Financial Ombudsman and Crowdcube's response to the Emoov Fiasco - Nothing to do with us mate

This is a disgrace but it is also exactly what we predicted Crowdcube would say. Thank you to the investor who forwarded this and who is now a member of ECF.Buzz - so it wont happen again. Shame on you Luke Lang and Darren Westlake - 

Dear xx

Thank you for your email, which we will consider and respond to as a formal complaint. 

We understand and share your disappointment at the outcome for Emoov investors. However, as we underline on our platform, there is a very real risk when investing in startups and growth companies. As always, Emoov’s pitch was reviewed according to our due diligence charter, and approved as a financial promotion.

Any claims made on the company’s pitch on Crowdcube, including the financial section of the pitch, were subject to our standard due diligence and were therefore verified with evidence before being approved as a financial promotion. Any additional claims made outside of the pitch or post the raise on Crowdcube, would not be verified or approved as a financial promotion by Crowdcube. 

In the cooling off email that was provided to all investors prior to the capture of funds, the company reduced its valuation and confirmed that they would require additional funding. Investors were able to withdraw their investment during that cooling off period.
You can access our Due Diligence Charter, which is public on the Crowdcube site, here. 

It’s always disappointing when a business doesn’t succeed but please be assured that we will be liaising with the administrator over the coming weeks and we will provide further updates to investors when possible. 

Please consider this email as our official response to your complaint. If you feel we are unable to rectify your complaint to your satisfaction, we would like to make you aware of your rights to escalate your complaint to the Financial Ombudsman Service at the below details:

Financial Ombudsman Service
Exchange Tower
London
E14 9SR
website: www.financial-ombudsman.org.uk 
email: complaint.info@financial-ombudsman.org.uk 
phone: 0800 023 4567 or 0300 123 9123

Unbelievable. 

Emoov, sadly going where no investor has been before....................for good reason.

Emoov may well turn out to be the end of Crowdcube. The company raised £2.6m in 2015 on the platform. It then merged with two other loss making online estate agents this year and on the back of a promised IPO, was allowed to raise another £1.8m on Crowdcube just 2 months ago. Now it is toast - albeit toast that is for sale. So what is it worth? Certainly not the £100m Crowdcube investors paid 60 days ago. 

We warned you all.......again. We knew about this a while ago but didnt want to prejudice the sale process by writing it up. Now it's hit the headlines. We had a sad email from an investor who says he has lost a large sum of money and that that is the end of equity crowdfunding for him. Well done Crowdcube.

The latest Emoov Crowdcube pitch has been 'taken down' by the platform to save some of their blushes but we wrote about their merger and the new campaign here. What investors were being told about the state of the company does not now appear to be quite true - ring any bells?

The captain of this ship is now saying that the cash runway has ended - that's 2 months after raising over 150% of the cash they asked for on Crowdcube. Yet another one for the good book - Russell Quirk (no typo) for the record. Quirk is reported by the FT to have said that the business ran very well for the last 8 years. That's the same business that has collected losses of over £10m. Yup that is some success story and we have not even seen last year's accounts yet. 

He can be seen here at end of the recent Crowdcube raise thanking people for all their cash - sends shivers..................

In a piece in the FT  - here, the same Quirk is now saying all this cash has run out. I would be surprised if anyone could find a more glaring example of gross mismanagement of anything, anywhere in this whole bally world.

Reports say that Northern and Shell, a major backer according to Emoov, failed to come through with the funds - leaving Crowdcube investors as the only source of new money after the merger. Who would have guessed that?

This is what Luke Lang had to say about the second Emoov Crowdcube raise -

We’re delighted to welcome our good friends at Emoov back to Crowdcube’s platform for this next raise, as the company continues to innovate rapidly in the property space. Emoov made a highly successful raise on Crowdcube in 2015, providing £2.62m of growth capital to help fund expansion.

Emoov’s crowdfunding success is a great example of how Crowdcube helps growth companies find capital to take advantage of market opportunities and build their brand while allowing investors who believe in the company to take part in that growth by investing as little as £10.

