Hop Stuff completes its Crowdcube raise of £500k - glass half empty or half full?

Hop Stuff will be the one to watch in 2017. Prudence has left the room.

Despite being only loss making since it raised funds on Crowdcube in 2013 and having an estimated turnover of just £1m for YE April 2017, Hop Stuff have smashed their £500k target with more than 3 weeks to go. Well actually this pitch was extended but lets not quibble about facts - this is CC after all.

Congratulations to Hop Stuff for what is either a great business or possibly one of Crowdcube's best examples of just why their system stinks. Only time will tell.

The pitch was full of interesting figures - ones stretched to their limit - see here  . After we wrote about them, many were removed or altered. Some are still elastic.

We think that this will either be a remarkable success or a catastrophic failure. Their plans leave little room for anything else. On their projections, they borrow another £500k by April 2017 - or that is the plan. They then pay over £100k pa in interest which wipes out the next year's profits. Burn rate for 2017/18 is almost £2m - much of this in the fixed cost column. 2017-2018 revenues triple, partly on the back of a Swedish deal which the founder has himself admitted has not been concluded - but only when asked. 

All of this on top of the fact that as far as we can see there is no experience in the team at the £3m t/o level. Sure the beer is popular but that's just one relatively simple step. 

There is no room for error here - the 2018 profit will evaporate if the GPM increase of 2% doesnt materialise and we all know how difficult GPMs are to project accurately at an early stage. If they over trade and require more cash  - this round's valuation is likely to prevent any new equity funding. They are already highly geared, so missing revenue projections is not an option.

400 trusting souls have jumped in. Here is a toast to you all. Brave or foolhardy - we will know by the time 2018 is over. We hope that the new year brings Hop Stuff much success - god knows Crowdcube could do with some really good news.

Affresol cements another bad year for Crowdcube

Affresol Ltd have just posted their results for YE May 2016.

This company, which created a synthetic concrete for buildings, raised a small amount on Crowdcube in 2013 and has since raised over £1.5m in equity finance  - giving it a current equity funding of £2.4m.

In the Crowdcube pitch - it was shown as being in profit from 2014 and made a handsome £3.8m profit for YE November 2015 - so we assume that 2016 would be even more productive.

This was not a brand new venture on 2013; the Crowdcube pitch showed the company had completed its 5th iteration of its product in 2011. It had sales and was paying its directors £36k pa each. It also had backing from Finance Wales by way of long term loan.

So what has gone wrong?

Well we cant tell you that - its not something that basic one page balance sheets reveal. However we can tell you that to date they have racked up losses of £2.23m with 2015/16 accounts showing a large drop in debtors and losses of over £400k. The long term debt on the books has been reduced to almost zero from £260k in the previous year. The cash raised in 2015 has been invested in what the balance sheet shows as fixed assets but this seems to have generated falling sales and increased losses. There was no cash in the bank in May 2016 and no new cash has been filed at CH since.

All in all not looking too good for 2017.

Crowdcube's Stakis Daycare Nurseries delivers more empty promises for yet another year

Diapers, you might scream if you had shares in this company.

Stakis - founded by the famous Hotelier's son, has now spent all the money it raised on Crowdcube and to this date has delivered not a single place for babies and toddlers to be kept safe.

In fact all it has done to date is spend the cash. On what.....who knows.

The last filed accounts for YE March 2016 are looking like dormant accounts.

We have written about them previously here 

Would Crowdcube care to comment? It was after all on their platform that the company raised over £100k in 2013. They no doubt go down in the Crowdcube portfolio as a success as they have not yet closed. The company was unreachable and Crowdcube dont speak with us so your guess is as good as mine. Fraud comes to mind. If that is the case, then what will Crowdcube actually do about it.

Here is what we expect Luke Lang, the CC Pring man, to say - 

'Investing on these start ups is high risk. We carry out thorough due diligence using our team of well trained interns - no sorry lawyers - to scrutinise every company. We have more lawyers than most law firms! (that is a real quote from Luke!!) Only 1 in 10,000 applications get to list on our platform - we are that meticulous. If people are stupid enough to invest via our site then that's their issue - we make money anyway we can. Are we off air??!!''

Thanks Luke.

Cookoo cancels its Crowdcube campaign

Cookoo have cancelled their £1m Crowdcube campaign - leaving empty handed.

This company went into liquidation on 25th February 2017, with all hands lost. Maybe if they had asked us first??

Cookoo, a platform that links cooks with consumers, launched a Crowdcube campaign about two weeks ago. It was a quite a decent effort although you had to wonder at the valuation and the projections.

The one thing that killed it for us was the use of a geezer on their video, This guy claimed to be some big noise in the world of start ups and his slot on the video, where he backed the company, was the gravitas that made it work . However a fairly rudimentary check showed he had achieved nothing and his Linkedin page was what could best be described as wholly optimistic. One thing we do know for sure is that he is not and never has been the MD of Virgin Care as he claims.

