventures do invest at that kind of level - they are a social impact incubator that also provides office space and support.

    ReplyDelete
  5. Bethnal Green Ventures do invest at that kind of level - they are a social impact incubator also providing office space etc to young companies.

    ReplyDelete