It's a little like the current Brexit conundrum. Ignoring whether you voted to leave or remain, no one in 2016 could have known what we now know. The vote was based on misinformation, spin, lies and good dose of inevitable ignorance on both sides. Many things were simply unknowable.
Well the same is true of the 8 year journey that ECf has taken. No one knew in 2011 that the information supplied by the major platforms and their pitching companies would prove to be so far from the real outcomes. No one knew that successful exits would be so low. No one knew that so many companies would become Zombies. No one knew that PR would be the main channel for the creation of these investment platforms and that the truth would be sidelined.
But we do now. Do you?
But we do now. Do you?
A state of ignorance suited the platforms - who would invest in a newco that projected steady unspectacular progress or a down round 2 years later? Who would invest via a platform where time and time again failed companies reveal that not all the relevant information supplied was correct. No one, if they knew this but the PR has drowned out the truth.
ECF is a great idea for both investors who want to be involved in start ups and companies who genuinely have a good plan and need funding. But that equation has a fundamental flaw - greedy platforms that have used misinformation and PR to make poor decisions to gain commission income. It is time the investors took back some control. But most do not know how to. Investing is a professional activity - it's not like fishing or golfing at the weekend. The platforms will tell it is - they want your money. But would you really ask a mate to fly you somewhere, without proof he had a licence? People need educating - only then can they invest sensibly.
Take for example the recent Crowdcube raise on their own site. People have asked Q's that have been removed on topics that did not paint the required PR. This blog has been mentioned and removed. Censorship is a sure sign that what's in that closed cupboard is not all on the inventory.
Investors are being hoodwinked and I have to tell you that the platforms are finding it far too easy to do. When you get Qs from people, who claim to be regular investors in ECF,
about when they will get their money back or what it will buy, it is clear that they do not know what they are buying. Like the guy who gets on a train, buys a ticket and then asks where it is going.
Now a lot of people do not like the way I go about this - too aggressive they say. Well this is not about me. Most people I speak to - investors,companies and the platforms, agree that if you keep presenting poor ideas run with poor management and dress them up using glamorous projections to sell them - eventually investors will turn away. The evidence for this was clear on Crowdcube's latest round. It is clear from the 1100 posts here. Give investors the right tools and they can ask the Qs and solve this for themselves. Crowdcube, with decent companies pitching, can be a great success. So forget about Marmite.
about when they will get their money back or what it will buy, it is clear that they do not know what they are buying. Like the guy who gets on a train, buys a ticket and then asks where it is going.
Now a lot of people do not like the way I go about this - too aggressive they say. Well this is not about me. Most people I speak to - investors,companies and the platforms, agree that if you keep presenting poor ideas run with poor management and dress them up using glamorous projections to sell them - eventually investors will turn away. The evidence for this was clear on Crowdcube's latest round. It is clear from the 1100 posts here. Give investors the right tools and they can ask the Qs and solve this for themselves. Crowdcube, with decent companies pitching, can be a great success. So forget about Marmite.
The idea behind ECF.Buzz is to help level the playing field, so that investors are not at the bottom of a 1:3.We want to give you the tools to find out for yourselves what makes a good company and a great idea. The tools to scrutinise company accounts and financial forecasts. The tools to know about IP and patents and make the most of your investments. As well as a place where you can talk to other investors without your Qs being censored. A place where you can find out about what really happened to company XYZ or Joe XXXX its founder, rather than accepting the guff the platform told you.
In the 2 days we have been live, Crowdcube's campaign has raised over £200k to add to its £7.1m total. Do you really believe there is any chance that these investors know what they are doing? At the same time their forum has had unanswered Qs about how many zombies they have funded - we know the answer to that!
But we cant make a difference without your help - you will be helping yourselves. We need you to get involved to help spread the word. Post us up on Crowdcube's and Seedrs' forums - give people the chance to look at our research at least. Tell friends and colleagues about us. Tell them about the Indiegogo campaign we are running to raise funding for the new site. We need to raise a minimum of £15k in reality to allow this to happen. We will need funds to build the site, join a variety of information resource companies, have guest experts answer Qs and build our community.
Please take a look -
If we fail to get this funding then that will be that. It is unlikely the blog would continue if I know that the support just isn't there. That's why we launched the Indiegogo campaign, to confirm one way or the other if we could build on the blog. I cannot accept that the status quo, where most investors are throwing away millions without having a clue what they are doing, is as it should be. UKplc is not gaining. You are not gaining. Failed companies and their creditors are not gaining. Only the platforms are gaining. Surely it is time for action?
Hi Rob,
ReplyDeleteI knew about the risks of failure, down rounds and zombies. I also knew there wouldn't be many exits by now. All but one of the fifteen companies I have invested in are still going (sadly for me, one was Sugru, but that's the risk you take, and after tax relief, my losses won't be too much more than the recent losses on listed shares).
On the question of censorship, when will you be allowing people to post without being approved first?
Clearly you know all that we can teach, so it's not for you - the forum might have been worth £24? We never suggested it was everyone. As to your last remark, if we had a totally open forum it would by now have been flooded with the 10+ per day spams from bots. Do you really think that is a good idea?? We are scrupulous about posting criticism unless it is rude. Love to know what the other 14 companies were?
DeleteOn the Sugru investment I wonder if you invested in the last round? If so, you did not have the knowledge you should have had about the bank default. Even Crowdcube didnt know about it. But Sugru did. We could have helped there. All investing is about minimising risk - that's what we are offering. You see, we could already have saved you money!
