Thursday, 26 July 2018

Two very different approaches to failure from Syndicate Room and Crowdcube.



Equity Crowdfunding needs a more holistic approach and Syndicate Room shows how this can be done. Crowdcube - time to wake up.


We received an email a couple of days ago from the Founder of SR - Goncalo. He said in it that one of the companies funded via the platform, Opun, had been sold to John Lewis but that this meant a loss for shareholders. The common cause was a lack of cash and inability to raise more. We are not commenting here on the way the company was run or the debts it built up. 

The email ends 'Personally, I’d love it if we could all be open about the realities of startup investing. It’s essential for the survival of this industry.' We would agree.

This email was sent out to all SR clients not just Opun's investors. It shows a real attempt to clean up what is fast becoming a swamp. King of the Swamp is without doubt Crowdcube.

When Crowdcube businesses go bust or are sold at a value less than investors had paid, Crowdcube are generally nowhere to be seen. A PR is issued and quietly slipped under a few doors, stating that these kind of investments are high risk and it's not their fault. Investors receive no communication. Crowdcube offer no help. You are on your own, sucker.

Which way do you prefer?      

13 comments:

  1. Ross Middleton26 July 2018 at 02:14

    I was one of the investors in Opun. They were a great company, pivoted a few times and struggled to scale but I honestly believe they would have got there eventually. JL made a great buy IMO

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    1. Interesting though that such a good company can get itself into such a mess. It hasnt really been sold to John Lewis. It had to to go into administration and then JL picked it up for next to nothing - the company couldnt be sold any other way. JL might pick the creditors but that is still being negotiated. Investors would appear to have lost the lot. So overtrading ie extending yourself beyond your cash limit has yet again been encouraged by ECF and resulted in a failed company - see Sugru and Oppo Bros as recent examples. There are plenty of them. It is bad bsuiness.

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    2. And on the same note this is where real financail planning/modelling comes in. Not what we see so often - hyped financials showing soaring sales on minimal costs with juicy profits. What that actually ends up being is steady sales, on increasing costs with BE in the distance and the cash pot run dry. That is why projections DO matter. Do not believe Seedrs founder Jeff Lynn when he tells you that they dont.

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    3. They also raised money from Aviva, so not just crowdfunding.

      http://www.cityam.com/270758/avivas-invested-another-fintech-startup-leading-104m

      The speed of the administration and subsequent scoop by JL makes me think JL had been engaging with Opun for a long time. Stringing them along maybe? All speculation on my part

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  2. Goncalo de Vasconcelos26 July 2018 at 02:34

    I couldn't agree more with Ross.

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  3. Sorry Rob - are you able to show the entire email? I fail to see how anything in this post shows SR as being any "better" than CC... They both warn people to invest aware, and they both tell investors when their companies go bust. Not sure how sending it to the entire customer base changes much - anyone who is a genuine customer of CC would have gone through their questionnaire at signup, which makes these risks pretty clear. Anyone who clicks through them just giving the "right" answers to get an account only has themselves to blame, in my view. Not saying CC are perfect - far from it, but it would be good to know where SR actually differ - unless you are just doing this post as an advert - I know you have links to SR and hate everything CC does, so maybe that's it?

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    1. Pete - do you have any examples of CC sending emails when their funded companies goes bust? We get numerous requests from CC investors asking for advice and news on CC failed companies and they tell us they get no help or information from CC. Maybe you have proof for your claim? I believe that SR are trying to get this right. I know that CC havent even tried. Here is the copy of the email FYI -

      Hi Rob,

      Opun, which raised £985,000 with the help of SyndicateRoom in August 2015, has very recently sold to John Lewis Partnership. While most would think an acquisition would be good news for investors, this is not always the case. Situation depending, companies can sell for a lower valuation than their last funding round and the result is that investors lose money. This was the case with Opun.


      Cash is king

      Despite a very attractive proposition in the home-improvement market, fast growth and revenues of £3.2m last year, Opun – like almost all early-stage businesses – was not yet making a profit. Unfortunately, it wasn’t able to raise enough capital to sustain growth and finally had to sell for less than it may have some day been worth.

      This is a shame as I personally believe that the company was on the right track to achieve something amazing.


      Lessons for the industry

      Investors should never forget the high level of risk involved in investing in young companies and we should all expect to lose money on some of our investments along the way.

      Unfortunately, a lot of investors I speak to are tired and frustrated with how some promoters spin these stories or simply brush them under the carpet. Let’s make no excuses: investors in Opun will lose money on their investment.

      For those that want to read the full administration report, it has now been released to the public and you can read it here.

      Personally, I’d love it if we could all be open about the realities of startup investing. It’s essential for the survival of this industry.

      All the best,
      Goncalo

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  4. Yes - about half my companies send all their updates (good or bad) through Crowdcube. In my view, the "lessons" on the bottom of this email are already well-known, and to put all that on the bottom of every email about a company failure would be over the top. I don't see that CC are hiding anything here.

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    1. And you offer no proof. The blog is full of examples of Crowdcube not even knowing companies have gone bust let alone informing SHs. Your comments are wholly unsubstantiated - who knows if you have even invested via CC.....ever?? Back this up with some evidence then we can talk.

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  5. Hmmm. Well you have a very different picture than the one many investors and companies give us. Still there is always an exception to prove a rule. Tell me - what note did Crowdcube send around when Sugru lost its investors so much cash? Or any of the other many recent failures? Im afraid I chose not to believe you. My experience over 7 years tell me what you say simply is not true. Not sure why you are saying it - Crowdcube SH?? Poor you.

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  6. Sugru are the only failure I have had so far. They emailed me directly - why would I need CC to do the same?

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  7. Well you might like to know what really happened? But maybe not. Sugru is not done and dusted yet. There is clear evidence that the second CC raise chose to withhold important information about the company's bank loan - which was the eventual reason for their fire sale. I know many investors who want to know the truth but have been stone walled by Crowdcube. Why wouldnt you care??

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  8. Having been in a few rounds on CrowdCube (EarlyBird, Mondo, Universal Fuels, among others) I must admit that when a company does fail, which can be the case as we all know, the message isn't very clear nor does it really give a good explanation.

    Understandably, there isn't always a clear failure e.g. manufacturing costs sky rocketed but some compassion for investors would be welcomed. Good on Goncalo for the plain english.

    As for Earlybird and Earlybird Tea! Well, I felt that was a kick whilst we were on the floor.

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