Sunday, 19 August 2018

The upside down world of the EIS incentive as Redemption Brewing Co fails to gain traction on Crowdcube



What a perverse world we live in. Brewers can make up all sorts of stuff about the number of units they operate, their turnover and plans but if they have EIS they almost all get funded on Crowdcube. 


Yet a decent brewing business like Redemption, with a solid existing core and Ebitda positive accounts, which has no EIS due to its trading for more 7 years, is failing to get traction on Crowdcube.

It makes you wonder. Is getting 30% back on an investment which will never see a return and will probably fold completely, really better than investing in a company already over its teething stages but without that relief. Common sense demands the answer to be no. Clearly losing all of your remaining 70% investment isnt a good plan.

I fail to see why there is a 7 year line. Young businesses are far more risky and there is a far greater chance that the EIS reliefs will be wasted. No one checks to see if these start ups are really sensible, with sensible plans. Yet a business in its 7th or 8th year, which is producing positive Ebitda, has no access - even though it is a more sensible investment and is therefore a better use of taxpayers money. 

We really need a system that is less rigid - a 7 year cut is plain stupid. A case by case test should be allowed. I know there is an 'allowance' made for companies that can prove their new product is for a  new market, even if they are more than 7 years old but I have yet to hear of a company successfully using this option with ECF.

I havent looked in any detail at Redemption's plans.

...............Well I have now and I can see there are a few other reasons for the lack of traction - like large losses and large debts. Ah well, they dont tell you that on Crowdcube.

Saturday, 18 August 2018

Crowdcube persist with its very misleading 'invested pledges' numbers. Now over £500m. So what?


We are sad to report that despite the whole equity crowdfunding sector crying out for Crowdcube stop it, the UK's largest platform by failures amongst other measures, is persisting with its pointless 'invested pledges' PR. It now tops £500m apparently. 


Crowdcube invented this number and Seedrs soon followed suit. What it means, in plain English, is that this is the total for all the 'money pledges' on the platform for failed and successful pitches, ever. As the failed pitches are a far greater number than the successful ones, you can see that £500m is a very long way off the money that has actually been invested. 

So why do they do it? They started by trying to get away with calling this simply the total 'invested' with a small footnote explaining the above. Obviously after we pointed this out as nonsense, the FCA have asked them to be less misleading. Well £500k in pledged investment is less misleading but it is still misleading. Take for example the headline for this piece of poor journalism  -


The internet picks up these headlines and they tend to become facts. £500m has not been raised. 

It is quite obvious why Luke Lang uses this tactic - £500m is far more impressive figure than the real invested figure. But is it relevant - the amount pledged? Well not really. It is an interesting metric for internal use but is meaningless and more importantly highly misleading to the casual on looker - who might then be tempted to have a go. It's a lot like an architect punting for business by telling clients he has X million of business on his books. Actually, he has none but he has quoted for X million and all the tenders have failed; because he is a rubbish architect who over charges.

In the same article above, they state that 60% of Crowdcube investments come from HNWs and sophisticated investors. Impressive .......until you realise that both of these categories are invented by Crowdcube as part of the kindergarten signing up process - it's self assessed; you just tick a box. Any old box, no one checks. Which makes this claim, which must have come from the Crowdcube PRing Dept, total paff. 

So nothing new there. 


Monzo - £1.5bn. Really?



Hats off to Monzo. They have joined or are about to join, the hallowed ranks of the Unicorn. The unicorn is a mythical creature that no one has ever seen.


Caveat - like Brewdog, Monzo was a big name before it came to Crowdcube. Investment at the £30m valuation in 2016, was a no brainer. The company has done pretty well since and this current round for £150m is certainly looking good. 

I wasnt going to write anything about Monzo's latest funding round for £150m, which if it completes, will place them well into Unicorn territory. But some goading from a Twitter follower who thinks he's rich, has stimulated the juices.

As anyone with their head facing the right way, knows, this and all of these 'valuations' are completely spurious - apart from as a gauge as to how crazy the world has gone. Monzo shares - the ones this twit has bought (£5k's worth from all three Crowdcube rounds) are worthless today. There is not market to trade them. There may be one soon but as of today there isnt. So he cant realise that £50k he is sitting on. He might be able to do a private deal for say £10k.

