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. So investors in companies that have gone bust suffer no opportunity loss according to their metric, they simply lose their money. This not realistic, factual or objective. £10k invested in Bad Ideas Ltd, which takes 3 years to go bust is £10k that could have earned interest or been invested in a growing asset. Altfi wipe this out. Why is that? Its a real quantifiable loss but then that would add to the downside pressure on the ECF figures. Their figures are in the end meaningless.
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.
Dear Rob,
ReplyDeleteI write as the CEO and Founder of AltFi Data. We provide objective analysis on the alternative finance sector. Our calculation engines and methodologies allow originators to provide investors, generally institutions, with a standardised and verified representation of asset performance. The bulk of our franchise, revenues and customers relate to p2p/marketplace lending. However we have also written one report annually, for the past 2 years, relating to equity crowdfunding.
In keeping with everything we do the report - 'Where Are They Now' - relies on objective data. Equity is a long term asset class so it is harder to be definitive than it is for loans (did the loan pay back or not). As such we caveat the report heavily. We verify something that is objectively verifiable - namely the prevailing status of all previously funded companies. We then categorise the companies as: failed; in distress; going concern; up round; down round; exit. After heavy caveats, highlighting the youngness of the sample, and the long term nature of equity returns, we then calculate an IRR based off these categories on both a pre and post tax (EIS) basis. Importantly failures are written down to zero. You seem confused as to what zero means but we write down the entire invested amount to zero. Or perhaps to help you understand, we count the entire invested amount as a negative. Furthermore we highlight that up/down rounds only represent a change in value on paper. And if we can't verify the valuation of an exit we mark it at par.
This report is made up of objective, quantifiable facts. We highlight where the methodology struggles for the reasons already outlined (young sample / long term asset class). But these are not assertions. These are facts. Our conclusions, which are watched carefully by the regulator, have also highlighted limitations of existing disclosures and recommendations to improve transparency.
Furthermore, when the reports authors have written and commented on the sector in a personal capacity, we have exclusively been critical, and highlighted ways in which this industry might improve.
I find your subjective conjecture relating to the sector to generally be frustrating. I share many of your concerns. But I wish you could build a case on some information that is quantitative and objective. Be that as it may. I would, however, ask you to desist from extending such conjecture to my company.
Yours sincerely,
Rupert Taylor
Thanks Rupert.
DeleteI cant agree with most of what you say and will leave it to readers to decide - ours are not stupid.
Rupert - thank you for trying to send another post today in which you include the link to your article. We are not going to post it as we dont approve of your self promotion tactics. You will not be surprised. Had there been any addition to the argument then we would have. We have plenty of evidence that is both quantitative and objective - studies of over 300 Crowdcube funded businesses to start with, many discussions with investors, commentators and other platforms in the sector, for seconds. They agree your methodology is nothing short of ridiculous. But then you know that as well.
DeleteDear Rob,
ReplyDeleteI write as the CEO and Founder of AltFi Data. We provide objective analysis on the alternative finance sector. Our calculation engines and methodologies allow originators to provide investors, generally institutions, with a standardised and verified representation of asset performance. The bulk of our franchise, revenues and customers relate to p2p/marketplace lending. However, we have also written one report annually, for the past 2 years, relating to equity crowdfunding.
In keeping with everything we do the report - 'Where Are They Now' - relies on objective data. Equity is a long term asset class so it is harder to be definitive than it is for loans (did the loan pay back or not). As such we caveat the report heavily. We verify something that is objectively verifiable - namely the prevailing status of all previously funded companies. We then categorise the companies as: failed; in distress; going concern; up round; down round; exit. After heavy caveats, highlighting the ‘youngness’ of the sample, and the long term nature of equity returns, we then calculate an IRR based off these categories on both a pre and post-tax (EIS) basis. Importantly failures are written down to zero. You seem confused as to what zero means but we write down the entire invested amount to zero. Or perhaps to help you understand, we count the entire invested principal as a negative. Furthermore, we highlight that up/down rounds only represent a change in value on paper. And if we can't verify the valuation of an exit we mark it at par.
This report is made up of objective, quantifiable facts. We highlight where the methodology has weaknesses for the reasons already outlined (young sample / long term asset class). But these are not assertions. These are facts. Our conclusions, which are watched carefully by the regulator, have also highlighted limitations of existing disclosures and recommendations to improve transparency.
Furthermore, when the report’s authors have written and commented on the sector in a personal capacity, we have exclusively delivered criticism, albeit in a constructive manner, and highlighted ways in which this industry might improve.
AltFi Data is not a ‘promoter’ of ECF. Nor is our analysis ‘crap’. We are in the business of presenting objective data based on quantifiable facts.
I find your subjective conjecture relating to the sector to generally be frustrating. I share many of your concerns but I wish you could build a case on information that can be objectively proven. Be that as it may. I would, however, ask you to desist from extending such conjecture to my company.
Yours sincerely,
Rupert Taylor
By all means...
ReplyDeletehttp://www.altfidata.com/wp-content/uploads/Where-are-they-now_2016.pdf