Gripit - back yet again asking for MORE.

Gripit is a mystery. You would think that with Deborah Meaden as a shareholder and adviser, they would be able to get some sensible projections prepared. Well you would be wrong. Crowdcube investors in this new round really should take note of what they have failed to deliver so far, not what they promise for tomorrow. 

There is nothing wrong with the product. It works and people love it. It fulfils a need and it has traction. What could go wrong?

Well sales for starters. Gripit first funded on Crowdcube in 2016 and then again in 2017 - over £4m in total. Meaden joined the team in 2016 after a Dragons Den show. 

You could forgive the company for being over optimistic in 2016. And they were. But in 2017, with the wise old bird on board, you would hope that the numbers might be close to deliverable. But they were even worse. 

Without wanting to go into numbers for obvious reasons, Crowdcube investors really must ask Gripit about their two sets of projections and why they have not managed to get close to them. And we mean not close. Here is a clue - £19m £12m £2m. If I was to say to you that the the first number was predicted to be the last number you might think I was crazy. Even the second is a fair way off the last one. You can join the dots. 

They are the sort of projections and real numbers that would get you laughed out of the Den. And in this round the claim that the GPM is now higher than projected is simply not true.

Reasons are given for the shortfall belatedly in the forum but they dont really make sense. Claims that the housing market has taken a dive since 2016 simply are not backed up by the facts. New builds, which is what is being referred to, bottomed out in 2008/9 and have gown year on year since then. Now we may see a real drop with the mess this Government is making of Brexit but that isnt in 2017/18 as stated. 

Meanwhile the CEO has been purchasing and running another business - dealing in numbers plates so not exactly in the same market, which also used Crowdcube to raise capital.

And what of Brexit? If a company cannot project reasonably accurate numbers in peacetime, then with this large black blog on the crest of the hill, what chance is there? Imagine a possible response to this Q. Gripits are UK made so any exports would benefit from the falling pound. However the component parts are not all UK made  - is this ringing Brexit Bells? The company might state that their suppliers have stockpiled enough extra to cover them. But what is enough when the company cannot even sensibly project its own requirements for 12 months? Why would a supplier purchase and pay for extra bits on the assumption that Gripit will buy them as demand increases. Based on previous years demand has hardly increased and certainly not at the rate projected. The suppliers would go bust as they have paid for their extra stockpile but cant sell it through. 

We are not recommending Gripit or dishing it. Given time there is little reason to think it wont make something of itself. Just not along the lines that the CEO plans. All we are saying is take a careful look at what has been promised for 2 years and what has been delivered. At some stage there must be a credibility issue. Would it not be fairer to investors for this current raise to be open and honest and publish the last two sets of projections? Wouldnt that be a more democratic way for Crowdcube to do things - give investors all the information - not select the bits they think they can get away with.

Given this opportunity in the forum, it is shame that the CEO has not taken it.

We have written about them before here  .

Growth since 2015 has been slow. That is a fact. If you just read the latest pitch you would not know that. That's why we are setting up ECF.Buzz and why you all should be joining. If you want this information in the future that is. 

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.

Gripit forced to slip on its fantasy valuation

We have been here before. A Crowdcube pitch forced to lower its valuation due to lack of interest.

You would have though that with the considerable backing of Dragon Meaden, that this fantasy valuing could be avoided.

Bragging about the fact that you are stocked in over 5000 UK stores and that you export to 32 countries when your entire turnover for 2016 was just over £1m is a little foolish. There has to something very wrong with the product or its pricing for sales per unit to be so very low. 

The value has now been dropped by £2.5m pre money. This is still high for a company that has so far completely failed to deliver on its potential or its projections from the previous raise. Still it has just succeeded with its US patent, so maybe things are on the up.

Depends really whether you believe the hype in the business plan. It still has a long way to go to get over its Crowdcube line - dont bet against a new valuation anytime soon.

Getting a Grip on some slippery figures in the Den.

Gripit raised £1.99m less than a year ago on Crowdcube. Valued then at £12m PM, the company showed no new raises would be required before 2019. Now they are back again raising another £1.5m at around a PM value of £20m. 

Backed by Dragon Meadon, the company makes and sells loads of widgets to help fix plasterboard.

What they dont seem capable of doing is creating any sensible financial projections.

Last year they claimed that 2016 would see a turnover of £2.546m. An impressive rise from the historic 2015 revenue of £338k. 

Now we learn from this new raise, the actual revenue for 2016 was only £1.189m - so well under half that anticipated in the first quarter of that year. Likewise the figures for 2017, which last year showed revenues of £8.885m are now projected to be only 3.984m. You get the picture.

As usual with Crowdcube financials, the GPM is more myth than fact and they missed their 2016 target by a whole 5%. Losses for 2016 were almost 4 times larger than the 2016 projections.

Now this company may go on to do great things. But why is it that 99% of companies (our research will back this up) fail to get even close to the projections they issue and that Crowdcube vet? Even a company with the help of an old wise bird like Meadon has fallen into this very obvious trap. 

Surely they dont do this on purpose?

In the pitch there is a passing nod to the fact that sales for 2016 were way off the published targets. Yet even here, the company claims  ' so we anticipate 2017 to be back on track, '  - yet the figures for 2017 are now only a fraction of the 2017 figures given in the first pitch just 10 months ago. The track seems to be an entirely movable feast.

