There is a certain delicious irony for a rating company with FCA registration giving out what can only be described as misleading PR about their own success. Crowdrating, run by some nice ex city folk in the West Country, has launched a new PR push with a story in Altfi. Story being the operative word. Altfi might consider changing their title to Altfac - as in Alternative Facts.
The article has the bold headline -
CrowdRating demonstrates it can help investors improve their crowdfunding success rate.
Put simply - it does no such thing.
In the article, which is clearly advertorial, Crowdrating claim that they can help investors make better decisions about their ECF investments. We were curious as to how they would do that.
Well it turns out that they rate pitches into Gold Silver and Bronze. They now claim that 96% of their Gold ratings or 24 out of 25, rated a year or more ago, have gone on to see success - this being measured by positive news, exceeding projections or raising new funds (ones that were in the original projections) at an increased value.
They leave us with a very useful top 10 of their Golds - 4 of which were on Crowdcube. Actually one of these was also recently on Seedrs but they dont seem to know this. We cant really comment on the Syndicate Room or Seedrs pitches as we dont have the data. But the CC pitches are a useful guide to their overall accuracy.
So its really quite simple - do their claims stack up?
For their Crowdcube pitches, they receive a Bronze at best. Why? Well we have no idea, it's not that difficult to get it right but of the 4 they list in the top 10, not one could be called a success. 2 have failed to meet their CC projections, one has raised new cash in a down round which was not in the their plan and another simply hasnt done much in commercial turns. So how can you claim these are all a success. It stretches the word to breaking point.
Witt Energy - raised on £2.4m CC and were always open about playing the long game. They have not gone bust but there is nothing to really suggest they are a success yet or even heading that way. They have made far greater losses than projected for YE2016 - £430k against CC projections of £240k. Whilst this isnt necessarily an issue longer term, they are about to embark on new £2m raise, so that may tell us more. They were due to bring home revenues of £1.8m for YE August 2017; where any of this will come from is not at all clear as they dont seem to have anything to sell
Inyourstride - raised twice on CC, tiny amount. Missed 2016 figures by a long way and have now raised far larger sum on Seedrs (Jan 17) at a lower valuation. How is that success? It may turn out to be but its way too early to tell now. If anything, a down round suggests the opposite for investors.
Simply Cook - did exceed CC projections (ie smaller losses) but we think this is due to lack of activity not success. Raised another ~£1.5m on Envestors this year which was not in the original plan. Envestors website says the pitch is on hold but CH records the share allotment. All a little odd and it makes a valuation per round difficult.
Empiribox - Again another Co 'on target or better' but this is due to the failure to raise a planned £600k in 2016 - ie their last accounts show a bit a cash crisis.
If the 4 in the top 10 are misleading, then what does that tell you about all the others. If you remove these 4, then the percentage falls from 96% to 80%? Who knows where it would end if we checked all the other CC pitches in the 25?
If I was you, Id do my own research. We dont give advice but if we did, it would probably be.............................. feel free to finish this off!