We talk to the CEO of the newly launched Envestry for Startups

Envestry for Startups is a new whitelabel SaaS for SMEs and start ups to raise funding via equity crowdfunding using their own bespoke site - well one borrowed at a cost from Envestors, the new platform's parent company.

We emailed Scott Haughton, Envestry's CEO, a series of questions and he kindly replied - the text is below. 

Does this help ECF? We dont really think so. It wasnt an issue in our eyes in the first place. The issue is the lack of information symmetry between the companies pitching and the investors investing. Envestry still use self assessment as the mainstay of their vetting process - which, as you know, we think is a very poor idea. The fact that an FCA regulated member of Envestry sanctions the pitches means not a lot - as numerous scandals on FCA regulated platforms have shown. In the end Envestry have no skin in the game.  See what do you think......................

1   

     How does this ‘new’ idea help to improve the quality of the businesses that currently use equity crowdfunding?

Envestry for Scale ups helps early stage and high-growth businesses to raise funds from seed stage through to maturity or exit. Our aim with the product is to empower these businesses by giving them total control over their fundraise.

Controlling the quality of businesses fundraising is not the purpose of the software product, however the due diligence that we conduct on each business as part of our sign-off for financial promotion creates a high level of transparency which is uncommon in crowdfunding.

We provide all companies with a Key Investment Data Document (KIDD), which is a comprehensive template that must be completed prior to sign-off for financial promotion. The document forces companies to be transparent about the accounts, liabilities, conflicts of interest, corporate governance and deal structure. Making this information accessible through the platform makes it easier for potential investors to evaluate the opportunity.

2   What you are offering is essentially already available via Sharein and other white label supplier companies that offer SaaS for ECF companies.

Envestry for Scale ups gives businesses their own dedicated platform that they control. Other businesses in the market offer a shared platform for fundraising, where multiple investment opportunities are hosted and/or marketed to a network of investors. With Envestry for Scale ups, businesses can market to their own community, drive them towards their own site and retain 100% of investor data.

Envestors is loss making – what message does that give

     It shows that we are committed to investing in our software product to deliver our vision of giving businesses control over their fundraise. Our business strategy requires a planned upfront investment in product development.

     

     Who is liable for the information that your platform provides to investors and will this be checked? Under the FCA regulations for equity crowdfunding, information cannot be misleading. How will this new platform deal with this? Will you make investments in these companies?

     

     Any deals posted on Envestry for Scale ups require regulatory sign-off to meet with FCA requirements. We offer a service, through our corporate finance team, to review documentation and provide the sign-off. Businesses also have the option of using a third-party to meet regulatory approval. However, sign-off by an FCA regulated professional is always required before a deal can be posted on the platform.

What will you charge and who will pay?

Our pricing for Envestry for Scale ups starts at £95 per month. Businesses have the option of adding-on additional services should they require professional assistance with their fundraise. Our corporate finance team provides a range of support covering everything from deal structuring to valuation guidance to shareholder reporting.

An entry level package that includes the platform for six months, onboarding, training and financial promotional regulatory sign-off, is £1450. Service fees of 3% are applied to funds raised.

We have priced the software to be affordable to growth businesses, who are typically lean and want to keep the cost of raising capital to a minimum.

The platform is suitable for startup and scale up businesses with their own networks who seek to raise more than £150,000.

Where will companies have access to a crowd outside of their own

Companies using Envestry for Scale ups, have the option of applying to ‘share the deal’ with the Envestors’ extended network which includes over 7,000 sophisticated investors. Deal sharing is at the discretion of each investment network and is not guaranteed

What marketing budget have you? What credentials does your team have?

Envestors is not a marketing company and partner to provide marketing services to our customers.

Is there a min or max raise?

The maximum amount a business can raise in a single round is €8,000,000. This is in line with FCA regulation and not set by Envestors. There is no minimum amount for companies raising finance, however, we recommend a minimum raise of £150,000.

Who will carry out the legals, share issue and the S/EIS claims?

Envestors has a number of recommended partners to help businesses with legals, share issues and S/EIS claims including CMS and Seedlegals. Businesses also have the option of working with their existing providers.

Will the new platform be involved at all after a raise is completed and shares are issued?

Envestry for Scale ups is designed to support businesses throughout their growth stage to maturity or exit. Businesses typically do four to five funding rounds; the platform can support them through each round. In addition, Envestry for Scale ups has a built-in investor relations tool. With this tool it is easy for businesses to keep all of their shareholders informed of their progress and to market any additional funding rounds.

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Our thanks to Stuart for taking the time to reply. 

New logos launched for ECF.buzz

We are excited to announce that our excellent design team have come up with these two cracking logos for the new ECF.buzz website. We have various alternatives on the same theme with colours etc and they lend themselves brilliantly to a variety of mediums - just what we wanted. 

Membership increasing every week - check it out at ECF.buzz

Pedal Me fail on Dragons Den but succeed on Crowdcube - with the Den outcome kept secret.

This is not about Pedal Me and their chance of success. This is about information asymmetry for investors - a topic we are red hot on. Pedal Me were successful on Crowdcube recently and they are now at least on target if not beyond it, since their funding came in. In principle their business is a great idea. 

Pedal Me raised £361k from over 400 Crowdcube investors at the end of 2018; valued at £1.5m. 

Last night's episode of Peter Jones' Dragons Den had Pedal Me as the first company up. Valuing themselves at £2m if would be fair to say they got laughed out of the Den with an offer in jest at a £250k value. There were various reasons given by the Dragons for their lack of support. All of them sound in our opinion. 

The problem we have with Pedal Me is that after filming and failing in the Den - sometime over the summer of 2018, they then appeared on Crowdcube with no mention of what had happened. They claim this is due to a contractual NDA with Jones' company.

