Tuesday, 9 May 2017

Crowdcube's new ploy - just so you are aware


3 of Crowdcube's latest pitches have a similar trait. They all have fake targets. 

So they all declare they are raising £X but then a small note tells you that Y of X has already been raised off platform. This makes the platform look better, increases the progress on the 'funded' bar which stimulates interest and allows Crowdcube to claim larger raises in their Annual Total Jamboree PRing sessions. So sort of win win win and then sadly lose, for all those investors who failed to read the small print. 

Crowdcube have been to known to do this without telling people - so maybe we should be thankful for small mercies. You may remember a certain promise of a £250k investment made on the Seedrs platform which has as yet never materialised. So who knows if these amounts do ever get invested?

Current target embellishments care of  - Hope and The Chapar. In the Chapar pitch it is clear that investors have not understood Crowdcube's 'note' about this off platform investment of £250k. A Q on the forum actually asks if this amount is included in the current CC running total. Of course it is and of course the answer to the other Q is NO, CC will receive no commission on this amount. And finally the Q is correct in his comment that this amount should not be on the platform at all  - it's a clear attempt to try to con investors by creating a false momentum. Investors on the platform have absolutely no guarantee that this £250k will be forthcoming - they have to take the company's word for it. Why have the FCA allowed Crowdcube to operate a system so obviously open to abuse? The A to the Q hedges around these delicate issues. Guilty as charged.

It would surely be more honest to just state the real total ie the raise amount less the off platform investment?

The latest one to try this has been Teachpitch, which is back for more cash after only 12 months since its first Crowdcube triumph of £300k. Target (apparent) £400k but £261k of this has already been raised separately off Crowdcube from two existing investors - we are not told who. 

The company revenue for YE October 2016 was projected at £207k but it has managed just £7k. No new raise was ever mentioned a year ago. Of course this lack of progress has led to a doubling of the company valuation. 

Apparently 'Due to the optimal use of our existing resources and team & our commercial strategy to work with licensing customers in the east who have multiple schools in their portoflio, our actual YE Oct16 EBITDA loss is £50,000 lower than forecast.' .........We think this means that running out of cash has meant a lowering on activity and therefore costs - but who knows. 

Hope these guys are not going to do any actual teaching.

4 comments:

  1. Captain-Boufles9 May 2017 at 03:52

    Hi Rob, I'm a fellow CrowdCube sceptic (a shame because i think the crowd funding model is fundamentally good, but ruined by bad practices and absurd valuations)

    Do you know if there is any obligation for the off line funding to be at the same valuation as that on the platform?

    If not then that is really bad as the initial offline funding at a fair value could be used to promote others to invest at the new terrible valuation...

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  2. It's normal that any funding off platform which is part of the online campaign is at the same value. I dont know of any that have not been but its not a legal obligation.

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  3. Are you saying that the off-platform money should not be shown in the ECF platform total? I'd have to disagree with that. As an investor I do not really care where the other money is coming from, and whether of not CC or Seedrs get commission. If the money is going in on the same terms and at the same time then it should be included. It makes quite a big difference to the prospects of a startup if it's raising £400k, vs £139k - I want to know the whole raise - not just what is going on the platform. As an entrepreneur I would want the investors to know how much we are raising total too.

    I agree that the platforms should not include the off-platform raise in their own headline raise figures, but lets not throw the baby out with the bathwater just to bash the platforms.

    Captain-Bouffles - Seedrs at least will insist that the off-platform money is on the same terms as the on-platform money, otherwise it cannot be included in the total.

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    1. Fair enough if you are happy - but you are not in the mainstream with this. This is a problem for Crowdcube not Seedrs as the article makes clear. Crowdcube have history of faking targets and investments to make the pitch look more enticing. If you choose to trust Crowdcube then that is your own choice but Id reckon you will be out of pocket in a very short time. The fact that a Q appeared on a current pitch asking if the total raise included the £250k invested off platform shows how confused investors are. Of course you may not be which is fine. Good luck.

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