Equity Crowdfunding only has one FCA rule to obey - do not mislead investors.
Well you should check carefully the numbers being used by Daily Dose in their second CC raise. You might be surprised by the real ones when you compare them to the claims and the original CC financials. What exactly does 'Since 2016, monthly turnover has increased by 1400%' mean? It certainly cant mean that the monthly average turnover is up by 1400% as the figures show this isnt so. Since 2016 the revenue figure is up around 650%. Now this is good viewed in isolation but it aint 1400% or even close.
So does it mean that for the month of July 2018 ONLY, revenues were 1400% higher than they were in July 2016? Well yes that seems to be true. But really so what? And why dont they state that instead of making it sound as though turnover since 2016 has gone up 1400%.
Well that may have something to do with the fact that the revenues for 2018 are around half what they said they would be. What about the numbers used to sell the equity 2 years ago? Well according to the figures they have used, the turnover has gone up from £90k to £573k, when it was projected to go to ~£1.2m by Aug 2018. (YE dates differ). A healthy profit of ~£200k is now a loss.
How misleading do you have to be to be misleading?
Are we surprised - certainly not. This has been commonplace on Crowdcube since 2011 but we did think they were trying to do better. Clearly we were misled.
Hi Rob,
ReplyDeleteI’m a big fan of your blog and enjoy reading your posts. However, I think that in this case your figures are incorrect.
Our first funding round was in 2016, when we predicted for:
Year 1 - turnover of £91k and actually turned over £109k;
Year 2 - turnover of £698k which we were 7% shy of hitting, finishing with £652k.
Year 3 - turnover of £1.52m (this is our current financial year); we are on track to hit £1.28m this year.
In the current round, we have adjusted the financial forecast in line with our performance to date.
You mention that revenues for 2018 are half what those predicted; this is not the case as we are on track for £1.28m and did not predict turnover to be £1.2m to August 2018, but for Year 3 which is runs to March 2019 (not sure where the August 2018 reference comes from).
The 1400% increase in monthly turnover is correct, and is not just for one month, as we have consistently had 1400% higher monthly turnover over the last few months in comparison to our turnover at our last raise. I am happy to go through the figures with you to confirm that the statement is not misleading.
I have been as open and transparent as possible in the pitch; please do let me know if you would like me to send you the two forecasts from our 2016 raise and current raise for you to compare - my email is george@dailydosejuice.co.uk
Kind regards
George
Daily Dose
Sorry George - you need to refer back to your first CC pitch. T/o for Jan to Dec 2018 was stated by you as £1,521,810. It is there in B&W. Now you say that t/o to YE Aug 2018 is £573k - that is what you state in the current pitch. We are happy to admit when we are wrong but unless you have something else we are not in this case.
DeleteTo help - here is what you say in this pitch - ''Since 2016, monthly turnover has increased by 1400% from £5.5k to £85.3k in July 2018. Revenue to YE Aug 2018 was £573k (-£50k EBITDA).'' YE means Year Ending - so here Year Ending Aug 2018 is the 12 months from Sept to Aug. Now you may have meant YTD Aug 2018 - ie the months in your financial year to August 18 - but that is not what you have said. We can only go by what you print. It is also incredibly misleading to use different YE dates in the projections to the accounting dates - as you did in the last CC raise. Those numbers ALL referred to Jan to Dec not what you are now claiming as March to February.
DeleteYou are also miles off your 70%+ GPM and making substantial losses against projected profits. Be honest about all of this and tell people why and then they can make a fair and considered judgement - probably to back you. I dont understand why you want to try to hide these facts??
I've got a copy of the 2016 financial snapshot - I will email this
ReplyDeleteFY Total Sales :
Jan16-Dec16 91,185
Jan17-Dec17 698,274
Jan18-Dec18 1,521,810
Thanks Brian - those are the numbers we used but thanks for the email. I dont have a problem with this company and it is making progress but they really shouldnt use numbers that hide important facts. They state revenue for YE Aug 2018 is £573k - maybe they meant YTD not YE. An error of some importance!! However delving deeper their GPM is just over 50% when it was supposed to be over 70% - an even more important error. Rising turnover isnt any use if the GPM falls.
DeleteRob
ReplyDeleteI'm sure you will agree that people shouldn't be investing based on the "crowdcube approved" webpage but should study the much more detailed documents that companys (usually) supply as additional documents.
In the case of Daily Dose these include a detailed spreadsheet and hence shows gross margin. The reason behind this drop and the solution (automation) has been clearly communicated.
A non compnay specific comment - could there more be on the crowdcube pitch page yes! but by the time you get the video, people bios clearly crowcube don't permit much space to actually talk about the business. I treat it as a 'flyer' trying to catch attention and nothing more and use it to decide whether to request documents but not to make any decision.
Ok So we can agree that, to a point. But in this case, IMO, the company has openly misled investors to attract their attention - and misused the term YE as far as I can see. There is no need and indeed no place for this type of nonsense in this space - it makes it look so tacky. Why not just admit that the first numbers were off, explain why and move on. Of course their is limited space on the front page, that's why we get the documents behind the offer before we make a comment. And you would be surprised by the number 'investors' we talk to who just read the first few lines and never ask for the documents before pushing in £100.
DeleteYou have to ask why this company makes claims about its progress that simply do not stack up when you look at the figures - to attract attention? Then you have to ask the Q - if you didnt have the previous rounds projections, would taking the current numbers be a true reflection of what they have achieved. I dont think it is. Why for example did they choose different YE dates for financials and accounts and why have they made the error on the homepage over YE as opposed to YTD. And the excus for the massive variation in GPM isnt explained at all - the Yr4 GPM is only 45% whereas they had it at over 70%????
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