Monday, 21 August 2017

Crowdcube tell the truth, their way.

An interview we did in the Memo has allowed Crowdcube to tell its investors how well they are doing.

The article here has been sanitised to avoid any court cases but the message is plain.

Here is Crowdcube's response to the piece, which really says it all.

In response to Brown’s comments Crowdcube told The Memo:
“Independent research from AltFi Data has found crowdfunded businesses have performed ‘impressively’ and Crowdcube has the highest internal rate of return for investors in the industry.”
“We enable young businesses to raise capital to create growth, which is not short term, but judging by the 430,000 Crowdcube members and the number of businesses being funded through our platform we think our investors understand that.”
“To say that most companies never bother to keep investors abreast of events is simply not true. Over 90% of Crowdcube funded businesses have sent at least one update to shareholders since fundraising.”

So lets take these one by one.
AltFi is a well known ECF promoter, so you can take this with a large pinch of salt. Their evidence comes from looking at companies that have raised again since their first ECF campaign and taking the increase in company value as a real increase. We all know that is crap. Companies that have for instance gone bust are counted as zero - there are no negative values and not one of the companies that they say has increased its value has in fact done so in real terms.
Crowdcube do not have 430,000 active members. Their real numbers are on the slide and from anecdotal evidence we get from 'members' sending us things, they will continue to be so. If returns are not short term then why have campaigns talking consistently about 3-5 year ROIs?
This is the worst one. So what they are saying is that of the 600 odd companies that have funded via the platform, 60 have never corresponded with their investors. That's bad enough. But if you take into account the fact that CC has been going since 2012 (ignore 2011) and most of the companies have only provided one update, then that is a disgrace. Our point made. Thank you. These updates should be minimum twice a year - so a company funded in 2014 should by now have around 6 updates - not one. We know that this is the case as we get told this constantly by their members, although many rather than most would have been a better description. And of course you know that Luke would have put the best possible spin on all of this, so its guaranteed to be exaggerated in CC's favour.

Sunday, 20 August 2017

Velvet buried underground

Velvet London, a beer producer, raised £45k at the turn of 2014/15, on Crowdcube and has now closed. As usual it didnt last long but it did use SEIS so no one will lose out, apart from HMRC. Yet another success for the UKplc's start up funding policy.

And we are only scratching the surface. Surely time for someone somewhere to wake up? If you put money into poor plans run by people with little or no experience, back it up with SEIS and free beer for investors, you will get funding. You will also get a business collapse. Extend that nationwide and we have a problem.

Velvet went from revenues of £12k to over £300k to £1.5m in the space of 24 months. Well the problem was, they didnt - that's what Crowdcube said they would do. Not sure they ever sold anything. The projections on Crowdcube are obviously complete tripe but so are the historic accounts. The real accounts show considerable losses mounted up and a negative BS, whereas the Crowdcube BS is in the black. 


Saturday, 19 August 2017

Crowdcube's Psonar stops the music

Cambridge has produced yet another Crowdcube flop. Psonar took £316k off 70 investors just over a year ago. It had previously raised another £1.2m. Now it has been put into liquidation with zero assets, owing trade creditors £250k. 

Dont know what it is about Cambridge but its having its share of Crowdcube cock ups.

There is no explanation yet as to the what happened. The SofA shows an estimated £11,900 of assets made up almost entirely of a VAT refund - so probably wrong if was worked out by the founders. 

The founders have what can only be described as caste iron brilliant credentials - our hats were full after reading all the big names they dropped. Makes you wonder. As does the veracity of the all the signed and pending contracts they had around the world. Is there a chance that Crowdcube checked these?

Where did the £300k plus go? It hasnt ended up creating any assets; they have none. Its just been spent. Mind you with 14 directors you are bound to have large expenses bills.

Surely someone, somewhere needs to be held accountable? This is nuts.

A new approach to S/EIS

Ask yourselves - what is the purpose of EIS and SEIS? Is it to help individuals get richer or is it to help UK plc?

