When you dont know what you dont know

This story is not criticism of anyone, it just illustrates that no matter how thorough you are , you can never be sure. Of anything. Ever. So lend me that ear......

Cauli Rice are due to produce accounts next month. Over the past 3 years they have raised a staggering £4m + on Crowdcube; having had a failed practice run with Righteous salad dressings. We follow them Keenly.

Reviews at one of their new listings are not great  - Ocado 2.7/5 with a serious number of 1 stars for smell and flavour. 

That aside, we were interested in some reviews on Amazon. One in particular caught our attention - from a  Dr Michael Keen. He tells readers that in his medical opinion this is the number one product for weight loss and healthy eating. He is a doctor so he should know - his point not ours. Quite a few reviewers agree but then quite a few hate it. We are not here to comment on the product. It's the reviewer.

We knew that the name rang a bell, and sure enough he had been quoted as an investor in Estatesdirect which has recently forced all CC B investors (£500k worth) to sell their shares for £7 in every £1000. Not a great result.

What is more interesting is that Dr Michael Keen, who we believe is a medical Doctor, is also a large shareholder in guess what. Yup, good old life saving Cauli Rice. We dont want to reveal his investment, but lets leave it at enthusiastic. 

It just shows you never really know what is what. Cauli has over 990 investors and relatively few reviews in total - so it is possible all of the positive ones are from people with, let us say, a vested interest.

According to recent news, some rice growers are about to request the term 'cauliflower rice' be banned as the product is not made of rice. That would prove interesting.

Lets hope the accounts have some good news.

Since posting this we have checked one other name and Alan Bowe who gives the product a 5 star review is also a considerable investor in Cauli Rice. We will keep looking.

What Investment mocks real independent journalism

What Investment now has a regular column by that well known independent financial journo Darren Westlake. Topic - well of course its how brilliant his company Crowdcube are.

See here - http://www.whatinvestment.co.uk/easy-exit-crowdfunding-investment-2553600/
And here - http://www.whatinvestment.co.uk/is-there-liquidity-for-crowdfunding-investments-2553774/

You will notice that all the plus side is wrung out until even the pith has gone , whilst with the usual guile Darren skates around the downside.

At least have the sense to call it what it is  - Advertorial.

All this from a guy who still claims to be a serial entrepreneur. Well that's probably because the only company of any significance he has founded went into administration and was sold (at the same time Darren resigned) for next to nothing, then went into admin with the IP being bought in a prepack and closed. All in all we estimate that investors lost around £80k, not to mention creditors etc. You wouldnt expect anything less from a Crowdcube founder. Mind you, he is excellent at receiving rewards.

Oddly all reference to this company, ID Telecommunications, has vanished from Companies House but we already hold the administrator's report. CH Google search shows the company but then you click the link you just get

This page cannot be found

Which is odd. It isnt to be found under Darren Westlake's various directors names at CH either. Wonder why that is? Only collapsed in 2006 and was certainly there a year or so ago when we wrote about it here  Is it possible to get companies removed from CH?

When is an investment on Crowdcube not really a Crowdcube investment?

This is a very obtuse line.

Wit Fitness have what looks like a normal campaign that has got off to a flying start on Crowdcube.

£370k already invested.

But in the pitch, it states that £320k was already raised and of that £125k will be drawn down before the pitch completes - so whether it is successful or not. IE it has nout to do with Crowdcube's platfrom or this raise. We dont know if CC are taking commission on it but we'd guess it will enter their annual raise figure.

So what the fudge is it doing on here?

Is this how Crowdcube propose to make investment more open and more democratic? Seems unlikely. 

Wit are not raising £840k, as Crowdcube state - they are at a pinch raising £840k, minus the £125k they have already signed off for and will be spending even if this raise fails, by their own admission. So why not just be grownup about it and say they are raising £715k on Crowdcube? 

Well the maths show that if you remove the £320k already raised then the all important percentage completed graphic looks a lot less impressive. It's not like we havent seen this before a few times.

