Sunday, 21 October 2018

Readers endorsements - always good to know the work is appreciated


Forgive the self congratulations. But we think it is worth pointing out to new readers that what we write here has some value and is reliable. You may not agree with it but it helps to make an investment decision in the round.


These comments are from a Seedrs forum today for an active campaign we have written about recently. Editing has been carried out to avoid names etc. Spelling mistakes are not mine (for a change)........................................

I'm sure XXXX is well on this but it would probably be very sensible for him to drop a quick note to Rob at fantasyequitycrowdfunding . I've read his blog for ages and he's a bit of a Marmite character - some people love him and others hate him, but one thing he's very good at is spotting discrepencies in crowdfunding pitches and raises.
...........................Rob has a lot of readers and good connections with some of the more sceptical financial journalists and it's always worth avoiding becoming a mention in that sort of story!


Well said XXXXX! I am also following the blog and despite the aggressive tone and clear bias (don't mention Crowdcube!) he is often spot on. I think he is doing a great job for the crowdfunding sector with his blog.

Thank you to the readers. Long Live Marmite. 

Friday, 19 October 2018

Perry Carroll is still peddling his version of the Solar Cloth Company disaster


Peregrine Carroll, to give him just one of his used names at CH, took £967k off Crowdcube investors. His company Solar Cloth Company, then went into administration, was sold for tuppence to a company that also went into liquidation. SCC owed around £3m. It is now finally dissolved.


You can read all about it here and here

We only mention this again as we glanced at Perry Carroll's CV on Linkedin, when doing some research into what had happened to the various people who have abused Crowdcube and we found he had rewritten history. Take a look here. It is pretty shocking when you consider what a mess he left behind and the fact that his past record, hidden by Crowdcube's total lack of DD, would have suggested this was a guaranteed outcome.

Then take a look at what the Crowdcube official SCC page says - no mention of any failure at all. You wouldnt believe it if you did not see it with your own eyes. Why are they not obligated to give the public the facts about this sort of catastrophe under FCA rules? It is exactly the sort of useful information investors need to avoid another con. 

Perry now goes by the name Peregrine Sakata-Carroll. Well that's for now anyway. Operating out of Cambrdige, he runs his own consultancy. There is nout as queer as folk, eh.

Failure of Square Pie loses creditors over £2m, costs 50 jobs and loses 324 Crowdcube investors £668k



Just in case you thought the failure of a business was just the business failure, Square Pie illustrates the resonance a failure can really have.


This is something we have highlighted here many times. When a business is enabled, by raising funding on Crowdcube and then it collapses, the ripple left by the splash touches a whole raft of people who do not get mentioned. 

Square Pie raised a bond on Crowdcube in September 2015. It was clear to us at the time that this company was not right. 324 investors piled in anyway. The Administration update posted recently shows we were right. 

This was the highlighted headline at the top of the Crowdcube pitch - 

**UPDATE**: Square Pie has reduced its minimum raise amount to £450k.  Please refer to the pitch update below.
**UPDATE** - Square Pie has been given a Probability of Default (POD) of 0.7% by Moody’s Analytics tool based on historic accounts. This compares to 3.3% average for the bonds listed on Crowdcube so far


Well you might conclude - god help us. The bond's purpose was to increase the number of eateries - to 25 by 2019. It was this part of the business that brought the whole castle down.

At the start of 2018, the company went into administration. All its eateries were closed with the loss of 50 jobs - jobs that the 2015 money had helped create and jobs that without this money, would not have existed. These are now 50 human beings who have been made redundant through no fault of their own. Its down to Crowdcube and its lack of DD on this company and its sustainability. Yet again they have failed on this front. Dont forget this was not equity, it was a bond  - a distinction Crowdcube were happy at the time to tell people made their investment more secure because they had checked the company's plans. Bond companies have to have a good trading record and be subject to a higher level of DD. What is higher than zero?

The administrators have managed to sell the wholesale side for just £100k. Picking up cheap off cuts is the norm in these disasters. 

Add the redundancies to the large number of unpaid suppliers - trade creditors to the value of £2m will not be paid a penny - and you get the real picture of the costs of financing hopeless businesses run by hopeless entrepreneurs. It just doesnt make any sense.

We are not too bothered with bondholders losing their pants - 38 losing more than £5k and a couple in the £20ks. The Bond company also left a large debt to HMRC headed 'Local Compliance' suggesting some serious management issues. Meantime in the two years 2015 and 2016, the CEO had paid himself a total of £176k. Nice. Caveat Emptor and the fact that we warned you not to do it here makes investors gullible idiots. From the last post in this link, we wrote this in 2015 - 

To take an extreme example, the recent lowering of required funds by Square Pie from £750k to £450k has gone unexplained. How can this company suddenly not need £300k? 

I can assure you we are not psychic - it is just good old common sense. 

What is a shame is that those who put in more than they wanted to lose, will probably not come back to ECF and that is a loss to UKplc. This should be billed directly to Crowdcube.

It would appear the grandly named Bond Instrument document was just a pile of poop.

Investors may already know that the ex CEO of Square Pie is also a major shareholder in the company that has picked up the off cuts. Ring any bells?