Why Crowdcube didnt pick up on this we will leave to your imagination. 

The business isn't a bad idea per se, although scaling it in the time given, is in our opinion not something the two girls who run it, are capable of. It may go on to great things at a slower more considered pace which in the long run will be to everyone's benefit.

We imagine they gave up because they found, as we did recently, that Crowdcube do not deliver. We helped a recent pitch, which also cancelled early, and they reported back to us that the investor event that Crowdcube put on for them and others, was largely attended not by investors, but by other businesses (potential CC clients) and a whole host of would be consultants trying to sell their wares to the unlucky pitching companies. No doubt these geezers had been charged by CC to attend. It was, according to this well established, profitable company, not only a waste of time but also extremely irritating.

All in all yet more proof that Crowdcube need to close down or change the way they operate.

Hop Stuff inflate their figures on latest Crowdcube pitch

Hop Stuff is a Crowdcube success story - no it really is a Crowdcube success story

It is one of the only companies that has raised money on the platform that has achieved or exceeded its revenue projections. So why in its latest Crowdcube pitch for £500k, has it felt the need to play around with the truth?

This is what they say on the pitch - 

We have a demonstrable track record of beating our own forecasts. In 2013 we forecast Hop Stuff would be turning over around £480,000 by this year, we’re currently on track to double that.

This is highly misleading.

In fact the 2013 projections showed a turnover to August 2016 of £417k against an actual turnover to April 2016 (their filing date) of £524k. The claim to be on track to double the £480k is made up based on firstly an estimated figure of £480k for 2016 (Jan to Dec) - which is not a figure they ever published and the use of a large chunk of 2017 - which has not happened yet. What they dont highlight is the crucial fact that in the 2013 projections they had a 2016 forecast EBITDA profit of £166k whereas in reality they made a loss on EBITDA of £84k. 

Would you think that this loss is the more significant figure - or rather how it came about bearing in the extra revenues? Maybe a look at that 2013 projected GPM of 83% might help. This 2016 figure was actually rising over the 3 year projection.

Then just when you think you have clearer picture of what has actually happened, you find this footnote on the pitch - 

The actual figures (12 months to Apr-16 and 5 months to Sep-16) have been prepared by the Company and represent consolidated figures of Hop Stuff Brewery Limited (08471474) and Yeomans Pubs & Bars Limited (09539108) which at the time was not a Hop Stuff wholly-owned subsidiary.

So we are really comparing Apples with Elephants. Totally transparent. 

It is still a success, certainly in terms of  Crowdcube, but they really dont need to make things up. They have most certainly exceeded their 2015/16 projected revenue figure. Part of the confusion has been caused by Crowdcube allowing companies to use different projection dates to their filing dates. Something easy for the FCA to stop? 

As usual, the valuation is stupendous at £5.5m - for a company yet to make a penny of profit but then that's why they have to make these claims. Oh and you might want to ask about that debt. 

A word of caution

We notice that the forum for this pitch is crammed full of hyperbole - from the founder. He claims that the company has done very well for its first round funders, that growth will be such and such etc etc. This is all fantasy - at the moment. Shareholders in round one are no better off than they were the day after they invested. The value of the company is entirely make believe - there is no market for the shares and the company makes losses not profits. Sure the future looks interesting but please take a good look at the hype here before jumping in. 

And on top of this, the founder has now admitted that a deal with an overseas importer which is given a big push in the pitch is NOT confirmed. He goes on to say that due to this, they have only put 50% of this deal's revenues into the projections - apparently that is prudent!!!! Come on please.

And a final update - 

It seems someone reads this blog as the Hop Stuff pitch text has been changed  - in line with our comments above. That's much better guys now we might believe you :))

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. 

GoCarShare thinks about calling it day

GoCarShare has raised equity finance on Seedrs twice - in 2013 and 2014. 

Now the company has written to shareholders to say that things are not quite going to plan - or to read between the lines they are not making money. Or rather they have lost it all.

Its quite an upbeat communication talking about two potential offers to take the business forward. You feel quite sympathetic reading it - here are some guys trying to do the right thing for the planet and mankind whilst also running a business.

However the sympathy bakes tinder dry, when you realise that they are well overdue with their 2015 accounts. So running a company is clearly not what they are doing. And they shouldnt have had access to equity crowdfunding finance. Their 'plan' has evidently been a flop.

In the great Seedrs Portfolio Report, we wonder where these guys appear in the graphic - doing well most probably. Well it just reiterates the pointlessness of the whole charade  - they are not doing well or even hanging on - they are waiting to close. The CEO has been forced to take on another job - thats how well they are doing.

Get the basics right first guys - do your accounts and file them on time. Then you might have an ear.