Troubles at Enistic highlight the poor Crowdcube model

Enistic raised £340k on Crowdcube in 2104. Now they are struggling with mounting losses, huge founder pay packets and resigning directors.

So how does a new company making losses justify a salary of £150k to its founding CEO. Well is cant but there is nothing Crowdcube investors can do about it.

We wrote about Enistic here when they suddenly withdrew their second attempt to take Crowdcube investors for a ride. Thet were not well received the second time.

Now information we have shows why. The CEO, Darryl Mattocks, has been taking £150k pa out of the company by his own admission. YE March 2017, the company reported losses of over £100k - ie his salary. He hasnt broken any laws, its just plain stupid. Investors did not put their money into the company to pay for his lifestyle.

A recent resignation by one of the non exec directors has led to the revelation that things are not well at the company and there have been some interesting goings on. We wont go into these here, suffice to say that they are not in the interest of Crowdcube's shareholders and it also involves a service contract which appears to be against the interests of Enistic.

So we comeback to the title of this post. How can Crowdcube investors assert any from of meaningful influence on rogue directors, once they are shareholders? Simple answer is they cannot. The first Crowdcube pitch raised almost 3 times the amount sort. So investors were enthusiastic. The March 17 accounts show little cash remains and assets total £119k, even after the company raised more finance last year. Someone has benefited but it is surely not the investors.

Enistic withdraw their Crowdcube pitch

Enistic were until very recently trying to raise £150,000 on Crowdcube. The pitch wasnt going too well, but then quite a few on Crowdcube seem to be struggling.

They had a very high rating from Crowdrating - two golds and a silver, which is pretty well the highest rating they can give. So if you believe what Crowdrating say this pitch was as good a bet as you can get. Enistic also formed part of the portfolio of Braveheart  - Crowdcube's Venture fund. In other words, it has the backing of Crowdcube's experts.

So where have they gone and why?

We may never know. Crowdcube run their platform firstly for themselves and secondly for entrepreneurs. Investors, or as some might like to call them, its clients, are almost always left in the dark. This is just one example alongside more obvious ones like 88 Delicious, where it would be very beneficial for potential investors to know why a pitch has gone off line.

We are left to fill in the blanks.