That flags up an interesting point - when does a TV entertainment show's NDA trump the rules laid down by the FCA, who regulate Crowdcube. Crowdcube knew about the DD episode according to Pedal Me and they chose to allow the pitch whilst knowingly holding back the information on the company's DD failure. 

In our opinion, investors were entitled to know about this failure. It may not have made any difference to their decision but it is highly pertinent information with regards to an investment decision. Pedal Me could have chosen to wait until after last night to pitch and Crowdcube could have refused to accept the pitch until after the NDA ran out. Either way it would have shown respect for investors. 

Of course none of this matters, other than in principle, if Pedal Me go on to be successful. If some of last night's reservations do turn out to be true, then investors would rightly ask how withholding this information complies with the FCA ruling that equity crowdfunding platforms must not mislead people. Who chooses to release what information to investors and what to withhold, is a very current topic right now with the collapse of several large Crowdcube investments where information was not as accessible as it might have been. Sugru and Emoov being two such examples. 

Lick reappear in the UAE with an imaginary PR story

Lick, a Frozen yogurt brand, took almost £300k off 293 Crowdcube investors in 2015 and then went bust early in 2017. The brand was sold for £20k during the liquidation. The purchaser, unknown to us, is now promoting the successful 'UK brand' in the UAE. Meanwhile creditors and shareholders are left penniless.

You wouldnt think that Lick had failed, to read the PR coming out of the UAE. '...........

after Lick saw huge success and sales across the world.' is how it is described. Huge debts maybe.

Caveat very much Emptor.

Our thanks for the heads up on this one - just shows how powerful collective information can be. Why not take a look at our new initiative and join ECF.buzz where you will be able to get this sort of information from Summer 2019. 

Either Equity Crowdfunding is Crazy or the world has gone mad.

Peanut Chutney is currently well into its £100k Seedrs campaign. It has valued itself at £950k (PM) on the basis that it has not filed accounts yet and has sold around 800 jars at £3.50. It is 'listed' in a few shops.

We have little the doubt the product is fantastic - who doesnt love a hot spicy peanut sauce and it has a great back story. But it's made 'at home' and has not been scaled. For investors to see a 10X return the business needs to be valued at £9.5m (excluding tax reliefs). So how can it now be valued at £950k?

We talk about overtrading a lot on here. Small companies trying to grow large too quickly get overstretched and their cash dwindles until they cant pay their bills - even though they are making some money. Given time a good product can trade out of this situation but a cash crisis doesnt afford that luxury. Bang.

The team have little or no experience of scaling this type of product.

Small, one (with little stress testing) product companies do not belong in Equity Crowdfunding. They are not an investment for investors and the company needs to grind out its viable product stage over a longer time frame to avoid a crash. You have to ask why Seedrs agreed to this pitch. Or maybe this is exactly what ECF should be helping? In which case it needs to be valued sensibly at around £200k. At the moment it has a serious valuation, for a homespun outfit and the two do not sit comfortably together.

Everyone knows, or everyone should know, that scaling up a kitchen recipe is incredibly difficult and can take a long time and cost lots. Numbers on a sheet of paper wont tell you that bit.

We did try to buy a jar for £3.50 on line but the end price was £6 with shipping. No way is it worth £6 and it was annoying that they didnt indicate the shipping of £2.50 (or an increase in the price of 70%) before the check out arrived. Im used to buying inclusive nowadays. It costs me £6 not £3.50 as claimed - I cant eat it until it arrives.

Now once ECf.Buzz is up and running this July - you can find out how to value start ups and how to see why valuations at the current levels being offered are crazy.

Faction Collective are back on Crowdcube after getting stuck on the lift.

Faction Collective are a trendy ski maker and snow fashionista. They raised £775k on Crowdcube in 2016 and are now back for another £500k - although we'd say they need far more. They have valued themselves at an incredible £27m.

Our problem with them arises from the lack of transparency. The 2016 pitch on Crowdcube gave historic figures for 2014/15. They do not come close to the numbers in the accounts filed. You can find all our posts on Faction here. 

For some reason Crowdcube have allowed them to include £371k of capital recently raised off the platform in this £500k raise. They claim this is for transparency! So at a £380k current total, it's clear they have only raised £9k on Crowdcube. Here, you can borrow our rag - now is that a little clearer? 

The current Crowdcube pitch makes little if any reference to the previous raise and the like for like results. Why? Well we think the answer is pretty bleeding obvious. The company claim that the first half of 18/19 saw revenues of EU5m - which is great and they clearly want you to think that it's great. Well it is great, that is unless you compare it with the numbers they had for 18/19 when they were last on Crowdcube. We wont even go into the Ebitda numbers. 

A little bit of honesty would do you no harm - try it. No one expects you to land all your projections but you might like to tell people why you have missed them by so far instead of simply ignoring them. That way you would garner more trust in the company management and sail through this round. 

In future you will only be able to get this type of information if you join our new site ECF.Buzz  - we are currently offering discounted membership via Indiegogo https://www.indiegogo.com/projects/ecf-buzz-the-crowd-investors-information-centre/x/19804529/ 

Crowdcube's Socapps finally says So Long, So What, Farewell, Hard Luck.

                                         

Socapps funded via Crowdcube in 2014. It took £77k off investors. It hasnt done much since and has now, after a long time in limbo, finally issued a Final Gazette.

It was apparently an App - but it never had much of a commercial offering as far as we can tell. The last accounts filed were for YE Feb15, so what it has done in almost 4 years since then is anyone's guess.

Yet another Crowdcube farce. Well done boys.

We have written about this company a few times - the App is now owned by another company although it too seems to have done little with it. See here.

According to Crowdcube the company is still active. Good job.