BeerBods sells out to ABV

Beerbods raised a total of £400k on Crowdcube in two rounds. Now Matt Lane has sold the business to Beer Hawk, recently acquired by ABV incubator ZX Ventures. 

This is exactly the sort of transaction that will make equity crowdfunding work; if it gives investors in BeerBods a return. Lane admits that the sale is forced - ie it's the only option if the company wants to make any immediate headway.

No figures have been disclosed although shareholders will know shortly. In the first round Beerbods was valued at around £400k and then a year later at £2.5m post money. So looks like the 101 first rounders will see a healthy uplift. Not so sure about the others. Accounts show a loss for the year to May18 of £80k.

Lets us know if you know.

Stamplay sold to Apple as Seedrs investors receive a 2X return.

BREAKING NEWS - Stamplay, which used Seedrs to fund, has been sold to Apple for around $5m in a much needed boost for equity crowdfunding. 

Whilst Seedrs nominee SHs will have to wait 2 years for the full ROI, their initial return is two times the principle excluding EIS reliefs. Stamplay founders remain with the company and will now be employees of Apple. A great result for all.

The deal suffers from the now normal problems with Equity CF SHs not being given full disclosure and with no choice but to go along - or rather be dragged. But it is a return in a sector that is very lite on them so far.  

Stamplay used Seedrs for multiple rounds between 2014 and 2016. 

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. 

Since writing this the St Vibes has opened a third restaurant,  Two Lights. They also seem to have facilitated the sale back to the company of shares issued through Crowdcube. Figures are a little complicated and not to be relied upon but SHs paid £500 and have received £625 per share back. Most of the 50 SHs did not take up this option. That is very interesting. 

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 now a two 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, then two units 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 two 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 £ 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.

We did warn you!

So here we are at the start of another year - this one is labelled 2018. What have we learned about equity crowdfunding? 

I suppose the easiest way to put this is to show you a Q&A I had with a reader in the summer of 2015 - so two and half years ago. Things have improved marginally since in that we have seen 2 exits but both for tiny uplifts and there are now at least 4 companies that have funded on Crowdcube that may make it. Whether at the valuation they were sold at and the dilution since, this gives investors a real ROI is another matter  - 

Anonymous21 June 2015 at 06:19

Rob, do you see any winners out of the crowdcube platform to the benefit of investors?

Some of the management teams I am seeing look shocking, but there are one or two I was going to back until I found you :)!!!

Delete

Rob Murray Brown21 June 2015 at 07:58

Not really. If you look at it logically why would there be? Maybe one out of the first 1000 CC pitches to fund will make money for investors - maybe. So that's in another 2 years time or so that it pitches and another 5 years before it sells for £££££. If like me you joined and invested in 2011, that means you have waited till well after 2020 for a single result. That is a very patient position to hold for more than 10 years, checking pitches every month etc. As of today not one of the 250 CC funded pitches has returned anything, 10 or so have gone have gone bust and many of the ones we have research on from 2011 to 2014 are nowhere near the projections used to sell the equity. Its not a sensible way to build sustainable businesses and without subsidy (SEIS and EIS) it would have died an early death. Really its just a play thing for bored overpaid city dwellers!!

Escape the City gives Crowdcube some much needed GOOD NEWS!

Escape the City raised money on Crowdcube in 2012 and has been very well featured on the platform as one of its stars.

4 years on, the company predicted an exit in 2016 or 2017. Oddly the amount raised as promoted by Crowdcube was £600k but there is only around £450k in the accounts. Still for Crowdcube that is accurate.

For the first time in its existence, Escape the City has reported a profit. £9,400, which if you split it between the 400 CC investors will give them a return on a par with the other 3 CC exits.

Oh come off it - we said we would look for good news and this is the best we could find!

Will investors via Crowdcube ever see a return?

We thought we would publish this article we wrote as guest blogger for Finance Magnates.com as they seem to be unable to publish anything without changing the meaning of most of it - this is the real version. Needless to say we would not recommend anyone either reading anything on their site or writing anything for it.

Will Investors ever see a return from UK Equity Crowdfunding?

Equity crowdfunding started in the UK in 2011. So what have we to show for it?

Equity Crowdfunding (ECF) was launched in the UK in 2011. The first platform and now by far the largest, is Crowdcube; established by two PR entrepreneurs. It has to date supplied funds to almost 300 companies, raised a total of over £100m and this year alone has exceeded £50m in funding. The question now is when will investors start to see returns ?

In order to see these returns, investors need to off load the shares they have bought. There is no secondary market, so exchanging them for cash requires either the business to be sold or floated via an IPO. These decisions, should they be available, will be made with no reference to the Crowd who invested.

One company, E-Car Club has sold out and investors apparently took a return of 3 times their investment – the details were kept secret. This is a slightly odd case as the company agreed to sell a major stake to Europe's largest car rental firm, Europcar, thereby giving this tiny loss making electric car club an instant pan European platform – something it had failed to deliver flying solo. Investors were forced to sell their shares as a drag along clause in the Crowdcube deal was activated. Clearly with these new backers, this company is likely to be worth a lot more than 3 times in a few years. Unlike most ECF pitches, this one was not eligible for the UK Government's generous income tax rebate scheme - a scheme that has proved the main driver for ECF's growth.

It is to date, the only return.
 

It pales into insignificance when measured against the mounting losses. E-Car Club raised £100k and therefore returned £300,000. To date investors in all the UK ECF platforms have lost in excess of £5m. Without fail, pitches on a platform like Crowdcube promise returns in 3 or 4 years, so we really should be seeing some by now. There is absolutely no evidence that that we will. Our research, based on Crowdcube and a few pitches from other sites since 2011, shows that 99.9% of the companies that have raised money this way, have missed their projections for all years since. Some have missed them by over 1000% .

These are the projections promoted by the platforms and used by punters to decide to invest. Under the current regulations this is all totally legal. Given the illiquid nature of these shares and the poor performance of these businesses, the chances of realising any return look very remote – they are locked in for eternity or until closure. Throw into this mix the dilution suffered by B share holders, when the inevitable unscheduled second and third raises occur and you have a gloomy picture. Caveat Emptor only works if you have information symmetry and that does not exist here. The reporting systems we operate for businesses with a turnover of less than £6m (most of the companies raising ECF) only require them to file a very sparse balance sheet for their annual accounts. These are quite often wrong and can be adjusted at any stage in the future. These filings are being used by investors to make decisions; so is it any wonder they get it wrong.

One recent development highlights the problem of ECF as practised in the UK. Mara Seaweed raised over £500,000 on Crowdcube and valued itself at £3.5m, pre money. When asked how they had come to this value, they replied they had used the Discounted Cash Flow method. As most people know this method is favoured by VC firms but cannot be reliably used for start ups, as the historic data just isn't available. Mara is a start up. Despite this the company was successful in its pitch. The punters are just that – punters. Ask a car parking attendant to position a military strike drone and you can expect collateral damage; blind fold him and anything could happen.

Does it matter? Well yes because despite the attempts of the platforms to cripple ECF in its infancy, this could be a very valuable source of funding for SMEs. Sooner rather than later, investors will wake up to the fact that throwing money at Crowdcube and the others for zero return is actually pretty foolish and the well will dry up just as suddenly as it appeared. Reaching a £100m investment milestone is rather pointless if all that money achieves is failed businesses and angry creditors. It seems very likely that finding such an easy source of cash, many companies that partake are over trading – with the usual dire consequences. A more responsible approach to promotions and to due diligence with the financials would help alleviate these problems. A model more along the lines of Australia's ASSOB would be better than the one we have now.