Correction to Tribe post which has now been removed

Tribe investors have now come through with funding to the original £1.7m, so the report we posted, which was triggered by an Annon post, was incorrect.

We take a great deal of care verifying the facts and as Crowdcube had Tribe listed in their 'Funded Companies' section at only £680k, we took that to mean its was final. Crowdcube have now removed Tribe from the Funded Section until the deal is completed

We were wrong and apologise for any problems this may have caused since the post went live 2 days ago.

Thank you to the anon post which alerted us to this development.

JAM Vehicles raising £2m for electric JIVR

JAM have featured here before. They dont do accounts - why bother? They just raise cash and spend it. Well the first part is what they claim.

Correction

It seems we may have been a bit fast to judge JIVR. We asked the company to explain all the things below and he said - 

Sales are going very well - no figures.

Accounts are very complicated due to various subsidies which he wouldnt name. They are late but so what.

The monies raised in 2016 was a mix of equity and notes - notes dont appear at CH until or if they are converted into equity or accounted for as debt in the annual accounts - which are te ones that are 5 months late. 

Who knows but the accounts when filed may give us a better clue. We think trying to raise £2m without them will be hard. 

The Jivr bike needs cash. Anyone reading this blog will know that. But wouldn't you think that a company trying to raise £2m in the private sector, would file accounts. Their accounts were due January 2017. Their filing record reads like the South Eastern Trains records - late late late.

In a new pitch deck dated 2017, the company claims to have raised over £1m last year, in two tranches. But this money isnt filed at CH. Could that be the reason for the accounts being sidelined?

JAM raised £160k on Crowdcube in 2014 and have struggled ever since. The directors' revolving office door has been spinning to The Swing. 

The new PD is littered with glossy pictures and quotes taken completely out of context. Substance almost zero. It's a neat enough design idea and has been generally well received but this looks very much like a case of the inventor turned CEO making a mess of things. 

Maybe go back to the Waltz lessons before you get into the Electric Jive. 

Another Crowdcube business abandons ship.

AngelBerry Frozen Yogurt raised £200k on Crowdcube in 2014. Now their website is closed and has been for sometime. Accounts were filed late but now they are, they show a company way past the edge. Insolvent is the technical term and this is the second filing showing this. 

The company was due to be making profits of £1.7m in 2016; instead they made a £10k loss. Predcitable? Oh yes, this is Crowdcube, whose own accounts show a £5m plus loss against a predicted £1m plus profit. 

Two tweets since Sept 2016. Only 695 followers. 

Meanwhile no doubt, the successful entrepreneurs portrayed in their Crowdcube pitch have moved onto other ventures. Ryan Pasco, one of the founders, has set up 2 businesses since Angel Berry funded on CC - neither looking good. He is sometimes British and sometimes Australian in the CH filings. His mate James Taylor hasnt been so active - maybe he was actually trying to make Angelberry work?

The business was supposed to be sold this year for over £14m - their figures in the Crowdcube pitch.

Right from the start in 2014, all projections have been way off target.  

As we keep saying - this is just the tip of the iceberg when it comes to companies that have not closed officially but have died.

We wrote about them before here   - it was a death foretold. 

Crowdcube success Onelane turns out to be a dead end

Onelane raised £280k on Crowdcube for its service of delivering children to their destinations. Little over a year later they are closing down as they were unable to raise the £1m they declared they needed this year.

So when a pitch on Crowdcube or any platform says it needs to raise £1m next year or the year after, it is worth asking them how they will do this. Or you end up where investors in Oneland are now - a dead end.

In the letter sent around to all shareholders, Camron, the founder, makes a good job of explaining what went wrong. But when you peel away all the pith, it all comes down to crass mismanagement and huge imaginations. If the idea had any legs they would have found investment, they didnt even try the usual Crowdcube trick of upping the valuation and having another CC round. According to Camron they were on target but no one would listen.

For a guy who claims to have an MBA and some connection to Harvard, oh and was instrumental in the role out of Just Eat in the UK, he sure wasnt much good at getting down and dirty when things got a little choppy.