Readers may also be interested by Crowdcube's sleight of hand with the interest return figure they have been recently been quoting in their annual PRing. According to Crowdcube, investors via the platform have received XXX in returns from their 'investments'. This figure is an amalgamation of the interest on bonds and the return from the few small sales that have occurred. But does it include the bond holders principle sum when it all goes tits up or the losses made from failed equity investments? Hmmm. Makes you wonder. 

Thursday, 18 October 2018

No change of tide as Mara Seaweeds' losses keep piling up



Mara Seaweed is a classic Crowdcube tale and investors would do well to learn from it. We warned you all at the time they were raising money. 


Where to begin - you could start by reading these previous posts - here

Mara had promised gold and has delivered shale. They have lost all of their key directors and the company is now back to the two women who started it. It is only afloat (albeit with a large hole in the keel) because the two remaining directors have used their own money to keep it there. 

This is the sort of business that could have made a few people a good living -  a lifestyle business. Healthy outdoor life and great product. But the demand for this product was never going to take them to the levels they sold to investors. A fact now clearly evidenced by their own departing business gurus.

The company is loss making and has run out of cash. The whole Crowdcube pitch business model was flawed from the start. This is a product to be sold online and at events, to grow organically to a stage where it is self sustainable then and only then, to possibly launch into mainstream retail. Their plan turned this on its head with glamorous accounts at Morrisons and M&S - who on earth puts those two together? 

It is a great shame but it is one we have warned about many times. Wrong channel, too hasty, no traction and bang. What was a perfectly good small business employing people in a local community becomes a large pile of loss making mush. 

The only thing that allows this to happen is ECF or more accurately Crowdcube. They take no view on a business proposition's sustainability - because they do not have the skills to do so. Of course they pretend they do but when one of the founders has to exaggerate his own past 'success', you know what you know. 

Where Mara goes from here is anyone guess. They took £500k off investors in a campaign that had several issues. Maybe they will find a way out but what investment will that take? Now their business guru backers have jumped ship, will their credibility have any standing?

Personally I liked their original name Sea Weed and Eat it. And the back story. But they have been ill advised. 

Wednesday, 17 October 2018

Crowdcube success Movem is sold to Barbon Insurance Group for £3m - most Crowdcube investors lose out



Great news for investors in Movem - an exit. Just a month ago Movem was taken over by Barbon in a deal which leaves the CEO in place and Movem in tact. So did investors make any money?

Addendum - sales price was a smidgen over £1 a share so a total value of £3m. First rounders did ok and second rounders wasted their time. Maybe that's why Crowdcube have ignored it? Thanks to SHs. It looks to me like another Ecar Club or Camden Brewery rush to exit before implosion. Reading some comments on Crowdcube, this will have done them more harm than good. Investors in round 2 feel used  - a cheap bridging loan to enable founders to exit is one interpretation. And for what risk? Im sure we can do better than this. Our new forum will be the the place to get the information (like this) that CC bury. 

Movem had two successful rounds on Crowdcube in 2016 for £199k  and then 2017 for £395k. The first round valued the company pre money at £800k and the second at £2.4m. Now we dont know the numbers for the takeover but we do know that a SH invested £3000 and received £7811 on the sale. - Well we do now.  

As we now know thanks to SHs getting in touch - Movem was sold for £3m. As investors in 2017 paid £2.4m with a post investment valuation of ~£2.8m there aint much profit in that. Investors were not given a choice in this. As one disgruntled investor put it  -  a very cheap loan to get founders to a sale where they cream off the money. It was also mentioned that there should be a list of people who make claims like 'Im in it for the long term' and sell investors out 12 months later - a list where future attempts to make the same claims can be challenged. We will be offering such a list on our soon to be launched new site. Welcome Peter Ramsey, Philip Screeton and Richard Totty.

And of course as a good reader has reminded us, investors in round 2 will have to repay their EIS reliefs. In fact as round 1 was in 2016, this sale in September 2018 is still within the 3 year limit, so they too will have to repay it.  

No wonder CC have not PRinged this big time. 

Monday, 15 October 2018

Clippings reports losses of £1.5m after raising around $15m in the year.


Clippings raised £845k on Crowdcube in 2015 and has raised around $15m since the end of January 18. Two key investors were C4 Ventures and Advanced Venture Partners. 


The company which offers contemporary design furniture on line was only due to make a loss of around half its actual £1.5m. 

It will be interesting to see if an investment of this size will be able to turn things around. The involvement of C4 might suggest an explosion is due. 

Sourced Market back on Crowdcube selling equity



Well well. Sourced Market sold their £1m bond on Crowdcube in 2016. To achieve that they produced financials showing their expected progress. Now they are back on Crowdcube with a valuation of £10m, raising £750k in equity or more likely far more than that. 


So how have they performed since 2016? Well they tell you that things are going great guns - but then they dont tell you what they told you last time. 

So they have 4 units and four units is what they projected. That is pretty well where the good news ends.