With very strong headwinds heading this way in fronts that none has ever witnessed before, 2019 will be a true test of the Monzo value. We have all seen how increasing valuations mean nothing - just look at Sugru. 

My best guess is that Monzo will be worth much more than the £30m when it first appeared on Crowdcube. How much more is a pure guess. I doubt it will be £1.5bn. What would it take for sizable numbers of their current 800k plus users to emigrate to Revolut or perhaps a new player not yet visible? A technical glitch or some small hacking scandal? Not much. Evidence is that only a fifth of the company's users place their salaries with with it - although this is growing. It seems like a pretty sandy foundation for £1.5bn. Current losses running at £33m mean new money will almost certainly be required. Like Deliveroo and Revolut, the Monzo Unicorn isnt fussed about profits - customer acquisition is the game. But at some stage it will have to be. Then of course there is always the rise of the established banks, who are just now waking from their techphobia slumbers. Most of them already have the numbers and the profits. Image is their problem. The race is on. 

What the twit was also trying to say was that this mitigates all of Crowdcube's failures. Really? It would certainly go someway to removing the losses - the investment in Monzo via Crowdcube is worth ~£4.2m and this is now 'worth' £84m or roughly a years worth of Crowdcube investment at the current rate. But the losses to date are not the point  - as we have consistently stated. It's the number of zombies that matters plus the closed companies. Closed companies are around the 60-70 in number but add in the zombies and that number flies to around 200 plus. That loss when it materialises, will sink the as yet fictional Monzo uplift. 

Wednesday, 15 August 2018

When Brewdog met St Andrews Brewing Co....and Innis and Gunn ran away.



Is all well in the Beer Garden? St Andrews Brewing Co, currently on Crowdcube with over £500k completed of their £400k campaign, are now opening another new pub in St Andrews; where they already have one. A few yards down the same street, Innes and Gunn, another Crowdcube alumni, have upped anchor and left their St Andrews pub ambitions in tatters. 


The purchase of the new lease by St Andrews Brewing Co is confirmed in the Dundee Courier here 

This is interesting on a few levels. 

Firstly St Andrews Brewing make absolutely no mention of this new unit in St Andrews in any of their Crowdcube plans - the ones used to entice £500k of investment. But the pitch is live and I'm sure investors would like to know more. In fact this new opening was mentioned in the press in April 2018. There is a very early update on the Crowdcube pitch but the plans for this 'new' unit are not included in any of their financials, PD etc.

Why, for instance, do they believe that a new unit, in such a small town, is a good use of investors new cash, when they already have one just 4 minutes walk away? Surely this is information that should at least be on the updates page (see correction above)-  it is a material fact in the investment decision. This is yet more evidence that investors are not given the full picture. Is this new lease and new expenditure on its opening, in the Crowdcube financials? Amusingly, the previous owner of the pub that will be St Andrews Brewing's new pub, has been given a 'senior management' role with the company. Checking on the accounts for Rascals doesnt make for good reading if you  are now investing in this pub - which 600 of you are. But hey, maybe St Andrews Brewing can achieve something with it that the previous manager couldnt - make some money. 

A few yards down the same street, Innes and Gunn, who opened one of their new pubs in a truly awful location, have given up. We knew they would. Innes and Gunn used Crowdcube to raise over £1m in 2016. The St Andrews unit would have cost them plenty to fit out. Since the building was renovated, it has housed a failed restaurant and now a failed pubeatery. St Andrews is not an easy town to operate retail - ask anyone who lives here. Units change hands regularly, apart from a very few stalwarts. Seasonal swings, the Links own retail operation, including large F&B offers and discount hungry students, all make a tricky mix. 

Now to put the final twist on this story. I know, via contacts in Aberdeen, that the greedy Brewdog have been looking to open in town. I also know that they looked at a site that is now to be run by St Andrews Brewery. The rest is as they say, history or is that hearsay. It probably has something to do with money. 

Can you really keep Brewdog out of a town? We think not. There are many locations in St Andrews that the dog could open in, in a swish of its mohawk tail, by offering a healthy premium. So are St Andrews Brewery really going to operate all of them? 