We asked him what he had paid himself and why the investors hadnt been more pliable. No answer. One clue might have been the fact that of the 12 questions on the original Crowdcube pitch , he only bothered to answer 6 and he avoided giving any detail to one that was specifically asked about how he intended to go about raising this £1m.

He claims excellent traction but the current 176 Twitter followers and 600 odd FB likes seems to throw this into doubt?

In his last email he says -

It particuarly pains me that you entrusted us with your investment and I failed to provide you with a return. It is important to point out that you backed a service that worked really well, had tons of innovations in the pipeline, and was on its way to improve the routine for thousands of parents. With further funding, there is no doubt that we would have been a great success

Apart from the obvious lack of attention to detail, this is complete nonsense and is most likely the main reason the business failed. 

That pretty well says all you need to know. But they still invested. None of this will change until investors vote with their feet.

PS
Following posting this piece, we had an email from Camron - rather irate(vaguely threatening legal action through CC), with the usual spelling mistakes etc and no answers to any of our Q's except the one on salaries. He states that he paid himself nothing in year 1 and was paying himself below market rate in the final year ie now. Well call me old fashioned but in my day start ups didnt pay founders salaries until they were in profit - living expenses yes. We live in an instant world today where Crowdcube thrive and poor entrepreneurs take people's cash and pay themselves off the back of running their company into the ground. Great idea.

E-Car Club running on empty?

E-Car Club sold out to Europcar in 2015. Accounts for 2016 show revenues are down and losses are up. Of course nothing for Crowdcube investors to worry about as they are already cashed up. Still thought it was an interesting outcome for CC's first ever exit.

Fieldcandy, tent makers, collapses into administration and is sold in a prepacked deal leaving investors penniless

This is an odd tale. Fieldcandy (co# 08326947) raised £417k (£370 net), twice its target, on Crowdcube in 2015. The same company went into administration in February this year. The administrator's report states that at the time of the Crowdcube raise the company was already in considerable difficulty - recognised by the company's directors.

So pretty well as you would expect so far a Crowdcube funded company. But wait.....

The Fieldcandy website is still active and is apparently run and owned by Terra Nova Equipment Ltd - via that old sidestep, the pre packed deal. Terra is in turn owned by Hubaco. Terra purchased the company for £25k  - Crowdcube had it valued at £2.2m. Hubaco are clients of the appointed Insolvency Practitioner Smith Cooper.

Things get really really odd if you look at the real accounts and the verified accounts in the administrators report and compare these with the pitch documents verified by FCA regulated Crowdcube.

YE Dec 2015 - so the year that the pitch completed (August) and the year after the company knew it was in trouble.

Real accounts show revenues of £352k and the Crowdcube figures show £700k.
Real accounts show losses for year of £(186k), Crowdcube show a profit of £3k

Remember these Crowdcube figures were verified by the CC DD Dept and August was already 2/3 of the way through Feildcandy's year.

If we now turn to YE Dec 2016, things are even worse.

Real accounts (management to October 16)  revenues £293k and losses £(25k) on large cost cuts
Crowdcube version to Dec 16                        revenues £1.3m and profits of £139k

The intangible assets worth over £400k on the books have been sold for £1250. There is no hope, according to the report, of any non secured creditors getting anything back.

In total the company will leave debts of £1.14m.

Of course Luke Lang will trot out the usual crap about how this couldnt happen now and anyway its not our fault and you will always get failures and look how much people made on Camden (not much actually) and we are on target to become a very successful company and we should know.

The problem here is clear. The administration has verified that the company knew in 2014 that its sales targets would not be met and its costs were spiralling. As a last resort they went to Crowdcube to fleece investors, who were given a very different story by the platform. The administrator states that the two directors knew at the time they raised the Crowdcube money, that expenses were too high and that this would not be enough money to continue the company. This information was very clearly concealed from Crowdcube investors.

The company had some large and prominent investors but there is simply no mention anywhere in the Crowdcube pitch of the situation we now know to be the truth - the company strategy was already flawed. Talk about taking Crowdcube investors for suckers.

