Tuesday, 30 January 2018

That old chestnut Red Advertising has spent all your money (again) and needs more now on Crowdcube. But the good news is this time it really will work.

Red Advertising, now Recruitive Software, are record makers. This is their fifth Crowdcube pitch - the previous 4 yielding £885k. Losses to date are £2.3m.

Richard Clarke invented the company. In the last raise in 2014, he was adamant that his projections were sound. They were not.

In 2015 he attempted to get a second Thin Cats loan for £275k. In those projections in 2015, Richard told people the actual turnover for YE May 2013 and 2014 was £95k per year. However in the Crowdcube 2014 raise, he stated that the prior six month period (historic and July to December 2013) had a turnover of £180k. So in six months he managed a revenue twice the size of the stated revenues (historic) for the full 12 month period. Something that is unlikely. The 2014 revenues were supposed to be over £700k; two years later the company has still not managed to get to £700k.

I find it hard to understand how any of this company's projections can be taken seriously. By now they were supposed to be making heavy profits on turnovers of well over £3m. Yet the real figures show continued losses and revenues well short of 7 figures. 

You have to consider that since 2012, Crowdcube punters have given Richard a job and salary for 6 six years. Whilst the company has come some way, it is in no way far enough to justify this laughable current valuation. 

So, he has done it 4 times - can he make it 5? You bet.

We have given various warnings about Red - here 


  1. The legal 'team' (one man band) was deliberating whether they should allow Red Advertising to advertise again back in 2014. I think the conversation went something like this - "with the backdrop of 88 delicious is it a good idea to allow companies to raise and raise again despite showing little traction". Must have decided it was okay.

  2. they keep changing their name which is really made to mislead investors

  3. It's not unusual for a tech start up to under estimate time to market and over estimate early revenues. This is more so challenging for a SaaS business which is effectively a subscription based model. Client acquisition costs will be high yet not reflective immediately in revenues due to the nature of the client paying an ongoing subscription and only partial revenue being recorded in its financial year. The harder the business hits growth the deeper the initial costs will be for client acquisition until it passes the tipping point.
    As a result a SaaS business will typically have a client book value significantly higher than it's collected revenues. As I see it this business follows a typical pattern of other SaaS businesses in the market. Moreover, the business is securing some good brands and retaining them and as such imo will ultimately be a major Crowdcube success story - time will tell