Luke Lang

Co-founder, Crowdcube

This is exactly why Crowdcube needs to lose its FCA licence. The evidence is there for the FCA, who do not need to go anywhere where man has not been before - they just need to wake up. 

Beam me up Scotty. 

Beware the numbers being used by Daily Dose on their current Crowdcube pitch.

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.  

Mr Gripit knows a good deal when he sees one. Is Crowdcube just for suckers?

It's probably a good idea to strike whilst the iron is still hot - a good idea for whom though? Jordan Daykin is back on Crowdcube with a newco - whilst his Gripit Fixings fall off the wall.

Daykin certainly knows how to milk a run. His newco, VPS, which he bought for £5m is now overfunding on Crowdcube. There wasnt much made of Gripit in the pitch. Gripit has raised £4.1m in two rounds on the platform. Lastest accounts for YE Dec17 show losses of £1.8m for the company - a nine times increase on the latest projections. The figures suggest something odd - read on.

Should shareholders worry that he has now turned his energy and attention to being CEO of VPS - a totally unrelated business, in a totally different industry? Well time will tell. Gripit is due to deliver a profit of over £3m this year. Clearly it must be on track or he wouldnt go wondering off.

Debs Meaden is a SH in Gripit - via that wonderful comedy series Dragons Den. What does she think? No comment.

The accounts were moved, so this loss of £1.8m is for 17 months. Interestingly the first 5 months of this were included in the Crowdcube pitch as 'historic' data. However if you add the losses for 'previous 12 months' and the year Jan to Dec 2017, you get a projected loss of only £1m in total. Now it is impossible to know if the discrepancy (£800,000) occurred before the CC raise dated 03/17 or in the period after that to 12/17.

In the light of recent events with the platform and the fact that accounting dates were moved in June 2017, you might be highly suspicious that old tricks are being played here.

It is certainly more grist to the mill when considering Crowdcube's FCA licence.

How to complain to the FCA

A friend very kindly sent this through and I thought it might be useful for anyone wishing to look at taking action against Crowdcube and or Sugru. I have to say my experiences with Ombudsmen is not good.

I have complained against companies that have ripped me off and have been complained against so here it is.

No matter how much fuss you kick up, and is on the message boards, the FCA won’t do a thing. They are not listening and not even monitoring.

They’re basis for taking action is complaints that are upheld by the Ombudsman http://www.financial-ombudsman.org.uk/

If any FCA company gets one or more complaints which are upheld by the Ombudsman, then suddenly the FCA is all over the offender. But under their light touch regulation, they have to identify a problem before they investigate it.

You need to get one of the investors or many of them to complain to Crowdcube. Standard stuff is we were presented misleading information to make our decision on. As such I want my money back.

Crowdcube then has 28 days to investigate and find a way to make the client happy.

If the investor is not happy he can then complain to the ombudsman (the FCA is now aware and monitoring events via the ombudsman).

The ombudsman investigates and has the power to get Crowdcube to refund all the investors money.

These are the proper channels for getting results. The FCA doesn’t listen to anything else

What Notes dont tell you - but we did.

Notes are back on Crowdcube, as expected. They have run out of your money. They dont tell investors what they told them last time, as that would be a real downer on their pitch. We told you back in March of this year but you dont seem to have listened. The pitch is funded.

When you have read through all the guff that Notes produce about how fantastically they have done since 2008, sit back and read this. And this - http://fantasyequitycrowdfunding.blogspot.co.uk/search?q=+notes

In 2015 they told everyone that they would have revenues of over £13m for YE June 18. They now say that its truly great that they have reached almost £5m. In 2015, they said they would have EBITDA of £1.87m by now. Now they are very happy with £200k. A net profit was projected whereas we are looking at large losses.

At some stage surely someone is going to do somehtig about the word 'misleading' when it comes to the FCA's use of it in regulating ECF platforms. How is the above not totally misleading? None of the information from the 2015 pitch is inlcuded in this one - only up notes on how brialliant the whole thing has been. 