Turnover was supposed to be north £9m for YE March 18 but is only £6.4m. Revenues for YE March19 were forecast to be over 11m. EBITDA for YE March 18 was supposed to be £500k but is in reality, minus £800k. Even on £6.4m (a figure they told investors was expected for YE 2017) they showed a positive EBITDA of £300k. What has gone wrong - well nothing apparently. 

Now reading the current Crowdcube pitch, you wouldnt have a clue about any of this. We are not saying this company wont be a success, we are just pointing out the facts which seem to have been missed in the latest attempt to raise more cash.

This campaign is almost complete at the £750k level from just 35 investors. 

Oh and the bond is still o/s as are various other long term debts. 

Sunday, 14 October 2018

We are launching ECF.Buzz - a one stop goldmine for all things ECF for both investors and companies.



ECF Solutions is launching a new site - ECF.Buzz - A subscription site, including this blog with free access, where investors and companies can read and download guides to and reports on all things ECF. Plus a forum so you can a have a safe and sensible place to discuss experiences, ideas and find what did happen to that investment!


Knowledge is Power - we have the knowledge, you need the power.


Fantasy Equity Crowdfunding (FECf) will have an annual subscription, a one off fee option for guides and reports, a separate forum subscription option and a one day, read only, use of the forum facility. We believe we are uniquely positioned as an independent source of relevant information in the sector. We intend to offer that information to subscribers. Since 2011, when ECf was created in the UK by Crowdcube, we have been writing about it. We have been correct in pretty well all of our assumptions to date. We know our advice is pertinent, as current downloads and feedback on our DD guide and our advice to hopeful ECf companies, both show this. 

Guides (~40 in total, updated and regularly added to) will use real data collected over the past 35 years and will include  - 

  • The Art of Due Diligence
  • Investing via ECF - what you need to know 
  • How to make sense of small company balance sheets
  • Reading what's really happening in a projection sheet
  • Analysing a Business Plan and Pitch Deck
  • Spotting a winning team
  • SEIS/EIS guide
  • Best practice for creating a successful ECF campaign
  • Telling the difference between fact and fiction.
  • Using SM to find out the facts.
  • Avoiding Overtrading
Annual reports using our data set will include

  • ECF platform analysis - independent!
  • Sector analysis 
  • ROI and analysis by sector, exit method etc
  • ECF Europe and ROW - developments and opportunities
  • The Regulation Landscape - what to look out for.
There will also be an information centre which take all of the data we have currently on companies that have raised, failed to raise, the people involved and the outcomes and allow you to search for what you are looking for. Additionally there will be a resource library with links to hundreds of useful resources and reviews of some of them. This may take a little time to get up and running as it will be manual for us to start off with. This will link into a purely fact driven information centre on live pitches - again allowing investors a level of information that they could not hope for without our service.
We would like to know if you have ideas that should be included. If we havent already thought of them then we will offer you free membership for a year if we use them. Dont post them here but instead send them direct to me at rob@ecfsolutions.co.uk. We are also keen to talk to potential partners who may have something to offer to this project. So please do get in touch.

We hope that with traction this will develop into a site that will be able to run an annual get together for networking etc. A community of SMEs and investors, with a common goal - the success of UKplc. 

If we can help make investors more savvy and help companies choose the right time and strategy to use ECF, then we will all be winners. This will force the standards of investment opportunities higher, make the businesses more sustainable and cut out the dross.  

The aim here is not make a lot of money. The aim is to help preserve ECF as a functional way to create sustainable SMEs in the UK. The fees will be small. To give you an example a single download will be ~£9 and 12 months full membership will be ~£36. This is still WIP.

Help us make a change for the better.


Saturday, 13 October 2018

Macrebur have parallel funding rounds on Seedrs and Angels Investment Network.



Macrebur, the maker of a recycled plastic additive product for roads, is currently over funding on Seedrs and is just over halfway to its £4m target on AIN. Neither campaign appears to mention the other one. 


It is a little confusing.

Following our piece here and some Qs to the company from Seedrs investors - the AIN camapign has been removed. When asked on Seedrs what this was all about, the CEO of Macrebur claimed that they had not put up the campaign on AIN and that this was merely a collection of HNWs all linked via a FB page. That'll be news to AIN. Confused? 15/10/18 

Just to make things even simpler, we now discover that a deal is also on offer via Greenbackers - here - .https://www.greenbackers.com/the-pitch.html - this time we have a screenshot.  They pitched to the Greenbackers on 11 October according to the platform. In this pitch the total being raised was not £2m, it was not £4m but £6m - £4.8m of which has already been raised. This £4.8m does seem to include include the £500k from Pontaq that is listed on Seedrs as part of their campaign - so this has been double counted. On Greenbackers there is a new amount of £1.8m already funded by Instarnac - something that is not mentioned on Seedrs. 

To help clear up any misundertsnading and to explain the CEO's claim that we have facts wrong re the £1.8m Instarmac investment in Macrebur  - here is a copy of the slide (slide 8 of 9) that is downloadable as Macrebur's PD on the Greenbackers website - 



So the CEO can hardly claim we are wrong - Greenbackers maybe but that would have involved them putting this PD together for a pitch that the Macrebur CEO has readily agreed he went to. It states VERY clearly ''investment so far'' and then lists the £1.8m.