Can one get any closer to a con? How many more scandals before the FCA does something...anything?

Beara Beara are back on Crowdcube.

Beara Beara raised £200k on Crowdcube in 2014. Since then they gone on to miss all of their targets - so standard fayre.  So lets start looking at this new raise with a blank page. 

Actually lets not do that - that's what they want. The original raise barely gets a mention in this new one and the old targets are not there for comparison. We can help you out with that  - see below.

We wrote about them before as their historic accounts in the pitch did not match the ones at CH. Here

CC pitch 1 revenues for 2016 were predicted to be £1,005,000. Actual revenues were £740k.

CC pitch 1 profits for 2016 were predicted to be £348k. Actual profits were £31k.

Promises that 2017 revenues are doing well and heading for £1.2m are only slightly dampened by the fact that the previous projections had them at over £2m with profits of over £1m.

Wouldnt it have been more honest just to give us these figures? Why hide them?

Also they had another £300k raise to go in 2016 which hasnt materialised - why?

They have chosen for whatever reason to file micro accounts - 2015 was a full BS filing. 

The current valuation has more than doubled to £3.4m and of course you will have forgotten that in raise one, they had to drop the value considerably to get over the line.

Nothing wrong with the product per se. 

You would have thought that on the back such very poor results recently, Crowdcube would have addressed these crucial issues - openness and honesty. Well it appears not.  

More Alternative facts for Equity Crowdfunding

Borrow My Doggy was reported as having raised £1.5m at the end of 2015. Many of the usual publications picked up the story and issued it as fact. It wasnt.

Reports range from City AM, The Sun, Yahoo Finance and numerous online ECf publications and this release which suggests very strongly that the money was 'raised' - http://www.prnewswire.co.uk/news-releases/uks-first-live-crowdfunding-summit---crowdfinders-live---today-announces-19m-funding-goal-reached-after-four-hours-of-sme-pitches-534962631.html

We were contacted by a shareholder in BMD recently to see if we could find out what happened. The £1.5m was reported as raised by IW Capital through one of their live events - 'Crowdfinders - Make your Business Rock!' - ahem. So successful was this raise that BMD cancelled a scheduled Crowdcube raise. This shareholder told us that several investors were puzzled by the outcome. The news reports were very clear - yes the full £1.5m had been raised at the event.

The Crowdfinders website carries the Yahoo piece and the City AM piece links but they have been disabled. The City AM headline as shown on the Crowdfinders site states -  

''BorrowMyDoggy fetched £1.5 million at Crowdfinders Live. City A.M.''. We would read fetched as raised?

So we spoke to IW's main honcho Luke Davis - a man closely associated with our favourite lady, Ms Horlick. He started by saying that he couldnt understand what all the fuss was about and was this a story being put about by a well known pundit; whom he had just expelled from IW. The story has no connection to the gentleman 'named'. Luke went on to explain that at the event, money is only pledged and that as far as he knew, they had eventually tied up around £1.25m but certainly not £1.5m as reported; although he couldnt be sure of the exact amount. In the reporting, IW is never quoted as saying they had raised £1.5m or any sum. The reports seem to get this figure from an unknown source and they never bothered to check it.

One of the shareholders has said that they believe the amount raised was only just over £1m.

Does it really matter? Well it matters that reports in credible publications can be so far from reality and it matters that companies have made claims that are not true. But then this is equity crowdfunding and the pond is teeming with sharks.

Crowdcube finally admit that their Due Diligence is pitiful.

So at last we have it in writing. Crowdcube have admitted that one of their now failed companies was poorly scrutinised by the platform and they missed a crucial piece of information off the campaign. A piece that would most likely have made investors think at least twice before jumping in. They, as usual, have now last all their money.

According to Crowdcube, they have now corrected the error in their systems and this couldnt happen again. Which is an interesting comment - because it has. A whole year after this company raised its first CC round, the Solar Cloth Company raised £1m. We now know that the information supplied on the platform about the SCC was missing crucial elements - like the CEO's bankruptcy and failed businesses. It is a similar story here - no lies just massive, glaring chasms in the information supplied. The result of a totally amateurish approach. This is the information asymmetry we have been banging on about for years. 