Invest but dont expect them to sell anything like the numbers they say they will. If this sort of nonsense came up in a Dragons Den episode, you can imagine the sort of ridicule and scorn the entrepreneurs could expect to receive from all Dragons but especially the Dragon Meadon.

Is Gripit really worth £13.5m?

Well the answer according to the Crowd is yes - it has fully funded and is now in over drive.

So how do we get to £13.5m when it was worth just £320k in 2014 when it funded on Dragons Den?

Meaden has put in more cash as a convertible loan which takes the input up to around £1m. Sales are yet to get going but it is believed that they will. Predictions show turnover of almost £20m in 2018 with profits of £8.5m.

If they achieve this, can we say the business would be worth 6 times EDITDA or £51m? This would give investors now a return of almost  X4 - good but not stella.

What are the risks?

The business has never been stress tested - £20m is along way from £300k in revenue and will take a total sea change in management and skill levels.

The marketing budget, which last year was just over 10%, peaks at  15% of revenue next year and then falls to just over 5% in 2017 and 3.5% in 2018. Is this realistic for a trade and consumer product that has to sell in volume? As a yardstick Sugru, which raised £3.38m on Crowdcube at a value of around £27m last year, anticipates spending 18% of its revenue to achieve sales of £14m in 2017. That's over 5 times Gripits estimate for a far larger turnover and interestingly Sugru projects a lower growth rate year on year.

Market changes - what happens to gripits when the planet decides that plaster board is out dated and not eco and that producing massive numbers of plastic disks is not good for the environment?

Taking into account the estimated return if things go well and the risks that might mean they dont, hasn't the value for investors at this price already been stripped out?

One final thought. Meaden had a twitter chat with us over this and proclaimed that the reason she didn't invest in this round is because she wanted the democratic benefits of ECf to spill over onto the people who 'buy, use and love ' gripits.

We just wonder about that.

At this valuation most of the up side has been cleaned up and is ECF really meant for the types of people who will be using plaster board day in and day out?

She didnt like our points, calling them cynical and declined to continue. Cynical is possibly using the average persons money to make loads of money for yourself. We will have to wait and see.

 

Meaden sacrifices herself for the sake of the Crowd.

We tweeted Meaden to ask if this was such a great deal for the Crowd, why she had resisted investing this time herself. This was her respeonse -

@makeyoubillions @Crowdcube i would have done whole thing but idea is for others to get involved who use, buy, sell and love @gripitfixings

They will have to change the name of the TV programme to Pussies Den  - these Dragons are so nice and thoughtful. It is a wonderful world.

Ignore the hype GripIT is overpriced.

We found this from a large article in the Telegraph -

Grip It is now exporting to Germany and Belgium and a full European roll-out is planned for the end of the year, followed by an expansion into the US in 2015.

Grip It fixings are currently stocked in more than 1,400 stores.

The cash raised in the Den has been used to help Mr Daykin move out of his family's garage into dedicated premises. The investment will also be used for new machinery, and to ramp up production.

Revenues were forecast to hit £750,000 next year, but following his appearance on the Den, the figure is "likely to more than double," said the young entrepreneur.

Now the interesting thing is that this piece was written in August 2014.

So the progress promised has been just that, promised - not delivered. Revenues for the year in the final paragraph were in fact only £335k, making his final remark slightly ridiculous.

The hype on Crowdcube is understandable - that's what they do best. But dont be fooled, the valuation of £13.5m is based entirely on future contracts not yet signed for push sales overseas. These may or may not get signed and may or may not result in further pull through sales. The evidence from 2015 is that the pull through is sloooooooooow. 

There was no expansion in 2015 into the USA, that is earmarked for 2016 now. 

Be careful what you believe.

Later - 

Well it's two days since we posted this and the pitch has completed its £1.5m and is now in over funding. Guess we will just have to wait and see what happens. If it was such a great deal we wonder why Meaden decided not to invest in it herself this time? 

Get a Grip said Daddy Bear

GripIt Fixings is an intoxicating story of boy dun good. Trouble is it has all clearly gone to his head.

There is no doubt the product has been a success but the hype is overdone. The business is now on Crowdcube valued at £13.5m.

If you check back over the last couple of years there is a trail of media crumbs that leads straight to Debs Meaden's door - the Dragon who put £80k into the business in 2014 for 25%.

Articles are rife -

http://www.mirror.co.uk/tv/tv-news/dragons-den-contestant-becomes-one-4066626

http://www.dailymail.co.uk/news/article-3459388/From-Pitches-Riches-Entrepreneur-10million-business-20-youngest-person-funding-Dragon-s-Den-appears-new-featuring-biggest-winners-losers.html

The problem is that the figures are not matched by the hype and the Crowdcube valuation is way ahead of the headlines claiming this business is now worth £10m.

Sales for YE Dec 2015 were only £335k with losses of £179k  - from a claimed distribution network of over 2000 UK stores. As you would expect the projected turnover rockets this year to by a factor of 9 - well it had to, to be worth over £13m. Future sales overseas are due to be epic - but they are for the future.

This business is a success, there is no doubt about that. At what level a success with a view to investment - well that is another matter. It seems to us that it is following in the Crowdcube tradition of being grossly overvalued at £13.5m.  

Someone is being very greedy and I think we all know who that is, Mummy Bear.

An interesting aside from this story is just how much money is needed to get a small business off the ground. Meaden has put in over £1m since her equity investment in 2014 - which may explain why she is so keen to see it back. Most small businesses raise £150k on here expecting that to be the end of their capital requirement, when in fact it is only the beginning.