Ok, so we all know it takes longer and its never possible to rely on projections - so why have them if they are so totally misleading? Well Crowdcube need them to show the 'big numbers' out there - the big numbers get the juices flowing. Crowdcube couldnt exist without them. And lest we foget, this is ALL about Crowdcube. 

Is someone lying here? Sugru Debt Facility - was it secure or just an option??

We are on a very sticky wicket here. Sugru's 2017 Crowdcube raise told investors that a debt facility was in place. No ifs and no buts  - it was secured.

If that is the same facility that after the Crowdcube £.15m raise, fell through and which led to this situation, then the facts used in the Crowdcube pitch were very misleading - if not negligent. Does the FCA have the powers to check this. Are you kidding. 

Come on Sugru and Crowdcube lets be having some real facts here - no more crocodile tears and no more PRing, please. Investors have lost £5.5m; the least you owe them is honesty.

What does the FCA mean by a misleading fact?

The FCA guidlines for equity crowdfunding state that it is the responsibility of the platforms NOT to present misleading information. But what does that mean?

Let me give you a recent example - this company is currently on Crowdcube trying to raise money.

So - the claim is that this company's product is stocked by the following national chains - Asda, Aldi, Morrisons, Ocado. Well that seems simple enough. Asda have 525 UK stores and Aldi have over 700. Ocado is online, whilst Morrisons have 500. 

Having such a fantastic listing in national supermarkets, totalling over 1700 stores, is a very clear investment gold standard. It's dynamite.  

Now you wouldnt expect that this company, which is only 3 years old, to be stocked by all of these stores. But given the fact they dont enlighten investors with more information, you would expect the listing to cover a good - for good maybe read sensible percentage of the UK coverage - number. 

As it turns out, the company only stock these chains' Scottish stores. So that is about 5% of their total number. They are regional listings in a region with 6m inhabitants. 

Strictly speaking the information given in the pitch is not wrong. But is it misleading? Well of course it is. Asda for example only have 20 Scottish stores. Investors might hope that this is exactly the sort of basic due diligence that the platform would carry out on their behalf. So the conversation might go - 'dont you think it would be fair to say that you have regional listings in these stores for Scotland only?' Actually you and I couldnt possibly find out that they are only in Scottish stores, unless the stores or the company told us - we tried the latter. They said it wasnt misleading at all! They said that they never mentioned how many stores the listings covered!! Wonder why? 

There is only one plausible explanation for omitting this information - it helps make the pitch more attractive. Isnt that the definition of misleading - something that informs but in a way that doesnt tell you the whole truth? It misleads you. 

When investors have to fight to get the right basic information to make a sensible investment decision, surely it is time for the FCA to do its job. 

What is it Crowdcube do not understand about checking the facts?

Moove, an Irish version of Purple Bricks according to their PR, have almost completed their Crowdcube £200k raise - then someone discovers that they are not licensed to deal with property.

So you have to ask if Crowdcube really do any very basic DD? The answer is bleeding obvious.

Luckily for CC investors, someone on the forum has done some checking and they are not currently licensed. His initial Q on the forum was removed by Crowdcube. Open and honest as ever.

http://www.psr.ie/Website/npsra/npsraweb.nsf/page/publications-licensees-en 

Even if this is a clerical error, as the company is claiming, you have to wonder if a company that cant even get its own core licence arranged, has any hope in the real world.

You couldnt make this up. FCA are you out there?

Thanks for the tip on this.  

Seedrs do the right thing when Crowdcube can only talk about it.

Yet again we have an example of Seedrs committing in action to looking after their investors. This is not what Crowdcube do despite what they may say.

A source has sent us details of a Seedrs raise. This completed but took a while to get past the paperwork. By the time it had, the company's circumstances had changed for the worse and figures given in the pitch were shown to be wrong.

So what do you do?

Well any right minded person with an ounce of decency and an FCA licence, would alert investors to these facts and ask them if they still wished to invest. Which is exactly what Seedrs have done. Armed with the facts, investors get to make a real choice.

There is a prize for anyone who can give me an example of this happening on Crowdcube. Here it would most likely have been 'passed over' and liability in the aftermath that followed would have been rigorously denied. For real examples of this type of thing, you need look no further than Ethos Global. Although once there you might try The Solar Cloth Company and a few others.

