Friday, 24 March 2017

How stupid can Altfi journalists be?


This article came out recently on Altfi about the move by Revolut from Crowdcube to Seedrs for their next round of funding.



It's amusing for once to see Luke Lang caught with both feet firmly in his large mouth. But the journalist, who is either an idiot or just plain lazy, fails to notice the glaringly obvious 'fake fact' is Lukes comments below -  

From the article -  

''Crowdcube co-founder Luke Lang said that he was "very surprised and disappointed" at Revolut's decision, given Crowdcube's "proven track record of funding VC-backed businesses". He also noted that some firms have gone the other way, switching from Seedrs to Crowdcube. POD Point – which recently raised £1.5m as part of a larger £9m round, led by Draper Esprit  is one such example.''

Anyone who has any knowledge of ECF and its 6 year history, knows that Draper Esprit are now major backers of Crowdcube. Do you think this might explain this particular switch? 

Wednesday, 22 March 2017

Come along and have a chat with us on Saturday at the Master Investor Event

Master Investor Show: Setting the standard for investment events

By  
 2 mins. to read
Master Investor Show: Setting the standard for investment events
This Saturday 25th March, the Business Design Centre in Islington, London, will welcome 4,000 visitors to the UK’s largest event aimed at informing, inspiring and educating private investors. The Master Investor Show brings together private investors of all portfolio sizes to hear keynote talks from celebrity investors and gain access to new investment opportunities.
Visitors can connect with the CEOs, founders and decision-makers of nearly 100 global companies in the event’s exhibition zones.  Companies can tap into investors to increase liquidity in their shares, to raise new funding, or to place their financial products.
Master Investor CEO Swen Lorenz: “Modern investors look at a broad range of asset classes. Shares, bonds and funds remain a mainstay of every portfolio, but private investors increasingly also look at early-stage venture investing, peer-to-peer lending, crowdfunding, international stocks, and binary betting. They are also looking for alternative sources of information, and are keen to learn about online tools that can help them improve their investment performance. We offer all of this under one roof, in a single day, and combined with keynote presentations by some of the most highly regarded investment experts this country has to offer.”
Event organisers expect around 4,000 investors to attend. Now in its 15th year, the event initially began with a focus on AIM-listed companies and has since grown into a much broader affair. Ordinary investors will get the opportunity to speak to the CEOs and founders of 100 companies from multiple investment sectors, including equity funds and retirement saving, crowdfunding, life sciences and FinTech, and alternative finance such as film funding and peer-to-peer lending.
46 guest speakers will deliver talks across four stages. On the main-stage, five of the most prominent names in the British investment industry will give talks packed with investment tips, insights and the next market trends. This year’s main-stage celebrity line-up
– Jim Mellon, arguably Britain’s most successful private investor and worth over £850m
– Justin Urquhart Stewart, co-founder of Seven Investment Management and a household name in investing
– Alex Wright, Portfolio Manager at Fidelity’s Special Situations Fund, and Britain’s best-known equity fund manager.
– Tom Stevenson, Investment Director at Fidelity International and market commentator
– Gonçalo de Vasconcelos, CEO of SyndicateRoom, the innovative online investment platform
The Master Investor Show has attracted major names as sponsors. Fidelity International, Seven Investment Management, Edison Research, SyndicateRoom, Deutsche Börse, Northland Capital Partners Limited, Selftrade, Huddle Capital, KPMG, and London South East are all sponsoring the event. Share Radio and TipTV are media partners.
To find out more about the Master Investor Show, visit: www.masterinvestor.co.uk/show

Ecco Recordings website in the dark just as their main attraction hits the BIG time.


Slippery little suckers - these success stories.

Ecco Recordings raised £234k on Crowdcube back in 2013. Their main pitch was a band called These Reigning Days - who were going to make it B.I.G. 

Several years later and they may have - Reigning Days have just signed with Marshall Records.

The Ecco Recordings website, however, is down and they were last reported heading into dangerous waters with their balance sheet in tatters in the wind. 

Looks like another empty stage for all those shareholders. One shareholder has complained that no communication from the company has been received since the Crowdcube round. It's a similar story with most Crowdcube funded companies.

MEEM's Pre Pack Administration hits some turbulence in the year they should be making £25m profit




MEEM raised over £700k on Crowdcube and then went into administration. One of the secured lenders to the company who has now been repayed, is one the directors. In a pre pack deal, most of the remainder of the outstanding debts has been passed onto the newco - a total of over £1m; £830k of which is from employer liabilities.

However the pre pack and administration has been stalled as two of the company's shareholders are considering or are taking, legal action against the company directors. No detail is given but one can assume it's not because they behaved normally.

We wrote about MEEM's collapse and pre pack deal here. Crowdcube's great facilitation just keeps on rolling. This year MEEM was due to be making over £25m in net profits according to the Crowdcube 2015 projections. Shame.

Monday, 20 March 2017

Red Squirrel Group have gone nuts - literally and this time its not on Crowdcube



Red Squirrel Group raised £651k on Crowdcube at a valuation of £5m in 2015. Now they appear to be back as Mad Squirrel at a valuation of £9m on a shambolic platform called Right Crowd. How this platform is allowed to operate even within proximity to an FCA license is beyond us. The forum Q's suggest this will be a massive flop.