Monday, 13 August 2018

Glentham Capital - Nicola Horlick's crowdfunded disaster - update



Nicola Horlick's daughter Alice recently got married to Nathan Engelbrecht. Around the same time, Nicola transferred a chunk of her shares in disfunctional Glentham Capital to Nathan and her brother. A wedding present perhaps?


We have written a lot about Nicola Horlick and the Glentham Fund - here. It used Seers to raise over £400k a few years back and has done nothing since except spent it. 

It seems someone bought £250k of new shares in Glenthan in April of 2017. This is the amount Nicola Horlick owed the company. She had said it would not be paid in to buy more equity. But she appears to be new owner of 20k shares.

Alice runs Aevha - a company that used Crowdcube to raise £150k in 2015. Alice's then boyfriend and now husband is also a director. Accounts are due out next month and they are supposed to show the company in profit. New money was raised recently, which wasnt in the projections but without which the company would have been struggling. Strange increases in 'other reserve fund' are unexplained in the last accounts. Bottom line is very thin. 

Glenthan Capital itself seems to be pointless. It made another £150k loss for YE Dec17 and has no money. The fund it was intended to set up, is very reluctant to come out and be seen.

What's next - anyone's guess but I wouldnt expect it to be too good. 


Saturday, 11 August 2018

EEEEEEEEEMove get weird on Crowdcube.


Emoov recently amalgamated with two other loss making online estate agents, then they came back to Crowdcube and raised over £1m. The valuation during the raise was £102m. Now they have sent out an email revisiting this valuation and telling SHs the valuation is to be £51m - adding that this is good for them as they can have twice the number of shares. 


Hmmm. What is 2% of 0? The same I think as 4% of 0. 

In 2015, when Emoov raised £2.6m on Crowdcube, they were valued (by Emoov) at around £22m. So even £51m, albeit a paper value, is double this.

We wrote about their last raise here 

We wonder if the management have been told by institutions that £102m is way too rich for the IPO they say will happen in March2019 - even though Emoov themselves predict this will be a £130m. Halving your valuation after you have raised £1m  - however you did it - is crass. It suggests the management havent a clue.

If anyone had any doubt about the ridiculous valuations that Crowdcube allow/encourage, then this has to put it to bed. Crowdcube investors accepted £102m and are now, just weeks later, being told it's £51m. You couldnt make this up. 

Otti Prams joins the logjam of Crowdcube funded companies going nowhere.



Otti Prams raised £89k on Crowdcube in 2015. For once ambitions seemed sensible - well for their failed 2016 second raise at any rate. Unfortunately even sensible seems to be beyond them.


More losses for YE Aug 2017 beg the Q - why were they ever on Crowdcube? These latest accounts have one line that reads like a certain death sentence -

' During the period the company carried on trading, selling to House of Fraser and independent shops.' Eggs all in one pram?

We predicted this 2 years ago - http://fantasyequitycrowdfunding.blogspot.com/search?q=+otti+prams

This is a classic small business with zero chance of scaling, so zero chance of a ROI for any investors apart from the owners. It is a fine business for those involved but it really shouldnt be allowed to raise funding from the public using, what seemed sensible but turned out to be, fantasy projections.

Thursday, 9 August 2018

Ubrew and I'll make up the stories



When is a brewery not a brewery? When the lease was never signed. Ubrew spent a lot of time last year talking about their new unit in Manchester. Well there isnt one. 


We wrote about it here.

Pictures even appeared of said new Manchester unit but these turned out to be the existing London one. This northern unit was due to open by mid 2017.

So what happened? Well Ubrew were unable to explain the fact that news put out by at least two rags said they had opened up north. Whats more the management of Ubrew were quoted as saying that a large percentage of the capacity had already been sold. This was in April 17. Today they do not have a unit open in Manchester. 

Something somewhere has clearly gone wrong. Now Will Horsfall has left - he was half of the company. The latest accounts show another loss of £102k which was a surprise as the London unit was reported as being oversubscribed. 


Wednesday, 8 August 2018

Workabode files small losses for YE November 2017 beating their Crowdcube projections


Workabode raised a total of £277k on Crowdcube in 2014 and 2015. Crowdcube projections show them making a £7.4m profit for YE May2018. 


There are numerous legitimate reasons why a new company might miss its projections. We have covered them on this blog as many times. Delays in funding, delays in technology are just two. Workabode has in fact beaten its projections for 2016/17 - makning a far smaller loss. 

