We think this is a first. Having not delivered to 8500 Kickstarter backers, Kokoon are valuing themselves at £6m and raising £750k on Crowdcube, using the 'sales' on KS.
Well in fact that isnt true as they have pre raised (off CC) £625k of this from two existing shareholders already. You know, the usual Crowdcube games.
What's quite astonishing, are the 2100 comments on their Kickstarter campaign, which enabled them to raise just short of $2m in 2015, to develop their headphones. More than 2 years later, despite numerous false dawns; they have not delivered an item. You can imagine what the comments say but here's a link - https://www.kickstarter.com/projects/1861630723/take-control-of-your-sleep-with-kokoon-eeg-headpho/description
We never thought anyone would have the balls to try this on. In fact we recently advised a company wanting to raise £2m via ECF, that until they had fulfilled their KS obligations in full, we wouldnt deal with them. And in our opinion nor would investors. And they had delivered half of their commitment.
It makes the recent Retro Computers Kickstarter fiasco look insignificant. Maybe they will be Crowdcube's next tempting offer?
So the Crowdcube pitch states - 'Last year (to the 30th of June), we had £1,114,618 in sales through our Kickstarter campaign'.
This poses an interesting Q. What is a sale? Surely a completed sale has to include both sides of the deal. Cash going one way, which we have here and product delivered satisfactorily, the other. This second half has not taken place and in fact it turns out the product isnt even ready to ship. It is still undergoing testing according to the KS updates dated 7 Sept 2017 and promised delivery dates continue to slip. Reading the updates and from our considerable knowledge about how badly these things can turn out, we would be highly suspicious of these promises. Refunds have already been demanded - so you could be looking at a debt of over £1m rather the trumpeted sales above.
The bottom line is - Kokoon are claiming that the cash they are raising is mainly for product development ie forward looking. It's our guess most of it will be to produce the pre sales already accounted for. Or to put it another way, to fill in the large black hole.
Joto is trying to do exactly the same thing at the moment
ReplyDeleteNot quite - their KS campaign was launched in March 2017, not more than 2 years ago and they dont have people demanding refunds. Joto are also not claiming that they had revenue of over £1m when from the looks of it this is just as likely to become a massive debt. Although i do agree that this is a worrying trend by CC who you have to say are getting increasingly desperate. Dont forget they need monthly funding completions of over £6m just to break even. That simply isnt happening.
DeleteJoto is trying to do exactly the same thing at the moment.
ReplyDeletei fear they (crowdcube) are waiting for seedr to buy em up.
ReplyDeleteBasic accounting. This is Deferred or unearned revenue: http://www.investopedia.com/terms/d/deferredrevenue.asp. They can't recognise this revenue (more importantly can't advertise this on CC) without fulfilling the obligations. This is a very misleading statement. As you quite rightly say - it should be sitting on the balance sheet as it's an asset with an equal liability. Rolls Royce were hammered for this under IFRS.
ReplyDeletePlus they have presumably paid CC extra to be able to send the CC email list an unsolicited email to inform them of the raise. I received one today.
ReplyDelete