Farmdrop could be Crowdcube's watershed?

Farmdrop raised another £10m recently. They appeared on Crowdcube at the start of their journey and raised £750k. Now the valuation is five times higher. What's not to like?

Well for one thing they dont seem to be able to make up their mind what they are. Since the Crowdcube round, where they were hub based and pick up orientated, they now deliver. Using electric vans for the last few yards. A completely different business really - more of a dig it up and move it than a pivot. It has certainly delayed their progress.

In the Crowdcube pitch they stated that in 2017 they would have revenues of £70m. So as we all know, these are projections and cant be taken as fact. But you would hope they would be on the same planet as the real figures - wouldnt you? Otherwise, what is the point?

In their latest PR - https://techcrunch.com/2018/06/14/farmdrop-picks-up-10m-series-b/  - they state that they are on target for £10m annualised revenue for 2018. This is a claim made with some considerable pride - one we should be applauding. Well guys when you compare that with your sales pitch for selling £750k of equity in your business, it looks well past its sell by date. 

Best we can say is; long way to go. I personally never believed that the UK shopper gives enough of a to take part in the Farmdrop revolution and if they did they would be already be out there supporting farmers markets. People's main anxiety these days is having it now, with as little effort as possible and as cheaply as possible. A very small percentage of us care enough to bother with this. The delivery is incredibly expensive to manage - much like the Deliveroo model - and profits will be elusive. It really doesnt have a USP and barriers to entry for existing food suppliers/delivery co's are low - if the model was ever going to be a success.

Then of course you have to consider the dark clouds of Brexit - which were not even on the horizon when 351 piled money into this via Crowdcube. Small farmers - the core of Farmdrop's supply chain - will be hardest hit and will likely go to wall in numbers in the first 5 years of the chaos we have brought down on ourselves.  

Might well be wrong but the numbers suggest not for now. 

Farmdrop post new £3.9m losses

Just because something is odd doesnt make it wrong. But I do think its fair to assume that Farmdrop's current business plan is not what Crowdcube investors bought into. They have little choice but to look on and hope.

To be fair, the company has completely changed its business model and has the backing of some very deep pockets. Which it looks as though it will need. Investors are just along for the ride, like it or not. Farmdrop have not done what Camden Town Brewery did - which was opt for a different plan whilst at the same time giving investors a way out. 

On the current GPM of just 9.9%, they would need to see revenues of 20 times the 2016/17 £2.1m just to reach BE. Of course its not that simple and there should be economies of scale but you wonder with their plans to open hubs all around the country. It's a logistics nightmare. 

Meanwhile Crowdcube investors will soon be diluted out of existence even if the company does go on to make it. The accounts talk of more new and substantial funding requirements.

What might concern investors a little is that yet again the revenues for the company have fallen well short of their own recent predictions. Crowdcube reported that for the year just filed, they expected annualised revenues of £3m - here. This was when that year was well underway. They only managed £2.1m, so off by 33%. Crowdcube pitch projections and yes I know no one believes them, had revenues at £70m for the year. £2m as opposed to £70m. Nothing to see there. Maybe they dont understand the meaning of annualised?

Looking forward to one opening near us soon - although we already have 2 excellent farm shops and a farmers market, so maybe not. 

This will be one to follow the whole way - what do you think will happen?

Farmdrop to expand outside London with £7m of new cash

Farmdrop raised £750k on Crowdcube in 2014. Now with over £11m invested in the company since, they are finally ready to launch outside London.

According to the 'simplistic' (Crowdcube's own term for their projections) projections that Farmdrop used on Crowdcube to sell their equity, they should now be turning over £70m (YE July 2017). According to Crowdcube's own blog, they expect to achieve £3m this year. 

Clearly someone thinks this is going to work on a scale, as investors led by Atomico have just put another £7m into the company. We have estimated that this was at a pre money valuation of around £14m. Crowdcube investors took shares at a valuation of around £2.5m. Atomico invested another £3m last year. We estimate that on the current valuation with dilution assumed, CC shareholders have been diluted 100% but have seen the value rise by 550%. Paper value, that is. Working backwards on 10X eventual EBITDA and a 5 times return on this round (value £21m post money), the company is going to have make a profit of over £10m. At its stated 6% EBITDA rate, that means revenues of £166m. So presumably an early sale based on numbers of current subscribers is more likely. 

The company is nowhere close to break even and it seems to us that after so long in London and with considerable investment and promotions, the revenues are small. But that's the way these tech driven investments go. Build to scale and hope that the profits follow. With the rapidly changing environment we live in we'd be bricking it a little on this one. 

Trust Pilot reviews are excellent unless you check them out by dates. All of the the poor reviews are very recent, possibly suggesting a problem with upping volumes? As with Just Park, the one defining  factor that Farmdrop have little control over is the consistent quality of the produce, once they have signed up a supplier. Bristol is next - worth watching how that goes.  

Seriously folks - more of the same from Crowdcube

So much to report that we have bundled all of this into one post -

Minor Figures - accounts just out - more losses although Crowdcube projections showed profits for the last 2 years. Little traction and even less cash.

Farmdrop - accounts just filed with a handsome £1.96m loss for the 12 months against a breakeven forecast. Profits for 2016/17 of over £4m look unlikely, despite the new and much needed injection of capital. Dilution a gogo.

Ethos Global and Zero Carbon Foods, Little Brew, Jam Vehicles, accounts depts on long term sabbatical.

Rough Runner - due net profits of over £400k and filed actual losses of more than £200k. Using Micro accounts but supposed to have turnover of almost £1.5m

Monii - funded less than 12 months ago and reported liquidation but no confirmation. No presence on the web.

All looking good.

Farmdrop secures a £3m investment

Farmdrop have secured a £3m investment in their on demand farm produce delivery business. CH shows a new allotment in 2015 for ~£2m but its unclear if this is part of the new announcement or a seperate issue.

We wrote about them after their £750k raise on Crowcube in 2014

http://fantasyequitycrowdfunding.blogspot.co.uk/search?q=+farmdrop

Hard to know what to make of this latest development. It has to be better than the business struggling along as it was before, but what of the dilution to CC investors?

We dont have a value for the new equity but considering where Farmdrop were - ie nowhere near to their projections - it seems likely that the VCs will have cleaned up at the expense of the early Crowdcube adopters.

Anyone out there who knows  - please tell.

Will be a very interesting watch for the next few years.