ECF Solutions can help prevent your Equity Crowdfunding campaign from crashing out.

We were contacted recently by an Equity Crowdfunding pitch that was live on Crowdcube.

You don't want your campaign being derailed.

The pitch wasn't doing very well and it was immediately obvious to see why. They asked us for advice but why would we give them a freebie when they hadnt bothered to contact us beforehand?

Nothing essentially wrong with the company but they had made a couple of fatal errors in the way they had presented it.

As we write they are almost certainly going to fail to even get to 50% so they will get nothing and this failure will sit on the internet for years. Crowdcube clearly had given them no advice about what are very obvious flaws in their plan - but I'm sure you will not be surprised by that.

So don't take the chance; we offer a free service with the payment only due after you have raised the money. What have you to lose?

Powervault is yet another Crowdcube success that is returning for more cash.

Powervault raised £150k in 2014 on Crowdcube. They raised another £700k in 2015.

They are now looking for another £750k on a valuation of that has greatly increased despite their failure to get anywhere near to their 2014 or 2015 projections.They need to raise another £1.5m next year. Although that is only a Crowdcube projection, which almost certainly means it's wrong.

In 2014 the plan was very different.

Why bother with these projections and plans Crowdcube? They are merely an amuse-bouche with no relevance to the business they are tagged to.

Looks like the good investors at Crowdcube are desperate to throw away all their cash as this one is just about to complete.

Crowdcube are re writing the business manual. Mind you, they said that about CDS's!

Crowdfinders hits most of the wrong notes

As promised, here are my thoughts on the latest fintech event held last Thursday in the Royal Institute, Mayfair.

The opening scene was set in the historic auditorium, where almost 100 years earlier, Faraday had begun his journey. He would have been a little surprised by the raging montage of Wall St and WoWS images, projected and accompanied by thumping cocaine infused mussak. This was like Johnny Rotten serenading the Queen on her birthday. Mixed into this mayhem of the worst abuses of capitalism, was the message that Equity Crowdfunding is a to be taken seriously.

Somehow it was not very convincing.

This was closely followed by the Crowdfinders' resident comic with the odd hair and eventually thank goodness, some slightly old fashioned sense from Lord Bilimoria. My initial thoughts were that I should get a grip and move with the times but on talking to delegates, the overall opinion was that this preppy style was passe and slightly desperate.

The first panel event didn't make things any better. A question about the recent Rebus collapse, was met with a completely false statement from one of the panel of 'experts', that this company was definitely fraudulent. This went unchallenged by the chair or any of the other panellists, most of whom I suspect had never heard of Rebus. Rebus may have been fraudulent and then again it may not  - we have no evidence yet either way. This was just grandstanding of the worst kind. It is also highly irresponsible - a theme that reoccurred throughout the day.

Walking the sponsors rooms revealed tables staffed by people who made me feel positively geriatric. As we have said here before equity crowdfunding requires experienced business people to run its portals, not interns just out of the university bubble. However The Mingling proved very useful. There are plenty of sensible investors and angels out there, I just wish they would stick their heads above the parapet now and then before it becomes too late.

A quick diversion of a culinary kind. I may have been out of the system for a while, but when did ramekins half filled with mini sausage and a teaspoon of potato get called 'lunch'? Then again is was on the house so one shouldnt be ungrateful - especially as it was hard to find anyone who had paid for their ticket.

So what can we learn from Crowdfinders 2016?

Equity Crowdfunding, being a new internet based industry, has attracted the young guns and shunned experience - in the main. It will not last this way - investors who are now happy burning £1000 on a punt in order to feel they are part of the entrepreneurial elite, will become disillusioned with the crass way this is all being handled.

On the way home I watched the film The Big Short. As a holder of a substantial number of AIG shares in 2008, I knew what to expect. However I was not prepared for the multi layered denial that led to the crisis. Equity Crowdfunding is not another 2008 crash, but it has some close similarities and it's time we learnt some lessons instead of making the same old dumb mistakes.





  

Road Trip to Crowdfinders

We are travelling. Going to London for the Crowdfinders event and to meet with clients.

