Wednesday, 3 October 2018

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?



32 comments:

  1. Well if the director's from these ECF tubes are akin to Fred Goodwin then surely the plum in charge of the FCA is culpable too..

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  2. That statistic is a good starting point, but does not mean the investment model does not work

    Take revolut: missed projections, heavy losses, but 19x return for investors.

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    1. One exception - already noted here as a success - does not change the overall pattern. Try again.

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    2. The exit is an exception, but the logic applies in general. If a company actually hits its projections, then valuation should go up massively, let's just assume tenfold. So even if it does worse than projected, the valuation at exit could still be up threefold, fourfold etc. Does that make it a success or failure in your view?

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  3. I take the point bu ti think you are comparing oranges and apples. Revolut, Monzo, HAB etc were already substantial companies before they used CC - they were not start ups. We are just pointing out what is an alarming trend - ie all projections are missed. And I was being kind. Revolut isnt worth 19X currently - there is no market for their shares unless they make one. So the end result is still very much in doubt. Its self generated hype drove idiots to put money into it at a valuation that frankly no one I know thinks is sensible - even if it had hit its targets - much like Go Henry now. The value at exit is a mute point - we have not seen a company progress normally to one of these - all exits so far have either been lower that CC value or have been forced sales at a small ROI due to structural problems ie Camden and Ecar. The value you pay for shares on CC is based on the future projections giving you a ~ 10X ROI. So no if a company hits its projections, it wont be worth 'massively' more than you paid for it. That growth is already factored into the 10X. But as I say this is all hyperthetical as no one has got their yet. My problem with CC is their PR is all lies and the businesses they support (in general - Revolut, Monzo etc are exceptions as above) are 99% tripe. The evidence from these results confirms this. We didnt know that 2 years ago. Why is this evidence being hidden from investors??

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  4. Well there is some kind of market for Revolut shares on Seedrs, and those shares is hard to buy because demand is high, and only existing shareholders can buy those. But I agree that the valuations is high.

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  5. I'm not sure if you'll print this but in my opinion every amateur investor, housewife and workman/woman should ditch ECF (period) this is not an advertisement, but punters will make a return using FREETRADE.. NOT ONLY A RETURN, but a clever tool for retirement.

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  6. I still find it amazing that people will still stand by and attempt to justify CC despite the evidence and your research which gives us the facts... it would seem it is far easier to trick people than it is to convince them they are wrong! CC should be stopped completely... the losses and damage to this country is not needed.

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  7. Talking to a client who is in control of £billions (in charge of a ft100 pension fund) v.v. smart, aware. He did invest in the latest brewdog round.
    I mentioned that the valuation was eye watering and he said in summary
    - he knew
    - the discounts
    - fun
    - something for his boys

    .. so cc survives at least in part because to clearly a lot of investors it is not about getting the best return.

    Back in 2013 I did think like that too.

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    1. I think your comment is massively contradictory. Smart and invested in a company for 'fun'?

      If he loses his money will the discounts be worthwhile?

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    2. In this sense it's not really like investing -- some people have so much money that CC is just an expensive version of Kickstarter where you might just invest (or should I say contribute) a few pounds and get a t-shirt.

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  8. That makes a lot of sense, the average CC investor will spend £500 to get a free tee-shirt and flush the illiquid equity down the pan. Andrew's 'aware' client wants free beer for his kids, stuff the tube extortion valuation, what a World.

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    1. Who mentioned £500? I know from talking to many investors, that many of them punt a small sum which they know they will lose just for the fun of it and the rewards. What they do not understand in doing this, is that they are enabling this company to build up debts which it almost always never pays once it has gone bust 18 months later. Those debts to other companies may result in redundancies, more company closures etc etc. Actions have consequences.

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    2. Whilst that may be true Rob it sounds as if you are blaming the crowdcube investor for enabling the company to behave with lack of financial propriety. We should be clear that the people to blame for this are the founders who put together the pitches with the ludicrous projections and Crowdcube for allowing it to happen. The punter that invests may be naïve but they are not responsible for this.

      The regulatory regime in this country needs changing, particularly the rules around administration and pre-pack deals.

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    3. Heye - I dont think Im doing that. They are partly to blame but its the Gov and CC who are really to blame. The Co's will take the money for as long as they are allowed to and the punters will punt it - but they both have to take responsibility for their own actions. We dont live in a nanny state - do we?

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  9. Hi
    The problem here is that Rob has had a negative view of crowd investing and Crowdcube specifically since 2012. He takes “a glass is half empty” pessimistic view on every CC pitch knowing on average he will be right most of the time! Failure rate in start ups is always going to be high, nothing new there, however Rob knocks practically every business that pitches on CC but Its a matter of time before a few of the companies listed do start breaking through and delivering major returns!
    The first Obvious point is that most start up businesses are likely to over estimate sales, under estimate costs whilst also pitch for lower capital amounts than they will actually need. Also, in working to become established the start up pains will likely take much longer than they imagined to overcome. Anyone building a business will know this
    A lot of these businesses are asking for £100k/ £200k nowhere near enough capital to grow and scale hence return later or run out of cash.a lot of businesses the owner has “skin in the game” they are not starting in order to fail. They believe in their business model and are trying to make a difference! Anyone can knock a business plan.
    An investor on the other hand should take estimates with a pinch of salt and take a VERY long term view if they decide to invest. I would say more likely 5-10 years before an exit. If they are expecting a return in the short term they should not invest in fledgling start ups.
    I appreciate there will always be exceptions but most businesses on CC will need the time to flourish and of the 56 a number of them will break out but it will take time.
    The data set here only goes back to 2011 that’s 7 years, but that’s only 7 years for the first few funded. The businesses 2015 onwards have had less that three years.
    Crowdcube offer a valuable service, it’s still early days for them, support them, stop keep knocking them and the businesses using the service and give them the time and space to deliver!