It really is time Crowdcube were held to account.

New ICO from Spice being promoted by Crowdcube - is that legal?

So now Crowdcube are licensed by the FCA to promote an ICO? 

Ignoring for the moment the benefits that are claimed by Spice's new ICO to establish a blockchain operated investment fund, why are Crowdcube involved? Is this a last ditch attempt to get the fund filled? Darren Westlake, the Crowdcube CEO who sent out the promotional email, says that - 

I want to let you know about an opportunity quite distinct to others that have previously been available through Crowdcube. 

Applauding the appalling English - what does he mean? Crowdcube are not allowed to get involved in this area but here they are getting involved anyway; using their brand to positively promote this ICO. 

Ok, so we cant ignore the detail behind this offer. What is being issued is a new coin that has an asset value behind it - the NAV of the fund that the pot of money is being invested into.

The offer which is due to close in two days, is for $130m worth of new coin in the Spice VC Fund.

The BIG claim from Spice is that in the old world, VCs locked up cash in these investments for 7 to 10 years. Now apparently this new system will allow investors liquidity - the Holy Grail has arrived.

Well no actually - not so fast. The Holy Grail may be in sight but it is still firmly out of reach.

Reading fewer of the headlines that Spice are good at pushing out and more of the detail reveals the truth.

1. Spice will be putting aside 5% of the fund to allow coin owners to cash in. However the value offered will be automatically set by the calculation that keeps the value at 5% of the fund - so for example a run will mean rapidly falling value and therefore no cashing in. It looks like liquidity but isnt.

2. The NAV of the fund will set the price of the new coin in the 'market'. Who sets the NAV is not mentioned. We all know where that road leads.

3. They state that they have no idea if coin exchanges will accept their coin. So no guarantees of liquidity here.

4. The only liquidity here is that fellow Spice holders will be able to purchase your tokens and vice versa. That is not really liquidity as the attempt by Seedrs to create a secondary market for ECF shares has so far shown.  

In fact despite the pages of technical waffle, their is no real liquidity here at all. There might be but then there might not be. Worthless.

So the whole show rests on whether you believe that the team behind Spice have a clue how to invest in what they are terming companies between Seed investment and an A round. A gap they say is waiting to be filled. Your investment whether held in Spice coin, dollars or bananas will go up and down on the back of the performance of these companies. Which is pretty much where we came in. A fund's NAV is already worked out this way. Without liquidity, Spice offer nothing new. Liquidity can only exist where there is a buyer and seller - Crypto or no Crypto.  

It looks most likely to us that this yet another outfit climbing onto the Crypto tower so that when they waive their flag, someone notices.  

Myshowcase's final crash

Our recent report of the give away of Crowdcube funded MyShowcase to Miroma Group has now been confirmed. A communication from Crowdcube, who are the nominee account holders in this mess, states either agree to this or the business will close. And you have 4 days to take legal advice and decide. 

Investors in MyShowcase via Crowdcube will get 12.5% of the new Myshowcase, whereas they bought 13.7% via Crowdcube for £1m. These new shares have no rights. Miroma will get all the MyShowcase shares for nothing. Miroma have recently signed an agreement with Reach4Entertainmant in the US which may help the business.  

As usual, the poor investors that believed in Crowdcube, have been royally hung out to dry whilst Nancy and her cronies have been rescued from a sunken ship; at their expense. Whilst the communication goes on to say that this is unlikely to effect investors EIS reliefs - as the deal is at 'arms length', we feel these are rather short arms. Given the fact that the founding CEO of Miroma was a major investor in MyShowcase. In fact if you were really cynical you might think this was all a set up.

We know the FCA are hopeless but are they really that stupid?

Bra Entrepreneur using Coin to divert the gaze of the FCA?

In the latest crazy twist in Fintech, Bra millionaire and Baroness, is launching a new Start Up fund based on crypto currency. 

Michelle Mone and her business partner Barrowman, are about to launch an ICO - Equi. Their new coins will be part of their new fund for start ups. Why they have chosen to raise the money by issuing a new coin is a mystery to me apart from the rather too obvious media attention.