Equity Crowdfunding relies almost entirely on the Government tax rebate systems SEIS and EIS. Without these there would be little investment. So from that standpoint, it is working - it is releasing private cash into companies as an alternative to the banks and VCs etc, where money has largely dried up or is too difficult to access for start ups and small SMEs.

So the next question is what happens next? What does this money achieve? Well the answer is a little more disappointing. The end goal of Government intervention into private funding of UK start ups, has to be the long term benefit of UKplc. You simply cant have Government handing out money from the public purse, to allow punters to go on a Saturday One Arm Bandit Spree - risk free. That wouldnt make any sense. And if further fallout was such that other SME's suffered as a result - because these newly funded, poorly run businesses went bust owing them money, then that would be crazy, right?

Well this is pretty well what Vince Cable set up. Investors openly tell us that its only because of SEIS or EIS that they take a punt. Some take an interest in the business, but many we have spoken with dont - some even admitted not reading the plan at all, they just like the rewards and with the rebate it makes sense even if they lose their principle. Is that helping UKplc? 

I have sat through numerous meetings and conferences on ECF, where the main speaker isnt an entrepreneur, but a lawyer. His is the most listened to section of the event and gets the most queries. He isnt talking about marketing, product development or cashflow. He's talking about how to maximise your S/EIS benefits. 

When a small business raises £250k on an ECf platform for their plan, and within a year has gone bust owing trade creditors that again, something in the system is wrong. Crowdcube now have around 60 failures (closures, so not accounting for the 100 plus that are zombies) to 3 dubious successes - the best exit being by sale to an overseas company, thereby taking any future benefit out of the UK. In fact 2 out of the 3 'successes' have been sales to overseas companies. 

It might all work better if the companies applying on the platforms were better chosen, or in some cases were actually chosen. A simple new director's course and test might help? If you havent passed it you cant access S/EIS. I am constantly staggered by the naivety of most plans and they never fail to back me up. If we really want to help these start ups we need to start at the beginning. The money so far wasted on tax rebates for 'investors', better described as punters, in businesses that never had a prayer of lasting 2 years let alone 10, could have helped fund this course and test. We'd be in a much better position now. It would allow easy access investment, help to protect investors, benefit the platforms and the businesses and most importantly benefit UKplc, which is where we started.

It's not instant, so wont be liked but it has to make more sense than HMRC pouring yet more tax payers money down the drain. 

All comments welcome. 

Friday, 18 August 2017

The Pressery has been squeezed dry.

The Pressery squeezed £143k out of 60 Crowdcube investors in March 2015. By November 2016 they had filed for closure with unpayable debts of another £80k plus. It's one we missed.

The company is still in liquidation nearly a year later.

Why are these stories never covered by any of the ECF or Altfi press and why do Crowdcube never even attempt to explain what went wrong? It may well have been an authentic business that just tried to scale and failed - but we dont think so looking at the pitch and its claims. 

Trade creditors were owed £99k. That is not helping anyone.

Yet another one for the growing list. Come on Crowdcube either try harder or push off.

Thursday, 17 August 2017

Rentify reviews are bad

Rentify took £1m plus off investors on Crowdcube in 2016. Now reviews on Trust Pilot are nothing short of a disaster.

You just have to spend a few seconds on TP on the Rentify page. Page one of the reviews - so the most recent - has twenty reviews. Of these, 7 are one star or would be negative if the the option was afforded. They come with copious notes on the complaints. One other review is two and one three stars, neither recommending the service. So that's pretty half of the most recent reviews telling people to stay away. 

Rentify is a customer service business. Or that's what they sold the punters who invested. Accounts due out next month. 

Saturday, 12 August 2017

Cornerstone lose £2.4m and secure investment of £3.5m

Cornerstone raised £845k on Crowdcube in 2015 and another £3m since. Now on the back of 2016 results, showing losses of £2.4m, they have secured £3.5m from Calculus Capital.

