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.
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.
May be too early to tell but is the ECF market as a whole growing?
ReplyDeleteNot completely beyond possibility that CC is getting a bigger slice of a smaller pie.
Either way round not great.
Anonymous,
ReplyDeleteECF market seems to still be growing. We almost doubled our revenues in the same period of time.
Goncalo
CEO of SyndicateRoom
I wonder if we'll see an ECF platform ever make a profit?
ReplyDeleteI wonder why no VC has turned themselves into ECF-ed platforms. Seems odd that all these ECF are started by people who have never done a private placement before, let alone a successful exit. I wonder want the VCs know that all the ECF entrepreneur don't. I believe GrowthDeck is run by VC experienced professionals.
ReplyDelete