This deal is being set up in such a way that it circumnavigates the eye of the FCA. Its a very fine line they are drawing and I just wonder if this is the sort of monkey business that a Peer of the Realm should be involved in? They get around the FCA regulation because the coins are non transferable so are not considered within the FCA's remit. In fact this is probably the only reason they are even talking about using coin.

If it comes off, which seems unlikely and the FCA quite rightly bring it within their remit, one hopes that a Peer of the Realm will not find another smoosh to hide it under. After all, despite her success, it should be a one size fits all when it comes to financial regulations.

Reports of the death of Myshowcase have been greatly exaggerated - apparently.

In a complete reversal, Myshowcase CEO Nancy, has now told shareholders the company has been sold in such a way as to protect their EIS status.

Hats off to Nancy. The deal she has done is with Miroma, who were an existing investor. How the deal is structured is not clear - certainly from Nancy's explanation. But according to her, Miroma will own all of the stock of Mychowcase and then apportion 12.5% of the enlarged Miroma to existing CC shareholders. Hmmm - how does that work again?

Questions asked of Crowdcube get the usual reply  - go ask Nancy. 

She also claims that 'as the bargain has been done at arms length' the EIS status will be intact. Right.

Miroma Group is a dormant company but is part of a chain of Miroma companies. Miroma International as the email indicates has a £100m turnover with £2.5m net profits. It's picking up a bargain but what is not clear is what Myshowcase investors have picked up.

So we imagine CC shareholders will end up with 12.5% of the empty Miroma Group - up until now owned by the Miroma CEO and as we said, dormant. Is this essentially a phoenix where the old Myshowcase will be able to off load irritating creditors? Miroma are paying a nominal amount to purchase 100% of Myshowcase. We'd expect to see Nancy taking a seat at the Miroma Group table shortly. 

Anyway it has to be better than her last email which simply stated the company was closing and would cease trading at the end of January.  Or maybe not?

Myshowcase raised £1m a year ago on CC.

Thanks to all those who emailed this in to us.

Just how bad is the Ethos Global Scandal?

Ethos Global, forced into liquidation by the Courts, and their funding facilitator Crowdcube, are trying to dismiss the closure and shenanigans that led to it, as nonsense. What really lies beneath the surface may be far worse then we thought.

Cambrdige has a bit of record with Crowdcube. There is of course this on going case but not long ago there was the confirmed fraud of the Solar Cloth Company. The SCC was run by a Cambrdige resident who was using various different spelt names to hide his business failures - a simple fact that the Crowdcube DD department missed. Result - the loss of £1m of investors cash plus a whole pile of creditors being out of pocket. Only two companies made any money out this farce. They were Crowdcube with their commission and the insolvency practitioners.

Now we have another Cambridge farce; Ethos Global. The truth is proving hard to come by but a recent source told us, that the scandal is far worse than it appears. The company was apparently already struggling before Crowdcube and was in dire straights. That's not all the source said but the rest needs some verifying. QED - when they approached Crowdcube and were vetted by them , they were already in a lot of trouble. If true, can Crowdcube really be allowed to keep their FCA license? What is the point in having any regulation if it can be so blatantly abused with no sanction. 

As with the Olympics, where they should just let it be a free for all and see who blows up first on the 100m, no regulation is better than regulation poorly enforced.

We think that Ethos Global marks a new low in the many lows of the development of ECF as a credible long term channel for SME funding. If not here, then where will the FCA draw the line?

New Year brings Crowdcube investors in Airlander to the ground with a heavy bump - no parachutes issued.

Airlander - the new/old Zeppelin idea  - has had to reduce its share 'value' by 60% to gain more, much needed funding. Leaving Crowdcube investors with large potential losses.

Airlander has always talked a great game - big numbers, massive enthusiasm and glittering future prospects. Who knows the latter might yet materialise. But progress has not been good from an investors' standpoint.