And all of this against a CC projection for 2016 of a profit.

Well somebody is wrong.

Brewdog close $50m, 12 month, punk USA round $43m short.

Brewdog's failed US fundraising campaign peters out with a whimper rather than a snarl.

Following the recent announcement that Brewdog has sold 22% of the company to San Francisco based TSG Consumer Partners for £230m, they have decided to close their ailing US Equity for Punks campaign. Targeting an ambitious $50m it raised just $7m. Clearly now, they do not need the extra $43m. According to their own PR, the campaign was a stupendous success. So that's why they had to sell out to Corporateville?

Some might say that all the vocals coming from the Ellon HQ, when Camden sold out to AB InBev for £85m, was just a sham. Now the punks have done the same. Promises to keep the razors sharp are no longer believable.

Investors in the company are looking at a stupendous return of over 2000% if the rumoured IPO takes place and is successful. The company has been a fantastic success, no doubt, but I do wish they would stop talking total crap.

Friday, 11 August 2017

Buffalo Grid announce new funding partnership with Microsoft

Buffalo Grid raised over £400k on Crowdcube last year. Now they have entered a new partnership with Microsoft's Energy Initiative.

Kevin Connolly, CEO of Energy Access, explained why they had joined up Buffalo Grid - 

''BuffaloGrid fits perfectly as a partner – it provides affordable access to clean energy for mobile phone charging to those who lack it, and it’s doing so through the innovative use of technology. With a solution that leverages the Internet of Things (IoT), data reporting, analytics and advanced services like machine learning, we believe that BuffaloGrid’s innovative use of Microsoft Azure services will be a truly exciting way to demonstrate that technology can be used to accelerate access to energy and connectivity, while building a scalable and sustainable business model."

The full article is available here.

Thursday, 10 August 2017

Seedrs CEO Jeff Lynn takes a bow

The CEO and founder of Seedrs has decided to step sideways to allow a new CEO to take charge.

This will free Jeff Lynn up pursue his 'moonshots' according to the platform. It is not possible to do both and he admits that being a CEO is not really his forte - which is honest.

We will have to wait and see if this changes anything. Whilst Seedrs is considerably better than Crowdcube in all areas, they have recently succumbed to some blatant PRinging and not being entirely open about the facts. Hopefully the new CEO, who is the old COO, will correct this. 

Adding to their wage bill at the top end doesnt seem very sensible at the moment - with all the uncertainty in the market. But if Jeff couldnt manage it, it maybe for the best in the long run; if there is one. One thing that might concern SHs is that whilst the credentials of the new CEO are good, they are certainly not in start ups or SMEs. So you might ask how is that going to work with a company that focuses almost exclusively on funding these types of businesses? He joined in January 2017 so has had very little experience in this sector. Im not a SH so really it's just an observation.

Wednesday, 9 August 2017

Paul Weller's Real Stars are Rare calls it a day

Paul Weller's fashion brand is no more, according to its website. Earlier this year the company tried to raise capital on Crowdcube but failed. Now they have thrown in the towl.

Maybe it really was one of those companies set up to use the ECF space as easy money or maybe he has just made a sensible decision. We will never know. The Crowd for once didnt like the star's idea.

And so rather than let the walls come tumbling down, he has exited quietly via stage door left; still a brilliant songwriter.

Tuesday, 8 August 2017

Troubles at Enistic highlight the poor Crowdcube model

Enistic raised £340k on Crowdcube in 2104. Now they are struggling with mounting losses, huge founder pay packets and resigning directors.

So how does a new company making losses justify a salary of £150k to its founding CEO. Well is cant but there is nothing Crowdcube investors can do about it.

We wrote about Enistic here when they suddenly withdrew their second attempt to take Crowdcube investors for a ride. Thet were not well received the second time.

