Mr Gripit knows a good deal when he sees one. Is Crowdcube just for suckers?

It's probably a good idea to strike whilst the iron is still hot - a good idea for whom though? Jordan Daykin is back on Crowdcube with a newco - whilst his Gripit Fixings fall off the wall.

Daykin certainly knows how to milk a run. His newco, VPS, which he bought for £5m is now overfunding on Crowdcube. There wasnt much made of Gripit in the pitch. Gripit has raised £4.1m in two rounds on the platform. Lastest accounts for YE Dec17 show losses of £1.8m for the company - a nine times increase on the latest projections. The figures suggest something odd - read on.

Should shareholders worry that he has now turned his energy and attention to being CEO of VPS - a totally unrelated business, in a totally different industry? Well time will tell. Gripit is due to deliver a profit of over £3m this year. Clearly it must be on track or he wouldnt go wondering off.

Debs Meaden is a SH in Gripit - via that wonderful comedy series Dragons Den. What does she think? No comment.

The accounts were moved, so this loss of £1.8m is for 17 months. Interestingly the first 5 months of this were included in the Crowdcube pitch as 'historic' data. However if you add the losses for 'previous 12 months' and the year Jan to Dec 2017, you get a projected loss of only £1m in total. Now it is impossible to know if the discrepancy (£800,000) occurred before the CC raise dated 03/17 or in the period after that to 12/17.

In the light of recent events with the platform and the fact that accounting dates were moved in June 2017, you might be highly suspicious that old tricks are being played here.

It is certainly more grist to the mill when considering Crowdcube's FCA licence.

Crowdcube 2016/17 results are out. Revenues fell!!!...................

Crowdcube have  filed their accounts for YE September 2017. The news is not good. Revenues fell by 5% over the 12 months and the company filed yet more large losses - £4.626m. So where do they go from here?

The company managed to raise another £1m in May 2017 but this was at the same valuation as the previous public raise in September 2016. You can hear the massive wheels grinding to a halt as the bearings explode. 

The only good news we could find is that the loss for the year was lower than the previous year but when your turnover is falling  - what does it matter? Falling revenues are the result of falling funded completions - a 5% fall at this so called 'growth stage' is a disaster. We didnt expect to see that sort of collapse.

In a good piece in the Sunday Times, Luke Lang of Crowdcube is reported to have said that the year was record breaking one for the company with £90m invested via the platform. So £90m produced £3.8m revenue. That's an average commission of just over 4%. But we know their standard rate for SMEs is 7.5%. So smaller companies are paying for the larger ones? We had heard a rumour that Revolut used Crowdcube for free - maybe we can see that might be true from these numbers.

At that rate the company needs to be completing well over £180m in funding just to cover its costs of £7.5m. That simply is not going to happen using their model. This all comes at a time when recent disasters like Sugru and Thevibe are putting Luke et al into the limelight for all the wrong reasons. More disasters are in the wings - see next post.

Someone asked if the ECF sector was seeing a fall in activity. Well we are not sure but Syndicate Room reported a doubling in their deal flow, which suggests if you have a decent model and are honest, you can still make good things happen. 

This is what Crowdcube said about its progress in a recent shareholder update - 

This has led to an exceptional year where we’ve significantly increased the volume and speed of launching pitches, which has positively impacted other key metrics. 

Is it just me or is that statement totally at odds with their filed accounts? The referral to the exceptional year must mean exceptionally poor? Increased volumes must mean that they have for some reason been forced to reduce their commission rate? 

In this report they also state that the 2017 revenues will be £4m - the largest revenues since they started. This is clearly either misleading or wrong. We dont know what the figure could be if this refers to the calendar year 2017, but we do know the accounting year to September 2017 saw revenues of £3.776m. In a update to your own SHs, you would think the date reference would be the accounting year. Why would a finance company use the calendar year unless to mislead?

It doesnt even bear thinking about the original Crowdcube pitch projections for itself - the numbers are so crazy out of kilter we cant bring ourselves to print them here. 

The fall in losses is a direct result of a reduction in costs of £850,000 - that must mean Darren and Luke have forgone their bonuses.

Upbeat references to increased deal flow - ie more pitches than ever before, ignores the essential point we keep on making. Pushing out lousy businesses with fantasy plans and numbers, will not lead to success. Increasing numbers of failures, with many having more than interesting stories attached to them, are a direct result of pushing through over valued, poorly managed companies for the sack of their own revenue. Now even that is falling. Why - well to the state the bleeding obvious, investors are wising up. 

There is talk of a new funding round in 2018 - there is just enough cash to carry the company through to September without one. Given these results it will be interesting to see where they go for money. The profit and loss account is at minus £17m and counting. Meanwhile all indicators are heading south. It's not a ship I would want to be on.

Of course non of this will get into the ECF fake news press and probably wont make a dent in the national newspapers. If you are an investor, we'd like to hear your take on the way these numbers stack up and the way Crowdcube have managed their release. Get in touch via email as we need to be able to verify you are a SH. All off the record and anon. info@ecfsolutions.co.uk Thanks.

Was Sugru's Bank loan covenant breach declared in the 2017 Crowdcube pitch?

We find if you keep on digging, the truth will out. This maybe a new piece of it. 

Thanks first of all to our anon comment pointing this out.

Sugru filed its YE Dec2016 accounts late, in Dec2017. When they pitched for the last time on Crowdcube in March to May 2017 and took another £1.9m off Crowdcube investors, the company and one assumes Crowdcube, knew that they had been in breach of their loan covenant - as stated in those filed accounts. This loan was with The Clydesdale Bank and it was the extended portion of this loan being withdrawn and the main portion being listed as due within 12 months, that forced Sugru into the fire sale. It is impossible to think that Crowdcube, with its own due diligence, did not know this fact. If they didnt, then that has be gross negligence and if they did, it is something far worse.

As pointed out by the anon comment, a breach of a bank loan covenant is a very serious incident. We can see the consequences here. So for this information to be hidden from the March 2017 investors seems astounding. If they had known the facts my guess is Sugru would have been forced to sell last year and this would have saved investors £1.9m.

We have been saying for 3 years that the accounting system in the UK is not fit for purpose when it comes to the modern age. You can easily delay accounts, hiding important information. We need a system whereby all companies using ECF as a funding channel have to declare accounts up to the time of the pitch or close to it - not sit on them and then file them 9 months later. 

If we had this simple change - this fiasco would have been partly avoided and investors and HMRC would not be looking at another £1.9m in lost money.