We are sad to report that despite the whole equity crowdfunding sector crying out for Crowdcube stop it, the UK's largest platform by failures amongst other measures, is persisting with its pointless 'invested pledges' PR. It now tops £500m apparently.
Crowdcube invented this number and Seedrs soon followed suit. What it means, in plain English, is that this is the total for all the 'money pledges' on the platform for failed and successful pitches, ever. As the failed pitches are a far greater number than the successful ones, you can see that £500m is a very long way off the money that has actually been invested.
So why do they do it? They started by trying to get away with calling this simply the total 'invested' with a small footnote explaining the above. Obviously after we pointed this out as nonsense, the FCA have asked them to be less misleading. Well £500k in pledged investment is less misleading but it is still misleading. Take for example the headline for this piece of poor journalism -
The internet picks up these headlines and they tend to become facts. £500m has not been raised.
It is quite obvious why Luke Lang uses this tactic - £500m is far more impressive figure than the real invested figure. But is it relevant - the amount pledged? Well not really. It is an interesting metric for internal use but is meaningless and more importantly highly misleading to the casual on looker - who might then be tempted to have a go. It's a lot like an architect punting for business by telling clients he has X million of business on his books. Actually, he has none but he has quoted for X million and all the tenders have failed; because he is a rubbish architect who over charges.
In the same article above, they state that 60% of Crowdcube investments come from HNWs and sophisticated investors. Impressive .......until you realise that both of these categories are invented by Crowdcube as part of the kindergarten signing up process - it's self assessed; you just tick a box. Any old box, no one checks. Which makes this claim, which must have come from the Crowdcube PRing Dept, total paff.
So nothing new there.
The Crowdcube definition of "sophisticated investor" includes anyone who has previously invested in Crowdcube in the last two years. So you become a sophisticated investor immediately after your fist Crowdcube investment.
ReplyDeleteWhen you join you are asked to self certify - sophisticated, ordinary or whatever the other labels they use. Totally pointless. For Crowdcube to then use this bogus information as PRing is highly misleading. Which if the FCA were ever to wake up, would certainly classify as 'misleading' - the only FCA criteria used to judge platforms. So it goes on and on ........
DeleteThe investor categories are defined in the COBS section of the FCA handbook, rather than by Crowdcube. That's why the Seedrs categories are much the same. For example, the definition of a "Self-certified sophisticated investor" is specified here:
Deletehttps://www.handbook.fca.org.uk/handbook/COBS/4/12.html#DES586
You need to have made two investments in the last two years, so I don't think you qualify as a sophisticated investor after your first investment, but you do after your second, providing it is within two years of your first.
Of course anybody can claim to be any category they like, as it doesn't seem like platforms are under any obligation to check that people meet the criteria they select. But the choice an investor makes doesn't seem to have any impact on the product experience, so I'm not sure why anybody would choose the wrong one, other than to massage their own ego.
Considering that they’ve reported combined turnover of c. £12m since they launched and claim that their fees are c. 7%, this £500m number looks like a load of rubbish. It would be more like 2% that they’re charging!
ReplyDeleteYes of course it is but the FCA just turn a blind eye. Bit like with Monzo were the claim is they have been valued at £15bn but the round hasnt completed yet, so the valuation is not set. Ignoring the fact it's a not a real value anyway. Spin, lies, more spin and half truths. So much promoting democratic investment.
DeleteYou also have factor in the strong rumour that Crowdcube did a deal with Monzo - ie didnt charge them anything. 7% is just for suckers.
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