We asked Workabode (Ex One City) whether they could fill in the blanks left by a very minimal accounts filing. They were aggressively sure they couldnt - advising they would 'come after me' if I wrote anything 'onerous' about them. Odd use of the word onerous I thought. 

So we are no clearer - maybe the next accounts will reveal a £7m profit. Certainly the projected plans show the company leaping from a £500k t/o to a £10m t/o in the last 12 months, with the next 12 producing £28.5m in revenues - all on a GPM of 93%. All of this achieved with the minimal inputs, a small SM presence, a website that doesnt do anything and what appears to be a large (projected) short term loan. Gold Rush.

Mind you, whilst Workabode has a tiny following on Twitter - who follows nothing - The Irish founder, Trevor O'Hara, has a healthy crowd for his continuous stream of banal business school retweets. That's Twitter for you. He has apparently written a book(he lists himself as an author but maybe that's the Irish humour) but we couldnt find it. As a self proclaimed Irish serial entrepreneur, we have struggled to locate anything with substance. Maybe that is also an Irishism. Still as he loves to tweet, failure is all part of the entrepreneurial journey. Something we can agree with.

You can catch more of Trevor's wise musings here  http://trevorohara.com/about/ . Odd use of language (as in onerous) but gives you a flavour of the man.

Previous talk of an exit by the end of 2019 is still possible. The 2014 raise highlighted the following - 

One City aims to roll out at airport locations too. We already own the IP for a 5.2m private pod with fully reclining seat, flat screen TV and Singapore Airlines-type service levels. So we are well positioned to target business travelers who frequent the top 75 airports in the world handling more than 15 million passengers annually.

We couldnt find this referenced in the accounts which show just £3,600 of fixed assets. That would be some write down over 3 years.

Our best guess is that the company needs to up its income a tad to stay balance sheet positive. We wish them luck. They told me they keep their shareholders well informed. So if any of you wish to comment or contact us on this, then please do. 

Tuesday, 7 August 2018

Awesome - A Crowdcube pitch with merit.



Well Punters - it is not often we slap a Crowdcube pitch on the back when it's live. But Awesome Merchandise gets one from us.


The company has been going since 2005, has continually made incremental profits and now has an established position from which to launch ambitious plans. Its valuation is sensible and you might even say generous, given the level of most pitches on here.

Barriers to entry are there based on the time it has taken to build up their trust quotient. This trust is founded on the IP of their staff - their creativeness - which cant be directly replicated. Competition in the US may be stiff.

Answers to queries are well thought through and robust. These guys have a plan and it makes some sense. There are risks of course but compared to most, this one looks interesting.

Please dont disappoint me by letting it fail! We had no hand in prepping them so this is a totally objective view.

Of course short sighted punters will duck out because of the lack of EIS - on the time limit. But more thoughtful ones will realise (I hope) that investing in something a little more solid than a beta app or a fad brewery, with EIS, is a better option for a return. EIS after all only limits your loss or marginally inproves your return if there is one. I think somewhere along the line, investors have forgotten this. The trade off is stability versus tax credit.

Id be very interested in your opinions.

Saturday, 4 August 2018

Hats off to Crowdcube - they just may have cracked it.



At the crucial moment when Crowdcube are sure to be asking for more cash - you can tell as their PR has been ramped up - the ECF platform is completing enough funded campaigns to generate a BE situation. For this month at any rate. 


Despite out best attempts to warn people and despite mounting evidence that they will not see any of their money again, the Crowd is reaching deep and if you count the over funding campaigns on the platform, it totals around £15m currently. This truly is a first and is a major breakthrough. Annualised this would get them to the magic figure of £180m which at a 4% commission, is BE nirvana. And this does not include the bizarre US campaign they have listed.

One Q you have to ask is just how much of this money is on/off commission? For example VITL were going nowhere with their £400k campaign until this week, when Nogra Group put in £600k. The Crowd in this instance has put in less than half of the target. Is is likely that VITL would be paying commission on this £600k? We think not. 

We know that Crowdcube have put a lot of flex into their commissions - smaller companies pay full wack, allowing the larger ones to pay less or nothing (reportedly). So that would explain their low 4% overall commission when they charge a 'fixed' rate of 7%. 

