Thursday, 22 March 2018

Crowdcube's One Rebel posts more large losses

The one thing you can say about One Rebel is that they are consistent. Late sure,  but they never fail to deliver losses for their Crowdcube investors. 

As always with the type of accounts UK companies are allowed to get away with, its hard to see whats wrong here. Losses of around £650k are added to their accrued losses. From comments, they dont bother to communicate much with the Crowd who have funded them to the tune of £4.5m in two Crowdcube campaigns in 2014 and 2015. 

However it is not all bad news - the company now has 4 studios. That's progress. When they last appeared on Crowdcube at the end of 2015, they had two. 

Of course it would be foolish to think that this progress in any way reflects the promises made in that campaign. Profits of well over £1m were destined for 2016 in 2014 and even the later raise had profits of over £200k for the period. The recent injection was a down round for Crowdcube punters - so a double whammy for dilution.

Im told these guys really know what they are doing. So if the person who told me that knows what he is doing, all should be fine. The numbers for 2017 will already be known by the management - we have to wait until September or more likely well into 2019 given their track record. A very Happy Exit was forecast for 2020. Here's to happy exits.

Wednesday, 21 March 2018

Thor Drinks Collapses after raising cash on Crowdcube

Thor Drinks has put itself into liquidation having raised £45k on Crowdcube three years ago.

This one is pretty much the usual sorry Crowdcube story. The 'left hung out to dry' trade creditors owed £130k, might not see it that simply. The more sorry businesses Crowdcube funds, the more contagion they enable with unpaid creditors. That is an excellent plan Thor. Kill me with a tray. 

The company never got close to any of its annual projections and with mounting losses it has closed. That is what happens if you have product no one wants to buy. 

This is what Crowdcube said about their exit strategy - 

The exit strategy is based on a 5 to 7 year plan. While a trade sale is one option, the most likely would be sale to a private equity to a firm that specialises in FMCG.
Examples of such sales include Bottle Green, which initially received £5 million investment from Piper Equity in 2007, and then more recently on to SHS for £30m
With a forecast EBITDA of £1.5m in year 5, we estimate a 9x return for investors.
Ah well another time maybe. Take him away. 

Tuesday, 20 March 2018

Farmdrop post new £3.9m losses

Just because something is odd doesnt make it wrong. But I do think its fair to assume that Farmdrop's current business plan is not what Crowdcube investors bought into. They have little choice but to look on and hope.

To be fair, the company has completely changed its business model and has the backing of some very deep pockets. Which it looks as though it will need. Investors are just along for the ride, like it or not. Farmdrop have not done what Camden Town Brewery did - which was opt for a different plan whilst at the same time giving investors a way out. 

On the current GPM of just 9.9%, they would need to see revenues of 20 times the 2016/17 £2.1m just to reach BE. Of course its not that simple and there should be economies of scale but you wonder with their plans to open hubs all around the country. It's a logistics nightmare. 

Meanwhile Crowdcube investors will soon be diluted out of existence even if the company does go on to make it. The accounts talk of more new and substantial funding requirements.

What might concern investors a little is that yet again the revenues for the company have fallen well short of their own recent predictions. Crowdcube reported that for the year just filed, they expected annualised revenues of £3m - here. This was when that year was well underway. They only managed £2.1m, so off by 33%. Crowdcube pitch projections and yes I know no one believes them, had revenues at £70m for the year. £2m as opposed to £70m. Nothing to see there. Maybe they dont understand the meaning of annualised?

Looking forward to one opening near us soon - although we already have 2 excellent farm shops and a farmers market, so maybe not. 

This will be one to follow the whole way - what do you think will happen?

Monday, 19 March 2018

Crowdcube's Luke Lang gives 'evidence' at HoC Treasury Committee.

First point is what the hell are Crowdcube doing at this committee giving MPs advice and secondly Lang is guilty of a blatant untruth in his response to Alister Jack MP. We really are living in a fantasy world.

Lang is asked a few very pertinent questions by Alister Jack MP at around 11.36am - why do things always go wrong at 11.36am? It turns out that Alister has invested in a company on CC - the outcome is not revealed but maybe the line of questioning is a clue.

Just as a note here, Alister Jack is himself a highly successful entrepreneur, having co founded an Edinburgh based marquee company back in the late 80's which grew to be very large marquee company - Field and Lawn. So he has some form when it comes to talking about successful start ups and how best to help them. I know all of this from first hand experience as we were both cutting our teeth at the same time in Edinburgh as entrepreneurs. You can tell he was rather better at it than I. 

He starts by asking Lang about the degree to which Crowdcube is liable for the information it produces on the platform. Lang says that they carry out extensive checks and get the companies to sign off all their pitch claims. Well that's not completely true as we know but it's passable. Then Jack asks about a company that had funded on the platform and went bust and it was proved information in the pitch was not correct or missing; who would be liable. 