This may well be all perfectly fine but it does seem a little confusing. There are certainly claims on the Grenbackers PD that do not stand up to much scrutiny - this one in particular - 'MacRebur are not aware of any other company in the world using a mix of waste plastics to replace bitumen in asphalt'.  See 

https://www.smh.com.au/environment/sustainability/plastic-and-glass-road-that-could-help-solve-australia-s-waste-crisis-20180802-p4zv10.html

and to counter Macrebur's claim that somehow one of their distributors is responsible for the Austrlian article/product here is a little more on their product - which makes no mention of Macrebur or its products. Which begs another question - about the patent??

https://www.closetheloop.com.au/wp-content/uploads/2018/06/Fact-Sheet-for-Plastic-and-Glass-Modified-Road.pdf

Readers and I mean those with a questioning mind, not the lemmings who seem to support Macrebur whatever they claim, might like to read this - https://www.thenewsminute.com/article/heard-about-miracle-plastic-roads-heres-why-its-not-solution-our-plastic-problem-36927 - it is not peer reviewed and is old (2015) but it throws up some interesting points. All these points seem to be irrelevant to Macrebur. For instance they claim that their bitumen (ie the bitumen with their additives in it) will not leach micro plastics into the environment - that is a 100% guarantee they give in their answer - no micro plastic leaching. Firstly this is not provable as their product has not been time tested for long enough to produce this data. Logic suggests that if a road degrades over time through use and more importantly weathering, then there has be leaching of all the road contains and if it contains plastics then QED micro plastics will be leached. Put that alongside the argument that we should be banning all production of plastic waste (and therefore eventually short use plastic) likes bags and the argument that hiding waste just encourages its production and Macrebur's claim to be a world saver looks rather foolish. To gain the sort foothold they are selling to investors, they will in fact be encouraging the ongoing production of plastic bags. How crazy is that??

If a company is going to use multiple online ways of raising the same funding in the same round, it doesnt seem too much to ask that they use the same information each time. Macrebur's claim on the Seedrs forum that we are wrong is completely untrue - check out the facts; they are all correct. As AIN have now removed this pitch, there is now no issue.  We wish them and all who invest the best of luck.

Both campaigns have a pre money valuation of £14.5m. But AIN is not, strictly speaking an investment platform. It promotes campaigns and then investors get in touch directly with the company and invest. According to the AIN Macrebur page, £2m of the target £4m has already been invested. As AIN state in their own words, this investment simply goes straight onto the company - there is not minimum level requirement as with ECF platforms.

So to cut to the chase - a pre money valuation of £14.5m would be the same as a post money valuation, after this £2m has been 'invested', of £16.5m. But the Seedrs valuation is also £14.5m. 

According to AIN that £2m has already hit Macrebur's bank account. According to Seedrs it has not. 

AIN are not FCA regulated although their new ECF platform, Seedtribe.com is. 

The Burrito Bond is back - Dónde va a terminar


Chilango have issued a new bond - this time on their own. Burrito Bond 1 was issued through Crowdcube in 2014 and is now due for repayment. As the company is someway off all of its targets, this new bond will do the trick.


Chilango had 6 restaurants when they issued the first bond in 2014 and had a total of 10 ready to go by the end of that year. Now they have 12 - 4 years later. Revenue for FY 2017 was a mere £10m compared to the projected ~ £20m (date changes make a like for like difficult). No profits were due and no profits have been delivered but the losses have been considerably higher than anticipated - aided by the slow progress and closure of one unit. Losses of around £250k have turned into losses of £1.4m.

Chilango also raised £3.7m on Crowdcube from over 2000 investors, in 2015. Maybe the lack of progress has meant that a new equity round was going to be hard work. According to the accounts to YE March18 they raised around £1m in the year and another £28k after YE. 

Since the 2014 success, the company has lost its battle with HMRC over a £700k vat bill, lost one of outlets and its central kitchen and pivoted the whole concept, costing many millions. You can read about all of this here. Reviews of their food are stubbornly stuck at average.

In an amusing twist, the company's auditors are Grant Thornton, whom you may remember recently missed a £20m hole in Patisserie Valerie's accounts. Room for a few burritos there. 

The current balance is in the red and company as at 31 March 2018 was short on cash with heavy debts and still struggling to break even.

In the Bond Offer document back in 2014, they told investors - 

Q - What happens if you can’t open any new restaurants?
A - Although our plan is to open new restaurants, if we can’t our existing financial position would be        strengthened as our current restaurants continue to mature. 

Well that didnt work too well. They forgot about closures, bad choices and rising costs. 

Given the above, what are their chances of raising more on this new bond? 

Well as with almost all things to do with ECF, astonishingly, they have, after just a day or so hit their minimum £1m target. Of course none of the information above was readily available to investors.

On she sails.  



Friday, 12 October 2018

Zapaygo ICO on Crowd for Angles hits the buffers - what's next?



Zapaygo raised £450k on Crowdcube. Their payment app was due to appear in the NEC but has been delayed. Now their ICO, for a utilitarian Zap token, has failed to get even close to its £8.5m target on Crowd for Angels.