So we have made some progress - Luke Lang never normally admits to anything and to be fair he didnt admit to this - his PRinger did. But it comes to the same thing.

But Crowdcube are still living in the Land of Nod if they think their DD is fit for purpose. We have the evidence that proves otherwise. 

Crowdcube's financials begin to show the stretch marks

Just in case we didnt already know, Crowdcube's latest accounts show just how stretchable their version of the truth really is.

I dont suppose it was mere coincidence that Crowdcube chose to release their latest accounts at the same time as the GE results and 3 weeks early.

According to a piece which appeared in Business Insider just after the successful 2016 £6.5m CC cannibal raid, Crowdcube's stated aim was to break even by the end of 2018. So that would be towards the end of the next financial year. 

Anyone who has read our other piece on Crowdcube's latest accounts will find this very hard to believe. It would mean that for 2017 and 2018, the company would have to hold costs and margins and grow at a rate of 150% pa (based on £4m revenues for 2016). That is a growth rate they have never got close to and considering the last two quarters of YE 2016 had stagnant growth, it seems unlikely. Certainly completion rates since October 2016 have not shown any signs of this kind elevation. Returns for investors have dried up altogether from the small puddle that appeared for a while. Disasters are now monthly. The secondary market has been pinched by Seedrs and IPO's, which appeared in this article to be their Holy Grail, are non existent. 

There is a certain ring to this that reminds me of Theresa May. Ask a question, dont like the answer and so carry on regardless. Totally pointless.

Crowdcube 2016 results are as we predicted - abysmal.

Crowdcube, the UK's largest ECF platform, has announced more heavy losses on falling margins and increasing costs. Pretty much as we expected. You might say, as predictable as The Donald.

The big time backers of Crowdcube must be worried. A 48% rise in revenues has resulted in a considerable fall in GPM and large increases in costs. Net result - an increase in losses for the year to £5.4m. At this rate the company has roughly another 18 to 24 months before closure.

The fall in GPM, caused by their rather panicked urge to make larger deals for PR reasons, from 57% to 52% must be a cause for concern. And the increase in revenues of £1.3m has been more than wiped out by this and their increased costs. It all looks out of control.

The really bad news is that even with these increased losses, they are not heading in the right direction - large deals are clearly impacting margins and the smaller ones are stalling - other platforms do these better. They have now lost their first mover advantage. The accounts are for YE September 2016, the same 2016 that Luke Lang predicted would be such a great one for the company - endlessly. Now the spin doctor is way out of his depth. 

As with all things, the end game will take a while to play out, but end it must. Maybe a white knight will step up and take over - god knows they need radically new management and some sensible strategy to turn this loss making business around. Accrued losses now sit at £12.7m as at September 2016 and will right now be way higher as we predict even greater losses for 2017. 

In the 2016 raise, that they performed on their own platform, they had some interestingly colourful graphs showing their success. One of these showed quarterly (stated calendar) revenue increases. So for Q4 15 and Q1 16 they showed 78% and 125% respectively. As we now know, the overall annual increase in revenues was 48% for YE September 2016. You do the math. Q2 and Q3 16 must have taken a vacation in Acapulco.

In the same MI, Crowdcube stated that their revenues to March 2016 or the first 5 months of its financial year, were £2.07m - this is the section where they try to explain their £65m ticket price......unsuccessfully. According to Crowdcube, the March to September period is more productive than the October to February one on a month by month basis - or that's the line that was sold  Yearly revenues for YE September 16 were under £4m. Bummer.

Management were careful not to include simple revenue projections - too easily scoffed at later on. But just to give you an idea of how clueless these guys are, in their 2012 pitch on CC, they predicted 2014 net profits of £3.7m on revenues of just £4.4m. Where are we in reality? Revenues of £3.95m with loses of £5.4m. That is staggeringly inept even for CC. Do you think people would have invested if the real figures had been known? It may help to explain why Darren and Luke have never run a successful business. 