Now information we have shows why. The CEO, Darryl Mattocks, has been taking £150k pa out of the company by his own admission. YE March 2017, the company reported losses of over £100k - ie his salary. He hasnt broken any laws, its just plain stupid. Investors did not put their money into the company to pay for his lifestyle.

A recent resignation by one of the non exec directors has led to the revelation that things are not well at the company and there have been some interesting goings on. We wont go into these here, suffice to say that they are not in the interest of Crowdcube's shareholders and it also involves a service contract which appears to be against the interests of Enistic.

So we comeback to the title of this post. How can Crowdcube investors assert any from of meaningful influence on rogue directors, once they are shareholders? Simple answer is they cannot. The first Crowdcube pitch raised almost 3 times the amount sort. So investors were enthusiastic. The March 17 accounts show little cash remains and assets total £119k, even after the company raised more finance last year. Someone has benefited but it is surely not the investors.

Some genuine good news for Equity Crowdfunding

One of Seedrs 2016 successes will be able to return investors a 3-4 times uplift on their money. Now that's what ECF should be about.

Blow Ltd raised £1.3m on Seedrs 14 months ago. Now the company has a large retail chain investing £6m. As part of the deal, it is also offering to buy back around £1.5m of the existing Seedrs SH shares. This offer is being made at a company valuation of around 3.5 times the valuation in June 2016. So for a Seedrs SH, a great and swift return. What's more, this is not part of some drag along clause as so often seems to be the case  - it is merely an option, to be delivered on a pro rata basis.

It seems likely that most SH will take the opportunity to off load at least some of their holding, so demand will be strong. The £1.5m set aside will not allow all investors to cut and run at the new valuation, so you could argue this is an option and a mere gesture. But in the current climate we would like to applaud all involved for bothering.

Hats off.

Saturday, 5 August 2017

Innis and Gunn PRing their 2016 success

Innis and Gunn have released a glossy spin on their 2016 accounts, prior to their filing next month. The Crowdcube projections, produced when 2016 was almost complete, beg to differ.

Dont get us wrong, these are very good figures viewed on their own but they are not quite Carling. The way they have been fed to the press, you would expect I&G to have smashed their Crowdcube projections for 2016 - the ones used to raise the funding.

I&G raised £2.34m from almost 2000 investors at the end of 2016. The projections for that year, so mainly historic in nature, showed revenues of  over £15.1m and GP of £8.9m. Again dont forget that these were hardly projections as they were published on CC at the end of 2016. The accounts, now being trumpeted as an enormous success, show revenues of £14.3m or short by £800k and a GP of £8.5m or short £400k. Actually that's not bad certainly for a CC funded business but its still not reached targets which should have been, lets be honest, spot on. If a company with projections where 10/12ths of the year is historic, cant meet its figures, there is little hope for the rest of us.

You might ask why they chose GP as a measure instead of the NP, which is a far more important indicator. We will have to wait and see when the full accounts are filed. Certainly the margin held up well.

It's really far to early to see if the company's new direction will pay off. We were not impressed with the St Andrews unit.

Thursday, 3 August 2017

Glentham Capital raises £250k - at last.

Nicola Horlick's Glentham Fund comes good on promise of £250k investment.

We have written about the Glentham Fund many times on here. Most recently about a promise from Horlick to come good on her promise of a £250k investment. Well now it seems the money is on - or in July, the company issued shares to that value. This appears to be a deal struck with two new SHs, to whom Horlick sold the newly issued shares after buying them of the company at a value of £12 each. What she sold them on for is unknown. With the shares currently issued, the £12 value makes the company nominally worth just over £2.9m. The Seedrs pre money valuation was £1.8m in 2014. 

We doubt the new shareholders paid £12 though. 

Now Seedrs investors just need to see her do something with it.

Recent filings show Cauli Rice giving off mixed messages.

However there are bigger question marks over the product and whether it will ever get where they told Crowdcube investors it was going.