We have written quite a bit about Zapaygo here

After their success on Crowdcube, the progress has been a little turgid. No revenue to date as their app has never been activated at the various NEC venues - which already have a functioning app doing the same job. They do have a 10 year agreement with the NEC Group or they did before it was sold. Whether that agreement still holds will be something SHs will be keen to learn about. According to the CEO of Zapaygo, they will be going live shortly once the existing incumbent has been negotiated out.

So to the ICO. The launch in private mode was all a little odd. The soft target was £2m which they reached just in time but only after a £2m tranch arrived. Likewise the £8.5m real target was going to be missed until another £2m tranche pushed the overall total to £4.7m. Which is where it is now just before the campaign ends today. The token was essentially a glorified loyalty scheme where Zaps could be traded in a Zapaygo rewards scheme. Why?  -  might be a relevant question.

We assume this means the ICO is off. But you can never say never with Zapaygo. The campaign has for now been funded at the £4.7m level according to Crowd for Angels.

So what does this mean for CC investors? Well certainly more delays. Crowdcube's projections showed 2018 as a year where the company was making around £2m NP on revenues of over £6m. As there is currently no or very little income this seems unlikely.




Thursday, 11 October 2018

Ethos Global and Crowdcube sent this to shareholders - can you understand any of it?



Ethos Global is in Liquidation and there have been issues with setting up of a newco by the founders. In August this year, Dr Theo Koutroukides sent the email below to Crowdcube, who then forwarded it their clients  - the shareholders in Ethos Global - without apparently reading it. 


It is complete nonsense and for an FCA regulated company like Crowdcube to be passing this off as acceptable advice to THEIR clients asks a lot of serious questions. None of which will be answered as usual. Let us know if you can understand what he talking about. 

FYI no new shares have ever been issued by Soma London England, a company solely owned by the two founders of Ethos Global. No shares in SLE have been gifted to Ethos Global SHs as we write. SLE now operates a gym in London which was initially paid for by Ethos Global and therefore by its shareholders' £800k investment. Very little communication has been forthcoming about any of this until we started to dig.

It seems to us highly irregular to suggest to SHs in Ethos Global, that they can claim loss relief in a company, when they are being offered shares FOC in another company in lieu of their Ethos shares. Isnt that illegal? The same must go for the offer of exchanging Ethos shares for value in the newco by way of discounts in the gym. Otherwise HMRC are paying for your yoga lessons! For this suggestion to be sanctioned by Crowdcube is quite astonishing. Although from past experience, this will be down to ignorance rather than anything more sinister.

It is also worth noting that no progress has been made with the liquidation of Ethos Global since it started over a year ago. In the Crowdcube pitch, the soon to be launched London studio was a key driver in the sales pitch. 



Hello Crowdcube,

Please see the below email for your attention from Dr Theo Koutroukides, of SOMA House.
Dear investor,

You are receiving this communication because you chose to receive shares in Soma London England Ltd. We are now in position to issue the shares to you following restructuring of the company under a new lease, assets, fitouts and successful implementation of the new business plan towards our most successful last month, summer and quarter historically.

Thanks for the continuous advice and support from so many of you in all the necessary steps we had to take prior to issuing the shares to ensure validity of (1) your initial 30% EIS; (2) in addition to 45% loss relief upon company liquidation in process, and; (3) new shares in the new company. For example, a £10k investment under normal circumstances would receive back a total of £6,150 plus a discretionary issue of the previous number of shares in the new company; that would be the original number equivalent to £10k investment out of the original total pool of shares plus new ones to include subsequent investments, options and our third, non-salaried Director.

These are fully paid-up, ordinary shares with pre-emption and full voting rights. Non-voting B shares have been upgraded to full-voting A shares. The shares will be issued in 14 days, shortly after midnight of Sunday, 26th August, when the current investment round closes at the pre-money valuation of £1,629,653 with a minimum investment of £10k. We are currently exceeding the £200k mark including contributions from all three company directors.

By completing the current bridge round to consolidate our London base and model, we are looking to open right after a larger round from next month towards expansion. The current round gives us the flexibility in time and operation to be in a strong position while we are negotiating bigger deals on the table.

Please note the above information is presented to you as a direct contact and past peer to become a future shareholder in the new company and is by no means an investment promotion or advert. It is merely intended to honour the principle that shareholders would normally have pre-emption rights by receiving investment information in advance. Please contact me directly if you need more details.

Some of you requested whether you could exchange the value of the shares with services at SOMA House. For investments up to £750, we can offer 3x the value of the initial investment in services at SOMA London. For example, instead of £100 equivalent of shares you may benefit from £300 of services that are also transferable to your friends and family. If interested, please contact me by 26th August.

You may see our most recent news at www.soma.house and Instagram. Trends are positive and the team is performing remarkably well as we continue to develop new and exciting revenue streams with higher profit margins, further differentiating ourselves from the noise.

To reiterate, the offer is made voluntarily by the Directors of the new company without any payment required by you and at the cost of the new company. No response is required from you to have your shareholding issued and maintain your 30% and 45% EIS benefits.