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    1. This is another comment made out of ignorance. You have no idea of my views on 90% of CC pitches as I very rarely write about them until they have failed or been sold or something else has happened. There is one reason that the posts are mainly negative - its what the facts dictate. Unlike their own PR and most of their paid PR supporters, we dont make fake news. To claim that all projections are nonsense is to take the view that ECF is a total sham - all valuations on CC and Seedrs etc are based on the projections - investors dont get to bid for these shares they have to pay the price the company asked for. Therefore grossly miscalculated projections - all in one direction- result in the same for valuations. Think about it. And as someone who has set up numerous new companies and been involved in helping others do the same for 20 years, I certainly do not agree that all start projections have to be exaggerated. That is simply naive and extremely stupid business practice - for reasons I have written about here already. Of course we all know most businesses take far longer than 3 years to reach a point of likely exit from their start. But a few points here on that. 1 - these are not all start ups by any means. 2 - They all make the claim that they will be (likely) exiting in 3-5 years. 3 - they are simply making stuff up to sell their equity to mainly ignorant punters.

      Finally it is my opinion and I have to say the expressed opinion of a large number of people I speak to weekly, that Crowdcube are in fact screwing over the whole sector with their drive to the bottom. You are entitled to your opinion but my guess from your post is that you havent a clue what you are talking about.

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    2. Further............

      You cannot claim all of the moderate ground - ie take a long term view, give CC a chance etc etc when the very company you are supporting is the reason that people are expecting ROI in 3 years. IF CC were more honest with their PR, so for example instead of having some rubbish about 100 companies funded at £1m plus - they had a review of some of the failures, then you might be bale to take them seriously. But when one of the founders - Darren - is part of the same problem it is unlikely this will ever happen. Darren's claims about his previous businesses success are complete rubbish - fake news, fabricated fairy tales. Do some DD.

      I believe that ECF has a future but I am also sure that Crowdcue is not it and that they will, if allowed to proceed on their current course, bring the whole thing crashing down. There is not evidence yet to contradict this view and there is plenty to support it

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  10. Hoping to emphasise this point from your comment above regarding Crowdcube:

    "....all exits so far have either been lower than CC value or have been forced sales at a small ROI...."

    " if a company hits its projections, it wont be worth 'massively' more than you paid for it. That growth is already factored into the 10X....."

    You don't really stand a chance with Crowdcube. Companies are all massively overvalued.



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  11. Not every company that pitches on CC et al gets funded. This suggests the crowd has at least some Quality Control. However, it does amaze me some of the obviously lifestyle companies getting funded. A deep bear market would be very interesting. I can't predict it though - poor stock prices push capital to ECF? or bearish investor sentiment means the ECF market dries up? or valuations pushed down to more sensible levels? Will be fascinating to see how it develops...

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  12. To go live on Crowdcube you have to secure a minimum of 20% via your own contacts as a starting point. In a massive number of cases you need to find almost all of your own investors. I don’t think Rob realises this fact.
    What CC are doing really is facilitating a way for you to collate your own investor schedule!
    The businesses listed that benefit from the “crowd” tend to be tap houses, veggie restaurants or craft brewery where they are not really investments to deliver a return but more a “feel good” as a “member” I receive details on promotions etc etc. A bit like when Next made you pay £20 for a catalogue for you to buy their goods, a small percentage of idiots were prepared to do that just so they could say they had one!

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    1. My dear boy, Rob certainly does realise this and much else. He helps businesses fund on Crowdcube, Seedrs etc, so he has little idea where you get your idea from. He knows exactly what is required at the coal face. The 20% is about 2 years out of date. The rest of the post is just guesswork -'massive'. Keep reading:))

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  13. Anon must be a team member from a slow funding raise Atm. Pump money into 'feel good' pitches, 10% off craft beers or veggie burgers?? If I put in £1k I want the slight possibility of making that 4 fold. These anons should man up and show their colours.

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  14. Hi

    Only just started reading on here. But just for the record I invested £3,000 in MOVEM in Oct/16 via CC In September I received £7811 into my bank account when they were taken over. Overall my portfolio of 30 companies is nicely in profit. Only 1 total loss that I am aware of so far, but fully accept some others will follow, but also I have several that showing substantial profits. I fully understand that they may be difficult or impossible to realise quickly. Regards

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    1. Hi - I do see that Movem was bought in September this year by The Barbon Insurance Group - figures are not available. Thanks you for this information - roughly a doubling of your investment which is good. It is all confirmed at CH. Which round did you invest in? The forst round valuation was pre money £800k so that equate to a sale of ~£2m. But the second round on CC valued the company at £2.4m pre money so that would equate to a loss for them. Which round were you in??

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    2. Hi

      The first round, I could not see the traction for the higher valuation to follow on. The sale price was not 2m but exactly 3m as per the sale docs on my file. So the later shareholders showed a modest profit. The sale price was £1.006147 per A and B shares.

      Surprised CC have not published this sale on the website, or if they have I missed it.

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    3. Thanks - but that dosnt make sense on your first numbers? You invested at £800k and sold at £3m so a gain of 3.75 times. You invested £3k so you should have received £11250 - where has the rest gone??

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  15. I hope Skint Golfer didn't put £ 3k into 30bets via CC, or Oct 19 be loss Making I'm afraid

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  16. RMB Junior

    Personal insults so be it. I was stating facts, which had not been reported on here. I stand so far above that. Scratch Golfer.

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  17. GOLFER

    Right ok sorry Amigo, I had just gulped at the possibility you had bet 30x3 grand in your portfolio. I'm not Stephen Hawkin but I'm confident that potential 90,000 would garner better gains on SCRATCH cards.

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