So despite the total lack of returns and exits and the increasing failures and zombies, all catalogued here,  the Crowd are fully behind the platform. It makes you wonder. What would it take to change this behaviour? 

Friday, 3 August 2018

Newgalexy break into profit - against the Crowdcube tide.


At last, some good news - well relatively. NewGalexy, now Contractpod Technologies, have shown their first profit - a magnificent £50k. Unfortunately, the Crowdcube projections showed them with a £2.6m profit last year, so we shouldnt get too excited. 


But hey, it's not another whopping loss and it means things are moving, albeit at snails pace, in the right direction.

So a cautious hats off to NewGalexy.

Seven Bros Brewery fails to meet its Crowdcube promises



Glass half full or half empty, you still need to make a business deliver. Seven Bros Brewery on the merry bandwagon of the craft ale explosion, persuaded Crowdcube investors to part with £200k in 2016. The first real results since, show the company is either way off track or has taken a different line.


Its a familiar tale but not one we ever make up. This brewery showed investors a 5 times increase in turnover from 16 to 17, resulting in a handsome profit for 17 of £260k. These accounts show a loss of £60k fro the year, with a low level of activity. 

Sales have to pick up or more money will be requested. This sector sure is getting crowded!

Righteous continues to make losses and is now in deficit.


Righteous raised twice on Crowdcube. They promised the earth and delivered nout. Jam tomorrow contracts that disappeared and sales figures that were mere dreams have left this once Crowdcube sensation, in ruins. 


Well that is one way of looking at it. Alternatively you could say that the couple who worked their socks off to make this venture go, had their heads turned at a crucial juncture by another venture, now called Full Green aka Cauli Rice. No doubt about their work ethic but there has to be considerable doubt about their ability. 

At a crucial time for Righteous, they decided to set up this new venture. Full Green is trading but has not got close to the promises made.....yet. Expansion in the US is critical.

Back to Righteous. Whats next? Closure most likely or a fire sale. Shareholders were at least given the option to exchange their shares for ones in Full Green - which is an honest and decent approach you dont see very often in this space. 

So whats happened at Energie Corp since its Crowdcube success in 2016?



Energie Corp run cheap fitness clubs and are well versed in the dark arts of franchising. They took £630k off Crowdcube investors in 2016. Spectacular growth forecasts where backed up with impressive opening schedules and unit numbers to match. 


Since then, the company has launched a rebranding of its Fit4less name and gone for Energie, with a cheeky little french twist. Reviews of the sites are not good.

What is curious is that the Crowdcube FCA verified section of the pitch in 2016 said this - 

Our track record
Over the past 13 years, √©nergie has built a fitness network spanning England, Wales, Scotland, Ireland, Latvia & Poland with 93 clubs trading, a membership of over 110,000 & network turnover of c£26m. Our key achievements to date include:
  • UK Market leader in fitness club franchising and third largest fitness brand measured by clubs trading
  • Over 150 franchises secured, 93 clubs trading, 31 in the current pipeline for opening and new franchisees coming on board at a rate of 40 per year and growing
  • Largest fitness club operator in Ireland, with 12 clubs and c. 21,000 members
  • Multi-award winning brand in both the fitness & franchising sectors, including wins & finalist positions in the UK Active Flame Awards, HCM Members Choice Awards & BFA Franchise Awards.  
  • Demonstrated transportability of our brands with with 21 clubs across four countries outside of England & Wales

The latest filed accounts, with accompanying statement full of how well they are doing,  said that they had 11 clubs in Ireland, one has been lost in the mists, 6 in Scotland and 1 club in Poland. A total of 18 which means they have lost 3 from the 21 declared above. By the end of the year, they state that they had 88 clubs across all of their networks. 

Now either I have gone potty and all of you are sane or vice versa. I read this as a considerable fall in the number of clubs operating since Crowdcube allowed statements on their platform giving the number as 93 with another 31 in the pipeline in 2016. So by now a minimum of 124 - not the 88 in the accounts. That is some difference. Other numbers on the Crowdcube platform also make it look as though things have not gone to plan.  

In a similar vein the accounts show further losses where the projections showed a healthy downward dog style profit of £630k. Ruff. 

