Craved raised 130k on Crowdcube just over a year ago. That was at a value of £900k. Now they are back for more at a valuation of £1.6m. They will now be part of Beauhurst's CAGR success data.
But hold on. Craved predicted revenues in excess of £1m by 2017. They have delivered £147k and this was with growing 100% in each of the last 2 years! This is a core claim in their new CC pitch. And its true. But if you compare it with their previous claim - they have failed miserably. So how can you justify the valuation almost doubling?
You cant. It is pure fantasy for £147k revenue in 12 months, after 3 years 'growth,' to give a company a valuation of anything over £500k and this sector is highly competitive. £1.6m is a travesty. One of the pitch's big claims is that their corporate sales have gone from next to zero to a little more than zero.
Craved Crowdcube 2016 (May onwards) pitch - Revenues real and imagined -2015 - Actual £27k Projected £80k - this was 'projected' well after the year end so how they are so far out is staggering. You do have to ask about CC's DD here!!
2016 - Actual £100k - this is our estimate based on 2015 and 2016. Projected £315k
2017 - Actual £147k Projected £1m.
2018 - ??? but YE March 18 Projceted £2.3m
What you can do is play the Crowdcube game. You dont tell people that you are off projection by over 7 times. Instead you give them the truth about how the revenues have grown 100% each year. If you dont have access to their previous pitch - how would you know? It's the truth no doubt but it hides the real information. Smoke and Mirrors is how Crowdcube run their own business.
Whats more compelling here is that the 2015 'projected' figure of £80k, which turned into £27k for the full 12 months, is essentially proof that either CC dont bother to check these things or that someone lied. The company's YE is March. So when the pitch was live on Crowdcube, Craved would have known that their 2015 figure was out by over 3 times. For whatever reason, no correction was made. Surely if it had been, this company wouldnt be back here again.
CC investors dont see this picture - because it is concealed. They just see 100% annual growth.
Why would anyone believe another figure Craved produce? £140k is around £11,500 per month. It is so small that in two years they have failed to even pressure test their model. Would you buy shares in your local corner store and expect a return? It probably makes a living for the owner, but it's not an investment. He wouldnt ask you for money.
I have no doubt the good folks on CC will back this business and we will see the usual debacle. It's the norm.
This does make a total mockery of Beauhurst's much trumpeted CAGR calculation. Their claim means any company that has returned for a new round at a higher valuation, adds to its investors' portfolio value. Even though this value isnt real and as in this case, isnt based on anything other than the platform's refusal to run a down round.
Of course all of the above is just our opinion. We are generally right and we can be certain that we are more right than Crowdcube when it comes to selecting their lemons.