In their first raise in 2015, Airlander shares were valued at £1, then again shortly afterwards they raised more on CC, at a share price of £1.42; valuing the company at over £55m. Below is the confirmation of these figures in a reply to a Q on the CC forum in the second raise. 

When we started the Crowdcube raise in March last year the company was valued at £34.4 million (with a share price of £1 per share). Today we are valued at £55.0 million (with a share price of £1.42 per share). The change in valuation is explained by a reduction in risk in the business, with the build of the aircraft now complete, and due to additional resources secured by the company. Since we commenced the last raise we have secured £3.9 million in equity, £5.3 million in grants and £4.5 million in convertible loans. All these funds add value to the company.

We are currently raising a total of £4 million of equity (of which the crowdfunding forms a part - hence why we are able to overfund by a small amount) which funds the Flight Test Programme. From that point onwards, the business plan forecasts we should break-even by getting customers to pay for the results of trials and demonstrations. At some point in the near future, we need to raise £30 million for productionisation of the Airlander, which is likely to come from an IPO or potentially through deals with other companies. So this raise will be undertaken with the benefit of secured orders in place. The level of dilution created by that raise is clearly dependent on the share prices achieved and that is extremely hard to forecast as it will depend on many factors. That said, our model suggest that the dilution percentage would be in the mid to low teens, but it could be higher of lower.

We hope that gives you a full picture of the future raises currently forecast. With anything forward-looking we cannot guarantee what will happen, but this is our plan and our best estimate as to what will happen.

The Airlander Team 

You can take all of that with a mouthwash of salt  - especially the bit about the dilution being in the low teens. All apart from the bit about we haven't a clue what will happen.

Just before Christmas 16, investors were sent a Christmas card with a lovely present  - news that this round of crowdfunding had just completed the remainder of the £4m (the 4 mentioned above) but at a share value of £0.575 per share. Crowdcube investors remember, all 1462 of them, had paid £1.42. The excuse for the discrepancy appears to be that some 'international' investors will bring extra benefit to the company - thereby making the lower valuation justified. What is it Luke Lang always says about Crowdcube giving the little a guy a fair chance! This value is not just a down round it represents value almost half of the previous, previous round.

Dear Fellow Shareholders

I am very pleased to report that we have successfully secured the first £4 million of investment in the current equity fundraising round.  In doing this we have added a number of significant international investors and we think their quality, when added to that of our existing shareholder base, will be very important to the success of the company as we go forward.

In order to secure this level of funding we have had to reduce the per share price for this round to £0.575. These funds will allow us to return Airlander to flight and to progress our discussions with customers towards securing revenue. Successes in these areas are what will drive huge value appreciation back into the company and so the Board was happy to accept this price and put the company on a good footing to start 2017.

As has always been the case, we are very keen to ensure that all shareholders have an equal opportunity to invest in new share issues.  This new price means that any investment will get more of the company for the same amount that we were offering you initially this round.  This also means that there will be more dilution to existing shareholdings than would have been the case had we achieved a higher price.  So if you didn’t participate in this fundraising or if you would like to increase your investment please reply to this email and indicate how much you would like to invest.  The amount available is limited so new applications will be accepted on a first come first served basis.

Similarly if you have any questions (for example, as to how much you would need to invest to maintain your percentage ownership of the company) then please just ask and we will come back to you.

I have pleasure in attaching our HAV Christmas Card and in wishing you all the very best for the festive season.

Regards

Steve

Stephen McGlennan FRAeS
Chief Executive

The picture at the top of this post is of the Airlander's second attempted landing - no one was hurt. It hasnt flown since. 

We dont suppose that Crowdcube even know about this double down round and if they do that they will as ever brush its embarrassing fall in share value under their increasingly lumpy office carpet. 

Of course you also have to know that Crowdcube are a sponsor of Airlander; so all the information you get from the platform on this company is highly subjective. Can it be right that an FCA platform is pushing millions of pounds into a company that it is directly linked to? That sounds like Trumponics to us. 

What's important here is to maintain some perspective. Airlander might just be a the next big thing - no one knows now. If it is, this massive fall in value will be inconsequential. However the cock up or greed on behalf the management is self evident right now - producing fictional values to rob ordinary unsophisticated investors of value. The more sosphisticated 'international' investors could not be fooled. This message is not lost on those feeling slightly bruised by the rough landing.