Thank you again for being part of a long journey and we look forward to welcoming you officially to SOMA House as new shareholders.

Kind regards,
Dr. Theo Koutroukides
Director of SOMA House

T: +44 (0) 759 323 4666
E: ceo@soma.house

SOMA HOUSE
OLD SPITALFIELDS MARKET
8 HORNER SQUARE
LONDON E1 6EW

Further to this email, Crowdcube will be in touch after shares have been issued by SOMA House in late August. As a reminder, any shares issued in connection with the above email will be held by the Crowdcube Nominee on your behalf and in accordance with our standard Declaration of Trust. If you have any questions regarding the Nominee, please contact support@crowdcube.com.

Kind regards,
Crowdcube

Tuesday, 9 October 2018

Burning Night, the Bierkellar operator, has been placed into Administration by its P2P loan company Crowdstacker



BurningNight Ltd raised £7.5m via a P2P loan with Crowdstacker at the start of 2017. With a healthy 7% interest and short term of just 3 years, the rewards were almost too good to be true.


Well.....they were. 

For reasons as yet undisclosed (but fairly obvious) Crowdstacker has, as their major secured creditor, pulled the plug and emptied all barrels. Their hope is that the venues can be sold on, to recoup the debt. 

The sounds of the Oompah Oompah band will be no longer.

Writing about the opportunity at the time of the raise, the CEO stated -

“When we initially approached Crowdstacker it was because we wanted to choose a way of financing our expansion that would allow our existing loyal customers as well as new potential customers and investors to participate in our growth.  
“It has proven to be very popular with investors, and mutually beneficial to all, so it makes sense to extend this source of funding.”

Maybe customers wont be thanking him for much now. I think it is more likely that the banks said no and everyone else said no.

It does seem a little curious that this company was able to raise £7.5m so easily  - its initial target was £3.5m but it then doubled that. What real DD was done by Crowdstacker has to be questioned. If they did do their job, then someone there needs firing. 

These P2P loans are supposed to go to established companies with relatively solid foundations. Not flighty doubtful operators. 

Hopefully it will all end well. 


Monday, 8 October 2018

Ginx TV files losses of £1.77m - time to change channel?



Crowdcube investors gave Ginx TV £579k in 2016. The company also took in investment from Sky that year.


It appears that the Sky money bought considerably more than the money from Crowdcube investors.

But in the end, what is has all bought so far is, not much. The filed accounts speak about 'almost' signed contracts that will come into play for 2018 and beyond and new funding that will be on the books. Well the new funding has not yet materialised at CH and we just dont know about those contracts.

What we do know is that the company's own estimation of its YE Dec17 profits, in 2016, was a profit of £634k. The real accounts just filed show a loss of £1.77m 

Oh well. Who ever believed their projections anyway. This is just telly after all. 

What has happened at Crowdcube's Ethos Global? We spoke to the good Doctor.



Dr Theo Koutrakides and his wife Jennifer Hersche set up a yoga studio in Cambridge. It took £800k off Crowdcube investors and was then put into liquidation by court order. At the same time the two directors opened up another yoga studio in London as Soma London England Ltd. 


We have written quite a bit about about this - here

The company was put into liquidation over 15 months ago, yet there is no further action filed at CH. What the liquidators are doing, apart from nothing, isnt clear. Meanwhile the two directors continue to trade in London from a venue originally paid for by Ethos Global and sold to Crowdcube investors as THE new opening.

We wrote to the good doctor as we had been approached by several shareholders. Eventually we got a response recently. He rang me from an airport.

The last comms that SHs had received from the good doctor, was a statement that all Crowdcube Ethos Global SHs would receive shares in the newco. That was 5 months ago and nothing has happened.

It is impossible at this stage to know exactly what is going on here. In a 20 minute phone call all the good doctor would tell me was that he was sorting things out - what they were was not explained. When asked simple direct questions, he was totally evasive. Then he had to board. Bye Bye.

We are none the wiser.

But he has promised to tell me the full story when he returns in a week or so. We will hold him to that. It should make for interesting reading either way. 


Eprop Services plc files losses of £13m for YE Dec17.



Eprop, on the back of what they are calling a reverse takeover of GPEA, have filed losses for the year of £13m. 


Eprop raised £1.35m on Crowdcube in 2014. It had up until this last year, had £55m of equity funding. 

Its hard to know what is going on right now. 

It is certainly irrelevant now, but the Crowdcube projections for this last year showed net profits of £9.5m. Oh well. 

Innis and Gunn beers soured by losses



We were not expecting this. Innis and Gunn, an established and well regarded craft brewer, have gone back into loss for YE Dec17. It had told Crowdcube investors, who gave them more than £1m in 2016, that it hoped to be making a net profit of £1.18m for the year. The loss was more than £400k. 


Innis and Gunn saw higher than projected revenues of £22m but their GPM was well below the figure used in the Crowdcube pitch; 58%. It was in fact only 46%. A 12% drop that represents a heavy £2.64m taken off the GP number. That is a massive drop for a retail facing operation and is hard to put down to anything apart from the fact that the Crowdcube figure was a mistake - a very misleading one. The year gave the company an operating profit of just £80k as opposed to the Crowdcube version of £2.76m. The GM is the clue. 