Cauli have raised 4 times on Crowdcube and there other company, Righteous, has completed another 2 campaigns. Righteous SHs have been offered and have in large part taken up, the offer from the founders to swap their Righteous shares for shares in Cauli. At a substantial discount, but better than most failed CC businesses. However its only worth something if Cauli  go on to do the business.

For those who dont know, Cauli have taken the simple process of turning fresh cauliflower into rice step further and created a long live easy cook packet convenience food. So with my business hat on, what are the keys to making this a global success?

First, create an unstoppable brand. This will depend on the product and production being tight and consistent. Word of mouth is key. Target the market sector, in this case young, busy, health conscious 20-40 yo. 

Second, trial and obtain long term listings with the major supermarkets and markets overseas.

Third, sustain a level of sales increases over several years which will cost in promotional spend so raise plenty of cash.

Fourth, new product development based on the original.

Finally a consistent and attainable plan of action, driven by a great team.

Cauli are someway to creating number 1. But they do seem to have a fundamental problem. 

If you scan the reviews of their products from the listings at Morrisons, Ocado and the other large retailers, they are not good, especially the recent ones. The first point is that there are not many reviews and the average is between 2.5 and 3.5 out of 5. Comments on most 1 star reviews, of which there are a high percentage, are extremely off putting and consistent on the bad smell and flavour. For the good reviews, Cauli have a slight problem with a certain Dr, who is to be found on most of these sites. The said doctor is a large shareholder, via CC, in the company. It makes you wonder if all of the good reviews are fixed?

A company trying to sell the volumes that their own projections submit, needs products that deliver. 

Supermarkets will not look kindly on a product review on their site which only rates a 2.5/5. They may have had a bad batch or the world maybe just agin em but both seem unlikely.

Number 2 they have started but with these reviews, will the listings last? The product has many, more healthy, substitutes.

Number 3 - they have consistently disappointed with their sales figures. Over the 4 raises, every time the previous projections have been missed and the new forward figures, slashed. They are yet to begin to see the BE line. Cash has been relatively easy to raise so far but investors might want to query some of the maths. For the January 2017 raise they used an independent company to verify their valuation and projections. This company, Blue Box, was then listed in the same document as their (paid) outsourced accounts and FP department. 

Number 4 - there has been some new development but if the base product isnt actually that great, then developments are pointless. Maybe they have some in the pipeline.

Number 5 - The plans have been changeable. The plans for Righteous were the same - at the time they were promoting Righteous as the next big thing they were also pre planning Cauli. Flexibility is important but firefighting isnt the way to build a successful business - you have to get ahead of the curve. The team are very enthusiastic, loved by their backers and work their socks off. But if my customers are writing -

Horrible artificial taste, nothing like rice texture, went on the lawn. Magpies ate it.(Morrisons May 2017)

Smells and tastes really strongly of plastic. Just thoroughly horrible. Wish I'd read the reviews before buying. Will go back to making my own. (Ocado June 2017)

On opening I expected the typical cauliflower smell but instead I got a very chemical smell I guess this is from the plastic packaging. It translates the the flavour and spoiled our meal. The texture is great compared to others but would never buy again as feel the product is probably contaminated. (Ocado June 2017)

This smelt and tasted like burning rubber. Even covered in a tomato based sauce I couldn't eat it. Had 2 mouthfulls and couldn't get rid of the taste for the rest of the evening. (Sainsburys Jan 2017)

Id be worried. They are not.

Now there are clearly a number of good reviews but to get so many really atrocious ones makes you wonder if this will ever be a popular purchase. I find that you learn far more from the atrocious reviews than any of the others. 

For the record the projected (from raise 3 in late 2015) accounts for YE 2016 showed a £96k profit whereas the real accounts showed losses of over £900k. Projected revenues were £3m and real revenues were £1.5m. It's far worse if you compare the first CC raise projection for YE 16 - revenues over £5m and net profits over £1m. One consistent feature is they have never undersold themselves.

People are heavily influenced by what they hear about a product. It's a very mixed message at the moment. But maybe its like Marmite? That did ok.