One thing we can guarantee is that Crowdcube, in their shortly to be PRinged Reveiw of the Successes of 2016 will make no mention of this down round and the loss of around £1.4m in 'value' on the £3.4m invested by over 2000 of the platform's investors. More for the overworked carpet cleaner intern to dispose of.

FCA Interim review is still looking through the wrong end of the lense

So now we have the FCA's interim report on alternative finance. Will it make any difference?

In the 21st century, you would have thought we might have learnt how to engage regulation with a new vibrant form of business finance. From the outcome of this turgid, starchy interim report from the FCA, its clear we have not.

For starters, if you look at the who the FCA are asking for input, it is mainly those parties with the most interest in minimal interference. So much so in fact, that this is one of the more inane comments that The FCA saw fit to include in the report -

Other matters 4.21

Five industry respondents said the FCA should not refer to blogs ((: and market commentators in the media, which may be sensationalised or subject to their own conflicts of interest. Instead, they recommended we focus on industry data.

Our response (FCA not us!)

We will continue to analyse due diligence standards in the ongoing post implementation review. As set out in Chapter 5, we are considering consulting on further rules on disclosure and may consider options for specific disclosures about the due diligence process, even if we do not go on to prescribe minimum due diligence standards.

To gain a rounded picture of the market, we will continue to consider all sources of data, including social media, consumer feedback and media commentary but will not give undue weight to any one source of information.

The key problem for the FCA is that they are looking to control the investors rather than the platforms. They try to limit the access to the platforms but under voluntary guides rather than rules - this will never work. People are too arrogant and or ignorant to admit they are not capable of knowing what to invest in. 

Control of the platforms in the form of making them more accountable, stopping them from using glossy advertising and restricting the use of third party FCA licences would be more appropriate here. This is business finance not some Saturday evening entertainment show.

Leave investors to fend for themselves - voluntary restrictions are doing that anyway. Get to grips with what the platforms offer investors and you will have a far better outcome. Crowdcube, the worst offender by far, is still producing the most ridiculous projections and valuations. Its advertising spend is massive and this is managing to hold the company up - despite the growing list of failures and lack of any real success. Their model needs to be banned - no due diligence, no post raise accountability, massive glossy misleading advertising, poor or non existent shareholder communications, poor or non existent S/EIS communications. But now we have Seedrs joining in with their Annual Portfolio Report, supposedly showing the majority of shareholders are doing well. It's a total fabrication.

The FCA needs to get together with HMRC and come up a new way of SME's filing accounts, listing their directorships etc etc. The current system is way behind the new business environment. Due diligence is made so much harder. As an example a recent pitch on Seedrs had a company looking for £1.5m as a loan. But the company was late filing accounts - so late it had had its first notice to be struck off. How does that happen? In fact this company had already moved its filing date, so it hadnt filed any accounts for 30 months. To add to the irony, the company declared it had applied for and was waiting for its FCA licence to allow it to carry out its main activity - raise money for businesses. Is someone taking the Michael?

The FCA seem powerless to do anything. They have kowtowed to big guns like Balderton, who have sunk large sums in to Crowdcube, and are now pussyfooting around the real issues.

Just by of example here is a little piece of the FCA report -

Due diligence standards on platforms 4.18 

Three respondents said that current due diligence standards are below those that would be expected for professional investors but most respondents said that standards are appropriate.

'Most' said DD was appropriate. In the time we have been running this blog and for the 4 years prior to that, we have not come across an investor who thinks the DD is appropriate - it stinks. It isnt just below a professional standard, it is criminally negligent. That's why we have companies going bust having never done a thing, why we have directors who are banned, why we have phoenixing like it was going out of fashion, why we have lies (promises) all over some pitches and why we have videos with fake entrepreneurs promoting the pitch. Platforms do not carry out anything but the briefest DD. It's all catalogued in this blog - the blog that respondents didnt want the FCA to read.