Overall this just may have been a blip - the balance sheet looks healthy and was boosted in the year by another £4.5m equity investment. Exports make up 45% of revenues and are highlighted as a strong growth market for the beers, so there may well be some headwinds to tackle with the Brexit debacle unfolding. the USA , Canada and Sweden make up their three largest markets.

One important strand of the strategy might be questioned. They are opening bars and in the notes to the accounts, the company extols the virtues of this action. At the very end of this section there is an afterthought - brought about by the closure of their St Andrews unit just 2 years after opening. It was the most hopeless sight and as a local I bet back when they opened, that it would close withing 2 years. If they cant do better with their locations then they will be in serious trouble at some stage. Their excuse was that it was too small! 

The loss from this closure, which will be substantial, was not included in the accounts to Dec17. The building still stands empty, fully branded as a sad reminder of an I&G flop. 


Sunday, 7 October 2018

Sorry - another Crowdcube funded company goes bust. So sorry.



Health Tech Innovation Labs took £117k off 139 Crowdcube punters 3 years ago; spent it and has just closed via a compulsory striking off.

The End. 


Oh, in case you come across him again, the highly successful serial entrepreneur (with multi exits) is Barry Shrier. By the time the company was dissolved (next Tuesday according to CH) by a compulsory strike off, it had failed to achieve anything. Investors lost the lot.

This information is not available on the Crowdcube website.

What an utter waste of time.


Wednesday, 3 October 2018

Kokoon guilty of a grossly misleading Facebook sales pitch





Kokoon, a technology design company that is trying to make sleeping headphones, are now claiming that their first shipment is 'almost sold out' on a FB sales pitch meant to persuade people to buy more headphones. 


https://kokoon.io/product-buy/?utm_source=facebook&utm_medium=cpc&utm_campaign=retargeting

In fact Kokoon sold this first shipment (just a few hundred sets) over 3 years ago on Kickstarter, when it took in more than $1.9m in pre sales from almost 8,500 backers. Since then they have raised £1.65m on Crowdcube to cover the costs of making these pre sold sets. However as I write only a handful of samples have been despatched. Money put into the company now, generated by this new sales push, will go backwards to make up for the shortfall of capital required to make the product they have already sold. It's kicking the can gone mad. Losses (£1.1m for 2017) are mounting as the company waits to clear the backlog of pre paid orders.

And the product hasnt even passed muster yet. Watching this shanbles unfold. It seems obvious that there will be large teething problems with the first second and third batches and that the backlog will not be cleared in 2019. So their shipping estimate on FB is a joke.

This is a clear breach of any rules there might be for promoting your sales - you simply cannot lie to people.

It makes you worried for those Crowdcube investors stupid enough to put money into this company - even if it was only to get a set of headphones to help them sleep. Headphones seem hard to come by, as the 3000 plus comments on KS, will confirm. Refunds are being issued but are not being received; or so it would appear. Who is paying for those?

Crowdcube's 56 real company statistics reveal a very different picture to the PR they promote. Isn't that misleading?



The evidence is now clear. The Crowdcube model doesnt work. You can find out why below. These are the facts that Crowdcube try to hide.

We mentioned facts - not PR management and spin. Simply impossible to get around, rock solid, stubborn old facts.

We have data for the Crowdcube businesses that have funded between 2011 and 2017 and have filed accounts to YE Dec2017 - ie they filed or were supposed to file by end of September 2018. 

This accumulation is for 56 companies - so a substantial data set in terms of Crowdcube funding to YE 2017. We must add here that ALL of our other data for other filing dates (another 400 plus companies) has the same footprint. Another 16 companies are late filing and given their history we are not expecting them to provide any data that is outside this overwhelmingly strong pattern. These 56 companies are the ones still in business and do not include the failures to date or the very few that have changed hands - normally at a substantial loss. Cocoon being the latest example.

St Vibes is included in this 56 and if you had read their post here you would know that they have excelled. We have not included them in this commentary apart from in one instance below. 

Of the 56, the year they funded breaks down as follows - 

2011 -   1
2012 -   3
2013 -   1
2014 - 10
2015 - 18
2016 - 21
2017 -   2

So the bulk of the data is for companies that have been trading since their funding took place. This is important as you could not expect a company that received funding in 2017 to necessarily achieve much by the end of that year.

Of the 56 companies, only 5 provided a net profit. In all cases this was a small NP and was not even close to the NP they had projected. But it was a profit. However of these 5, none look like they will make it much further. 

Investors put ~ £34m into these companies via Crowcube. 

Of the 56, only 3 companies have got close to their Crowdcube promoted projections in any year since they funded and this was a smaller loss, due to running out money and having to refund. 

The accumulated gap between the Crowdcube promoted projections and the real numbers is ~ minus £55m.

The total loss for the year to Dec 2017 for these 56 companies, including the profit for St Vibes (£0.5m), is ~ £20m.