On these current figures, they need revenues of over £16m or at a 5% average commission rate (their stated rate is only 4%) annual completions of £320m just to reach BE. This year saw revenues of under £4m. At the current rate of increase pa, we are looking at a minimum 4 to 5 years to break even. So that's roughly another £25m of losses. That's without any increase in costs and a continued 40% increase in business every year. Unlikely? You bet. Their dream of a secondary market is just that and is already being trialled (rather weakly) by their arch rivals Seedrs.

Who will go first - the orange guy or the spinners? 

Is Ernest mad?

Ernest is on Crowdcube. He's a fintech app. Either we are mad or he is.

Ernest doesnt really exist yet. He doesnt have any customers and hasnt been sold to anyone. Ernest is apparently worth £4m in his underwear.

That's not the crazy bit.

This year Ernest will bring in under £10k of revenue - projected.

Next year Ernest will bring in over £1m of revenue from around 15,000 newly acquired customers. The CPA this equates to, is approx £10, based on their answer to a CPA query. Now that's the mad bit. (We have ignored revenues from the white label plans given the time frame). 

The idea might work but the budgets certainly will not. They will run out of money well before they obtain 15k new customers and will need a lot more to get there. So dilution or extra investment is a given.

You do have to worry a little about the management that put together and stands by this budget.

We love you we really do possums!

Oh Powervault - you returned, again. So lovely to see you. A fourth time? Yes that's four times on Crowdcube and still you cannot get anywhere close to your projections. Oh well, we love you little critters with your energy packs anyway.

For all you possums out there, trying your hardest to lose your money, this one is a dead cert. Luckily Crowdcube have decided not to mention all the other 3 rounds with increased valuations against failed KPI's. On the pitch forum the outstanding Q is so far  - 'how many times have you raised on CC?'

We can tell you that this is PV's 4th time. That's probably a record. Those naughty little generators are so thirsty. 

We can tell you that they have missed their projections from the 2016 CC campaign by a very handsome margin - in this KPI they are consistant. And that they expect to sell this company after 2020 making all you possums a pretty penny. We dont know when they expect to make a profit but then it deosnt matter as their predictions are nothing if not totally unreliable. 

So invest invest invest. You know you want to.

Fake news is all the rage in Equity Crowdfunding

Just when you thought it was safe to go  - BAMM - more crap hits you in the face

We wrote about this here  and now we have the finale to prove the point we made before.

Satago was one of this high flying jam tomorrow internet nonsenses we are seeing so frequently. It burnt through its money raised on Seedrs and promptly arranged a pre pack deal to sell itself out of administration. The cash realised was enough to pay off some of the creditors debts but investors lost it all. 

This was reported by none other Beauhurst as a successful investment!

They wrote - 

What happened to the startups of yesteryear?

This week has been rewarding for investors in high-growth companies: Xafinity Consulting raised £190m in its IPO on the LSE; Ramsdens raised £15.6m with an IPO on AIM; and Satago, Customade, Root6, and SecretSales were all acquired.

What they say is not untrue - it was acquired but investors might baulk at the idea that got any reward. 

This is what Jeff Lynn CEO of Seedrs said about Satago in June 2016 just after they had secured further institutional funding - it makes for great reading when you consider Seedrs claim that any of their businesses that go on to raise more money at a higher value have produced real ROI for theie investors. This proves that to be total BS Jeff -

Satago was one of the first businesses to raise funds on Seedrs, shortly after we launched in 2012 so we’re thrilled to see their on-going success. The £4.6 million institutional investment they have just raised is wonderful validation for a great company, and shareholders who invested in Satago a few years ago on Seedrs are enjoying a huge increase in share value as a consequence.”

As administrations go this one does look legit - creditors did benefit or at least they got some money back. But isnt it time that with the rise of ECF we started to consider ECF investors as creditors? As ever the only people really making anything are the insolvency practitioners.

Note - we had previously stated here that Satago raised £1m on Seedrs. This was incorrect and has been altered. Thanks to Steve Renwick for pointing this out.