Crowdcube - helping to make the impossible unattainable, using Government backed tax breaks.  




Basic dishonesty is the new truth - Rise Art mislead investors on Crowdcube.



Rise Art appeared first on Crowdcube in 2016. They raised £516k. Now they are back again raising over £650k in a campaign that is on the edge of being successful. So well done. Valuation just under £10m.

This is a comment on the standards of disclosure on Crowdcube rather than any comment on whether this company has a chance or not.

When asked a direct Q about how the business had performed compared to their 2016 projections, the waffle that follows defies description. Glowing reports of doubling turnover year on year does not tell the truth guys. Your projections showed turnover go from £518k to £2.26m, 2016 to 2017 and then from £2.26m to over £9m 2017 to 2018. The 2017 and 2018 numbers showed profits and the 2018 profit was over £5m. So what really went wrong?

Actual turnover (and this is presented throughout the pitch as a triumph) went from ~£500k in 2016 to just over £1m in 2017. So around 50% of the projection. There have only been large losses. So the projections were total nonsense. But when asked, they fail to admit this or in fact even refer to it - despite the directness of the Q demanding that they do so. 

What is the point in producing this rubbish? No idea. Why do people believe anything these guys say - havent a clue. How can sensible people invest in this  - totally baffled. 

Crowdcube  - Defying Logic. 

Thursday, 2 August 2018

Where will it end? Crowdcube congratulate bereaved shareholders in MyShowcase.






Myshowcase raised £1m on Crowdcube not long ago and has now been 'sold' to another company for a large loss to investors. So Crowdcube thought it would be good idea to send a cheerful message to the Wake; ignoring the death. 


We have written about this company here.

It seems there is just one button for outgoing news on the Crowdcube control panel - its the marked ''Congratulations''. The outcome of the investment seems to be irrelevant - which when you think about it, is spot on. We love the references to EIS and SEIS - DUH. 

Here is the message - 


Congratulations! Your investment in MyShowcase has been completed and your ownership statement is now available.



On behalf of Crowdcube and the team at MyShowcase, thank you for supporting this business on Crowdcube.

If you are eligible for SEIS and EIS tax relief (which will depend on the Company being eligible and your individual circumstances) you can expect to receive your tax relief form within 8-12 weeks of your certificate being sent. Please
................. and note that the availability of tax relief may change in future.

Best wishes,
The Crowdcube Team

Time for Bed  - too much good news is so tiring

Looking like an Entrepreneur.


There is a look - the look of the entrepreneur. It is hard to define - a crystal-clear and steely-strong look, that comes with a calmness and a fathomless confidence. It's not bravado, it's not ego - it is the antithesis of both. But when you see it, it is worth recognising. 


I have just spent sometime meeting clients in London. After day two it suddenly struck me, as I was flicking back through the meetings flahbacks,  that all of these people had a similarity - they had that look. It is one I remember encountering first back in 1985 when I ventured out into the world of start ups. But I didnt recognise it then. It's unmistakable but hard to define and it cannot be simulated. I suppose my best attempt would be to describe it as like the perfectly still rock pool. Clear, calm, deep and powerful. Even after the wind removes the image, the calmness returns time and time again. It is immutable.

This is something you cannot recognise unless you meet someone face to face. Video doesnt carry it. A group meeting doesnt always reveal it. Eye to eye, one on one, close contact, is the only way. It bears no relation to physical looks, although it is clearly present in demeanour and presentation. It strikes you within a minute of meeting - or it is not present. Without that look, the chances of a start up succeeding on a scale that makes an investment worthwhile, is pure chance, with the odds stacked against it.

To make sense of this where we are now in the altfi world, you have to realise that most ECF investment is raised without any attempt to see if this look exists. When the wind blows and the look is disturbed - it doesnt return and your investment is lost.

When Crowdcube for example use referrals as a major source of new campaigns - handing over around 2% of their stated 7% commission to the referer, you can see why the platform is so chockablock with rubbish. People who work at CC, in senior management roles, are not experienced enough to know the look. How could they be, when they have had just a couple of 16 month jobs with the likes of Virgin Start Up. Misusing the Branson look is not helpful. Yet Virgin Start Up are one of CC's main referers. You can see the problem.

We can do so much better.