So in conclusion, Crowdcube has facilitated £34m of investments into start ups filing accounts in September 2018, which has generated in YE Dec2017, a loss of £20m. This loss was supposed to be a NP of around £35m according to the projections promoted by the Crowdcube platform.

We think that beats their latest PR stunt of having 100 £1m raises. Cocoon is just the latest real example of what Crowdcube can achieve.  How many more examples do you need?



Tuesday, 2 October 2018

Cocoon fails and losses Crowdcube investors £1m plus



Cocoon raised £2.3m on Crowdcube, from over 1000 investors. Now the failed company, 'worth' £15m in 2017, is being given away leaving shareholders to rue their own poor judgement. 


Shareholders might exclaim that the management at Cocoon were full of it. And they would be right. They might also question Crowdcube's part in this. But as usual the debacle that is now unfolding will benefit the purchasing company, some of the management, the sales team and no one else. Well apart from Crowdcube who have already made their commission.

In the usual pathetic suicide note, shareholders are told - 

It is clear now, that the business required significantly more time and investment than that available to achieve success in this dynamic and competitive market. 

Who knew that - it was clear back in 1890. 

These guys were seasoned entrepreneurs (according to the glowing pitch on Crowdcube). So how does that make sense with this statement above, which could have been written by a year 4 student. 

Not sure what the next stage is when you leave farce - but Crowdcube are now in it. 

A genuine Crowdcube success - St Vibes'Clove Club goes from strength to strength


In what is going to be the worst September's results for Crowdcube funded businesses since the platform started, one shining light stands out. We look at why The Clove Club has been so successful. 


Amidst the carnage that is the YE end filing date of September, we can thankfully report that one company that funded with Crowdcube way back in 2012 is exceeding expectations.

The Clove Club is a one venue restaurant set up with the backing of £250k of Crowdcube investors money, in 2014. Real chefs and real hard graft have brought this idea to a very successful and sustainable reality. Instead of gallivanting around opening new sites in poorly chosen locations, this crew have concentrated on one unit and have made the most of it. For the YE Dec17, they posted profits of over £500k - the second profitable year in a row. In a market where we are constantly told by failed Crowdcube chefs that the market is sooooo difficult, the team at The Clove Club have cracked it.

There has to be a question about the ROI when we are looking at a one unit business. Or maybe not? Given its current profitability and the fact that investors bought in at a valuation of £1m, you would have to say they are sitting on a substantial real return. One that makes a mockery of the recent Go Henry and other so called Crowdcube successes. At the end of the year, the accounts report that St Vibes bought back 92 of its own shares for £625 per share. We believe that Crowdcube investors paid £500 per share but find it hard to believe that anyone would sell at the £625 level on the back of this success.

You might also wish to query the structure of the company. Seeing as the management run it via a third company, Saint Vibes LLC, which charges St Vibes a fee - over £700k for YE Dec17 - up from £300k. But it does seem to work.

Unfortunately that is where the good news ends. We will be reporting on the more usual catastrophes over the next week or so. It is a mess.

It just goes to show that a real business, with real drive and genuine expertise, can make money for both the company and its investors, without scaling itself into oblivion. Why cant we have more of these less of the trash. We called this one way back - just saying.

Many and I mean many important people have told me many times that our analysis here isnt relevant. All companies have to miss projections - it is what they are for - Im told. Well if you needed evidence of the nonsense of that concept - here it is. You can read what we said about them in 2015 here.

Three cheers for St Vibes. 

Monday, 1 October 2018

Go Henry or Gone Potty? Crowdcube are at it again.



Kids love Fudge. But investors dont. Or so we thought. The new Go Henry Crowdcube blockbuster proves us wrong again. Paint a pretty picture, air brushing the facts  - that's all you need to do.  


This is bonkers. Go Henry is a neat idea and has a little traction. Although this traction is no where near to the traction if promoted just over a year ago. Now readers, who dont have their last projections, will not know this - but it is a fact. One that Go Henry do not mention in their latest fairy tale. 

Take for example the sales numbers for Apr 2017 to Mar 2018. Crowdcube allowed them to produce this forecast the last time  - it showed revenues of £15m. Now we are told that the revenue for CY 2017 was in fact £6m and that this was an increase of 115%. Nout about where it was supposed to be. Again the projections from the last time showed revenues for Apr 2018 to Mar 2019 as £37m. Now we are told the revenue projected for CY 2018 is just £8m. A fall of ~ 78% (!anon) on a 18 month old projection. Wow. 

On the back of these falling numbers, the share 'price' has risen from £1.50 in 2016 to £3 now - a price increase the company incorrectly identifies in a footnote as a 50% increase. Is it any wonder they cant get their sums right. Back to school boys and girls.

Children are even included in their metrics  - so their active members are stated as 550k - broken down into 226k parents and 330k children. Is that supposed to be some kind of joke? Of course the fact that this imaginary split (so obviously used to up the 500k figure) doesnt appear anywhere in the new fairy tale says it all. ALL. 

A neat idea that may get traction in the US - although is more likely to get copied - is worth £55m without traction. If traction fails to hit targets in the US, then kiss goodbye to this dream.