Our guess is that the final FCA report will just like the 2015 effort - a hands off whitewash which leaves 99% of all this just as before. 

Crowdcube investors are now contacting US for help!!!

Its is really very depressing.
3 times this week we have been contacted by shareholders in companies that funded via Crowdcube, to ask us to help them find out what is happening. 

We are of course happy to help where we can - but what the hell are Crowdcube doing? Appearing at Crowdfest to soak up the adulation of their own industry's PRing.

Today's contact came about Chupamobile - which raised £740k on Crowdcube in 2014. Ignoring what they do, what they have achieved to date is waste this money as far as we can tell. Projections showed them in profit for 2015 and making a profit of over £1m for 2016. But the reality is, as it always seems to be, that they have clocked up the losses and continue to do so. Only silently.

That aside, why is it that companies feel they can abuse the very people who funded them? Why are Crowdcube not involved in pushing companies to give a minimum of quarterly updates via email - how long would that take? Where is the bloody FCA when you need them? Stumbling through another review in which they have used the gangsters to advise on the regulation.

Things are clearly not right when a blogger from deepest Scotland is the messenger for so many shareholders. Less preening more action please Mr Williams!

Its time the FCA protected creditors from this abuse

For all you caveat emptors, red in tooth and claw, you 'entrepreneurial' go getters who believe blindly that equity crowdfunding is gggreat. Here's one for you.

When a business goes bust, for whatever reason, you can be pretty sure there will be unpaid creditors - the amount will depend on the scruples of the directors. If these unpaid creditors are a result of a plan that was flawed and funded via a model that is also flawed then something should be done to prevent it's repetition - dont you think? Ignoring the idiots (shareholders) who backed the idea, creditors who may have run thorough credit checks and read news items, should be protected from this abuse.

East End Manufacturing is one such example. 

A recent report from the liquidator, not published yet, shows how flawed this business was. It went from this statement on the Crowdcube blog in May 2016  - 

Our sales topped £1m last year and we are expected to turn a profit for the first time this year, so we are moving in the right direction.

To admitting to the liquidator that by June 2016, the business was in dire trouble; ultimately resulting in its closure last month. You have to say that takes some believing.The Crowdcube projections show YE February 2016, that this company was making over £600k net profit. Pure fantasy passed and stamped by the FCA as good to go.

So these poor creditors, who being sensible businessmen and women, would have read up on East End Manufacturing, run credit checks and seen the good news story carried by Crowdcube in May 2016. Hey, no problem with this company's credit, they say, we can do business. 

By their own account only a month later in June the company was toast - having lost 60% of its revenues via 4 customers moving on. Was there no hint of that in May? Again by their own admission during the summer they entirely failed to get any new customers - is that really possible for a business 'moving in the right direction'?

The two main trade creditors have been hit with debts of £55k and £47k. Even for a substantial SME those are heavy debts likely to lead to lay offs or even closure. These creditors were misled by output from Crowdcube and the company. For the one owed £55k, this will put the company balance sheet into the red. Likewise the other one is small start up. 

So where does the responsibility lie? Could this company have run up these debts without Crowdcube? Simply put no. Who ran a piece praising this company and its future prospects just weeks before it was hung. Crowdcube. Have at least two small SME's been very badly damaged as a result. Yes. Is that really a sensible way to help the UK's SME's?

Quod erat demonstrandum.

Investden claims to have raised money for Bedlam Brewery are false?

An FCA regulated equity crowdfunding platform has claimed to have raised over £250k for Bedlam Brewery. Bedlam Brewery deny this. 

Bedlam are currently on Crowdcube raising £330k. We posted an article on them recently stating that they had raised money on Investden and showing how the projections used then had been missed by several fairways.

To refute this, Bedlam have posted a response on the CC pitch forum stating that they have never raised money on Investden and have asked them to remove the claim - with no response. You can see the Investden claim here

Someone is lying. 

Investden are FCA regulated via a proxy arrangement with Clasp Investments, who own and run the platform. If they are promoting false information - the link above clearly states they raised the money from 87 investors for Bedlam, then action must be taken. Of course it wont, but it must be.