The hope is that the gathering of most of the UKs ECf sector in one space will give everyone a chance to find out what is really happening - not the PRing version but the real one. And of course we will be letting you all know what we think next week.

Meanwhile, it looks as though another Crowdcube success story maybe in trouble. Jam Vehicles raised £165k but are now very late with their accounts and have had a GAZ1 stuck on them. Of course this maybe just because they are so busy that their accounts are now 3 months overdue.

An increasing amount of what we read on the UK ECF scene shows a distinct split in attitudes. Two totally different and non convergent views are emerging - it all depends at which end of the telescope you are standing. Those in the industry seem unable or unwilling to be frank about its very obvious flaws and those who view it from the outside with scepticism seem equally unwilling to see the enormous potential benefits if we can get it right.

Somewhere in between is the answer. Time to open up some minds.

Seedrs says it will only handle US investors under Title II rules for now............ but not yet..

So now we know.

We had hoped that Seedrs would be operational in the US by now. However we did expect them to be tackling equity crowdfunding using the SEC's retail Title III bill, which goes live in a few weeks.

However an on line public conversation we had today with a Seedrs Director revealed that they will be going live in the US but under Title II rules. This makes a huge difference.

Under II, only accredited investors can put money into an ECF pitch. In SEC terms accredited means something rather different than the self assessment tick box joke we operate here. Put it like this - you need to be very rich or you cant play. So the massive volumes of cash from the American public pumped through Crowdfunding sites like Kickstarter or Indiegogo will not be appearing in a Seedrs pitch any time soon. In essence Title II is not equity crowdfunding as we here understand it - its an elitist club for the super rich to get even richer.

Can anyone else open up this goldmine?

Rebus case calls into question ECF platform's credentials

Rebus was a Claims Management Company (CMC).

People we have spoken with in the industry and indeed the ombudsman, FOS and the official bodies have all acknowledged that CMCs have a problem. They are in the regular practice of issuing false claims against IFAs. In 2015, the FOS received 2,707 complaints about advisers, 494 (18%) were upheld but only 113 (22%) of these were made by a CMC. This meant 78% of cases brought to FOS by a CMC were declined compared with 34% of cases against advisers in general. This data shows that the quality of CMC claims is disproportionately low. 

Given that this has been an issue since at least 2013, you have to wonder why a site like Crowdcube, which claims to turn away 90% of applicants to the site, chose to run with Rebus. Rebus was not innovative, it was not cutting edge technology, it was yet another CMC - whose reputation in the market was far from good. Indeed Rebus had instigated the highly dubious practice of publishing a list of companies it was investigating even though many had not had and would not have the claims upheld. 

You only have to look at the eventual price the administrator received for Rebus' claim's book to see how they went about their business.

So we have to put this down to a lack of experience or nouse or both on Crowdcube's part. Not only did the platform not know, by its own admission, that Rebus was in financial trouble, they did not know that Rebus was employing an FCA banned Director, Richard Rhyse or that the whole industry had a reputation that was far from perfect. 

It rather neatly emphasises what we have been saying for 4 years - Crowdcube is not fit for purpose. We shouldnt let this platform endanger the future of equity crowdfunding. The only way this gets sorted is by investors using their power to call for change. It's clear in this instance and many others that the due diligence carried out by this one platform was not good enough - they expect investors to carry all that burden. The UK system just isnt set up to allow this - it has to be a collaborative effort. Other platforms manage it. 

Crowdcube provides the road kill for the vultures

This piece from the FT Advisor makes interesting reading - here.

You have to wonder if it is sensible to allow the same company involved with the management of Rebus before it failed to be in charge of the administration? Certainly Resolve will be tracking Crowdcube road kill for the next juicy scraps.

From the same article this is a telling indictment of Crowdcube's claim to turn away 90% of the pitches that apply because they are not viable -

Gareth Fatchett director at Regulatory Legal Solicitors, said many(claims management co's) find it difficult to make enough money out of mis-selling claims as they try to move on from payment protection insurance (PPI) complaints.

As we said before Rebus was not viable so why were they allowed to pitch?