Delete15 companies, one still going and that's equal to recently listed shares? I'm sorry but dear old Dale is talking pish. Once bitten, 14 times shy
DeleteOldDales - as Im sure you know, loss relief and tax rebates will not make the great deal of difference to your Sugru losses as you pretend. If you inevested in the last round, you will lose your EIS relief for starters. Shares were sold within 3 years. And assuming you are a 45% rate taxpayer, then your allowable loss will be 45% of the allowable costs of purchase - in the last round that would 100% less any purchasing costs. So you will have lost around 50% of your investment. Assuming you are not a punter who put in £10, that is substantial and is a loss our new site could have helped you avoid. We told investors at the time not to go for this.
DeleteI believe all rounds were within three years. The total loss after rebates and EIS repayments will be about 2/3rds, so yeah - not great but better than a wipeout.
DeleteNo - all still going, one of which is Sugru, which was exited at a loss. Still a great product, and still available. None of the others have failed. I expect some will, but the point is that I knew the risks. Also, I never said "recently listed" - I said "recent losses" on listed - e.g. Amazon, nVidia, etc, who have all been listed for years, but have dived in the last month.
ReplyDeleteI would add that what we are doing is not all about you or me or any one person/investor. It is an attempt to improve the overall function of equity crowdfunding. You may disagree - with your successful 14 investments, but most people we talk to believe that there is considerable information asymmetry and investors are not getting a good deal.
DeleteTotally agree. It was all the sentences starting "No-one knew..." that I was challenging.
DeleteWell you clearly did not know about Sugru but good to see you being a little more honest about the loss.
DeleteNo - predicting the future is very different to knowing about risk. Not sure why I was not being honest earlier - I said it was a loss all along. That loan did not exist last time I invested. Hope that helps. As for the ZCF projections, it is very rare for startups to hit projections, but that's why the returns are higher when you do back a good one. I never look at them - just judge the people, the product, and the strategy.
DeleteNow I know you are just making it up. I have been running start ups for 35 years and it is not unusual for them to hit sensible projections. It is however almost unheard off for a company to reach a Crowdcube projection - current ratio is 2 out 440. Zero Carbon Foods made two separate projections - one totally ludicrous and the other just ludicrous. And they lied to investors. Making an investment without looking at the company's projections is an interesting strategy. Not one to be recommended. Anyway way best of luck.
DeleteExited at a loss - come on, be honest. It was fire sale based on the managements hiding of the Clydesdale bank loan default, which they failed to reveal to CC investors. We told investors in the last 2 rounds not to go for this - so we would have saved you £5000 of a £10k investment assuming you went in in the last round. That would have cost £48. You do the math. What are your other investments in - we will be able to tell you how they are doing!
ReplyDeleteI've already said I didnt go in last time, and I've never put £10k into anything on CC. Yes the exit was a fire sale, but the company wasn't a complete non-starter like Ethos etc.
ReplyDeleteAs for the rest of my portfolio - I'll keep you in suspense, but happy to tell you how they pan out!
Wouldnt a place to discuss your endeavours with like minded investors be of interest, even if the rest is not? Wish you luck with the other 14.
DeleteIt would, but I'm one of those who isn't a huge fan of the tone on here. Take for example Zero Carbon Foods (there's a clue!), who you laid into for no reason, and now they're increasing their M&S listing. With few exceptions, I'm still in direct touch with each CEO, so I'm pretty well up to date. There is one large one that I think is waiting to die, but we are where we are. I'm not putting any more in until I see returns (apart from Monzo - another clue!), so all to play for.
DeleteZero Carbon should be making £2m in net profits by now (YE May18) - well that's if you believe their projections. How is that going? The posts on them have largely been about over promising and under delivery. Fair reason? We think so. Investors need to know these things. That doesnt mean ZCF cant make it. But when asked in one of their rounds a few years ago if they would need to raise even more cash, they stated no. That simply was not true. We didnt make that up. It is a fact. Increasing an M&S listing is fantastic news albeit about 3 years late. We get regular updates on this company (there's a clue!).
DeleteDear Dale
ReplyDeleteOn paper as proof, if you can prove in the future that your 14 investments have succeeded, I'll give you £1400.
Sign up to the NEW SITE.
It takes nearly as much ability to know how to profit by good advice as to know how to act for one's self.
Francois de La Rochefoucauld
Hi rob, you say you could have advised punters not to invest in Sugru, etc. How will that work in reality on ECFBuzz? Are you going to be personally analysing and making judgements on the various companies in a way that you don't currently? Or is it that your forum members will advise each other?
ReplyDeleteHi Jim - the new site ECFBuzz will not be bale to give direct investment advice to start with as it's not FCA regulated. But the forum and the blog posts will be able to look at a company like Sugru and comment on their previous rounds, cover off a high degree of DD and make comments. It's a grey area. For Sugru we knew they were full of it after round one. We currently post on companies that have used this funding before and that will continue. I think the forum will be a very powerful tool - it wont be censored as Crowdcube's is. A higher degree of knowledge will result in fewer companies taking a punt and telling porky pies - because they will know that they will be held to account - again something not done by the platforms. It all adds up to more power to investors, which must result in better pitches and better for everyone.
DeleteOlddale,
ReplyDeleteThe thing that tends to trigger rmb's fury is the understanding that
-People like you only have so much money
-You choose to invest via CC for example
-This is with the understanding that most of the businesses will go under but some succeed
Due to the structure of the cc business model, you-we are offered a less optimal choice of businesses to invest in than if we had a better level of knowledge.
This means
- you get less money for your investment
- as time goes by you will tend to invest less in ecf than you might have otherwise
So some small businesses will fail or never see the light of day because they do not have access to capital at this early stage.
This means
-less good jobs for young people.
There is a moral component to this.