Lang responds with a total untruth. He says that to the best of his knowledge this has never happened.

Luke you do remember Solar Cloth Co? Surely. It was on here and we helped the Times write it up - it was well covered and you were asked questions about it at the time. Investors were most definitely not given the right information about the founder and his previous businesses. They were in fact misled. Ethos Global is another one. Ovivo was another where the information was not too good. There are several others that have gone bust where claims made on the pitch were dubious at best. Tip of the iceberg.

Crowdcube took no responsibility and investors lost it all.

Of course Lang was only at the HoC as an 'adviser'; he was not under oath. Which in itself is total joke. It would be like asking Fred Goodwin to advise on banking reform. Or Tony Blair to advise on Intelligence Reports. 

Where is the counter balance?

Vested interests, as always, win the day - it is no way to run a country.

Thursday, 15 March 2018

Cape Fisheries - another Crowdcube success goes bust.

Cape Fisheries raised £136k on Crowdcube in summer 2015. Now they have been closed by CH. No news of what happened to the money invested by 121 Crowdcube clients.

There are some very large sharks off South Africa, the homeland of Cape Fisheries. Looks like some of them decided to pop over to the UK and help themselves to some easy money from Crowdcube clients. 

Since funding this company has produced only a few lines of accounts - hardly even a minimum. Now it is dead. Something stinks. 

You do have to ask what the platform was doing allowing this business anywhere near to their 'investors', with projections and a PD that showed impressive credentials and much jam the morrow. No point in asking Crowdcube though as they are now well used to batting away such complaints. 

Wednesday, 14 March 2018

Is this is why companies on Crowdcube believe it is their right to mislead investors?

We had a very enlightening chat with a business founder who had used Crowdcube to raise capital but had so far failed to get even close to its projections. 

His explanation was honest. Simply put, it is impossible to create sensible projections. So all businesses therefore produce overly optimistic projections. Everyone knows this. Therefore everyone allows for around a 50% reduction on net revenues when they look at them. The point was also made that it's impossible for businesses to know what costs and revenues will be even 12 months out, so trying is pointless. 

Added to that, he stated that the only sensible way to value new businesses was to look at further funding rounds where the value of the company will be dictated by the amount people are willing to pay for shares. 

We dont agree with either.

It maybe a fact that all the projections we see on Crowdcube are hopelessly optimistic but we believe there is a positive reason for this. Its done to attract investment. If any of the investors believed that these projections were out by 50%, they wouldnt invest at the value which is set by the very same projections. We know this because if you look at the queries on valuations on Crowdcube, they are all answered by pointing directly to the figures in the projections. If everyone agrees the figures are nonsense then so is valuation. Unless investors really are fools, they would only invest at a halved valuation. Its not a conclusion you can escape - people still invest. QED they believe the projections are in the right ball park. Most of then are not on the same planet. 

Regarding the company health check - we also disagree with this. How many times have we seen companies returning for second third and fourth rounds at increased valuations only for the company to go bust. There are quotable examples where the administrator's report states the company had been in trouble well before the funding rounds and yet the upward valuations indicated the opposite. These valuations are entirely subjective and investors have mixed motivations for reinvesting. Many believe that just a little more will bring about the outcome they dream of -  a healthy ROI. Otherwise known as the Gamblers Curse - once on the ride it is difficult to jump off. These dreams are initiated and encouraged by founders emails to shareholders giving them often highly misleading information. These emails are not regulated and do not go via the platforms. So they are legal lies. They can get away with whatever they like and often do. 

There is a fundamental problem with UKplc being littered with companies that have accessed ECf  funding based on these types of projections. It encourages them to over trade in a vain attempt to meet their aspirations - taking on crippling fixed costs that will if unfunded in subsequent rounds, bring the business to its knees. As down rounds are not really the thing on ECf platforms, these next rounds simply exacerbate the problem by raising the value - thereby satisfying everyone that the business is being successful. Given a more gradual climb many of these companies could become part of a healthy UK SME structure. 

All the while all of this mess creation is being paid for in part by the Goverment's S/EIS tax reliefs. What we need is a system where all directors of limited liability companies have to pass a knowledge based test or S/EIS is not available. This, backed by much more stringent assessment of the handling of the company's affairs on administration, would certainly help. After all you wouldnt want someone on the roads without a license.

It was certainly interesting and worrying in equal measure to hear this opinion from the horses mouth.

Crowdcube's Adzuna win Government contract to replace Universal Jobmatch

Adzuna has had a rough ride but has turned a corner. From Q2 of 2018, Adzuna will be providing what is one of the UK government's largest online services.

When the founder of Adzuna was diagnosed with stage 4 cancer, things looked bleak for him and the business. Remarkably he has now fully recovered and the business, which was on hold, is steaming ahead.

It's too early to know how things will turn out a couple of years down the line, but for now Adzuna is a success that Crowdcube can genuinely point to as a company they helped.