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.
Redemption only went live to the public on Monday. Prior to that it was in hidden mode. Still time for it to fund.
ReplyDeleteHI Rob,
ReplyDeleteThis is Andy from Redemption Brewing. Firstly I find your blog very incisive and well written.
I agree with your comments regarding EIS but I think you’re being a little unfair suggesting we have not mentioned any losses or debt on Crowdcube.
We have been clear in our business plan and financial documents about both past net profit/loss and ebitda numbers, as well as the level of debt in the business and have also included the profit and loss account from the balance sheet.
Just to put the net losses into perspective we have had significant amounts of depreciation since 2015 when at the end of the year we started to make significant investment in a new Brewhouse. You will note we had 3 years of net profits prior to that and would have maintained that record in 2015 if we had a pro rata depreciation policy (we charge full depreciation in the financial year regardless of when assets were purchased). Ongoing investment in 2016 added to our depreciation charges. In 2015 and 2016 we invested over £600k into fixed assets so you can appreciate we are taking significant depreciation charges, although would point to ebitda remaining positive.
In terms of debt most of our debt is from myself and my wife. Specifically directors loans of £200k and my SSAS pension of £200k. The directors loans receive no interest and the SSAS loan is only 4.5% and is required to make annual repayments which are then loaned back to the business. I would suggest both of these forms of debt are positive for the business in terms of the cost of financing and that debt can be an efficient part of the capital structure of a business. Additionally we have a local authority loan (£100k now £70k through repayments) at an extremely attractive annual rate below 1% so again would argue this is debt a business should take. Our main asset finance lease is also over halfway through its lease agreement. I appreciate that technically and legally debt is debt but I would suggest in our case the debt is less of an issue.
Apologies for an essay but I just wanted to clarify those points and I’m always keen to engage with people. We genuinely believe there is great potential for return in our business and that we have already done a lot of the heavy lifting.
Thanks Andy - Fair comment. I agree that this as an investment has been de risked compared to other Crowdcube offers - St Andrews Brewing being a classic. Which is why we wrote the piece. I have removed the addition at the bottom as on reflection is was ill informed. All of the infomation you put here you should ensure is available to CC readers - maybe an update?
Deleteps - had you availed yourselves of our services, we would have ensured that this picture was clearer from the outset!
Deletealso noteworthy that Redemption values itself at the same level as Wooha did after it was forced to cut the valuation by 50% to get over the line. So an established, profitable (at the Ebitda level) business vs a ludicrous lifestyle business with a nonsense business model of targeting misty eyed Americans with tartan branding. I like Redemption beer and think the valuation is sensible, will be taking a closer look.
ReplyDeleteThanks for that Rob and I do appreciate the general theme of your piece. Unfortunately I only came across your blog and business after we had started our campaign. I can absolutely see the value of engaging a firm experienced specifically in the crowd funding sector. Another lesson to add to the long list I have accumulated (and will no doubt keep accumulating) as a business owner!
ReplyDeleteDon't forget that as well as 30% rebate on EIS you also get relief on losses which is probably a necessity for CC investments!
ReplyDelete