You can have a good laugh here - https://therightcrowd.com/.

This is exactly why equity crowdfuding will go down the tubes. Red Squirrel ran a very odd Crowdcube campaign, with the line between their two operating companies and the Holding Co almost impossible to understand. Recent accounts have the holding co making a £7k loss but the two subs have made a total of £160k loss for the year. On Crowdcube, they predicted a profit...of course.

Talk of dividends for 2017 look like the usual Crowdcube fantasy.

On Right Crowd, there is no business plan, no mention of types of shares and in fact nothing about what shares are on sale in what company as Mad Squirrel is just branding. To join RM all you have to do is give some vague(in our case spurious) details and you are in. This is wholly contrary to the FCA guidelines.

It is truly farcical. Asked on the forum why they have chosen this atrocious platform for their second raise, they say that Right Move is better for fast a growing business like theirs. Firstly there is little evidence they are growing at all and secondly Right Crowd looks to us more like a scam than a serious platform. These guys have under 500 Twitter followers and only 3 live pitches - all rubbish. We would agree with their strap line though - 'Crowdfunding with a twist'.

When asked on the RC forum about the dilution for existing CC shareholders, the reply is that by increasing the shares the value of the company has increased. We all know that is nonsense and even more so in this case.

Oh and if you are interested, the Mad (that's you if you are) Squirrel or whatever they are called, campaign on this platform has been a complete flop with only £80k of the desired £1m pledged. We'd imagine the £80k is from the company founders.

Rateragent moots closing due to total shambles. We called it two years ago.


Yet another Crowdcube funded company comes off the rails within 24 months of funding. This Blog warned would be investors at the time that the claims made by the CEO were far from transparent.


To quote the email sent to shareholders - ' Unfortunately, due to the previous leadership the business has reached a precarious position.' IE it's insolvent.

It had spent all of the £134k it raised on Crowdcube in 2015 and more by the end of 2015. In 2016 it was due to be turning over £1.23m with profits of £294k. In fact it only achieved just over £80k in revenues, with a small loss of £8k,; cut back from the £150k it lost in 2015 when it received its lovely lolly from 133 investors.

The leadership that is roundly blamed for this shambles is one Mal McCallion, who is described in the Crowdcube pitch thus - 

Mal was involved in the launch of two very successful property technology start-ups, Zoopla & Primelocation. He has spent 15 years immersed in UK property tech.

and


Mal has extraordinary experience in this marketplace, having been on the launch team of Primelocation in 2000 - taking that all the way to exit in 5 years for £48m - and driving the re-launch of Zoopla, when it pivoted from a private sales platform to an estate agent subscription site from 2008. 
Having spent three years helping to build Zoopla from zero subscribing agent branches to a solid number two in the property portal market (behind Rightmove) by 2011, Mal was headhunted to join Brent Hoberman, co-Founder of lastminute.com, in an interactive floorplan business which let people build Computer Generated Images (CGI's) of their actual homes with up to 125,000 new furniture items in them. 
Having sold that to Floorplanner in 2013, in 2014 Mal went to run Fine & Country / Guild of Professional Estate Agents' technology company, PropertyLogic. The concept of a new start-up in raterAgent became too tempting in December 2014, however and, within a month, the 'beta' site was launched in January 2015.
Until he began to use every waking hour creating and nurturing raterAgent, Mal loved running, cycling and spending time with his family. He is a downtrodden Ipswich Town fan and knows more than anyone reasonably should about Simple Minds' back catalogue and Blackadder.



That hardly sounds like someone who would place the company in such a precarious position by accident. Mal resigned a while back and we wrote about this here and here whilst the pitch was live and in fact told investors that the claims made on the Crowdcube pitch were dubious...at best. 

Crowdcube must be held accountable for this misinformation - it was after all a prime part of the pitch they vetted and published under their FCA license. But of course they wont be. And so it goes on and on and on ......................................................................

Friday, 17 March 2017

Here is a typical Crowdcube 'success' story. And you wonder why there has been no ROI.



Pizza Rossa raised twice on Crowdcube in 2013 and 2015. An LBS award winning business plan and Crowdcube accolades to die for, the Pizza chain is a sad sight 4 years on, with just the one solitary unit.


We asked the London Business School how they allowed their hard won barnd image to be used on such an obviously flawed project but have yet to receive a reply. LBS have asked Pizza Rosa to repspond and below is the email from them 'explaining' how things have gone so very wrong. Apparently the LBS connection is not significant, which rather contradicts the statement made by the CEO of PR 'Our Success Will be London Business Schools Success' on the video! Anyway the CEO very kindly gave us these 'clarifications'.......:)

'A few clarifications follow below.

1- The London Business School did not back the pitch. We won business planning awards not only at LBS but also in international competitions, in front of entrepreneurs in private incubators, with top accounting firms and were finalists in a national competition organised by one of the leading British banks. We were a business incubated at LBS but LBS as a business education institution did not endorse the pitch. Nothing different was stated anywhere and your sentence "Your pitch was backed by LBS" is incorrect.

2- The projections in the initial pitch were based on market research and benchmarked against existing businesses. All projections in the business plans were made to the best of our knowledge at the moment of writing them. The first pitch was based on a business plan for a start up and this was clearly stated in the pitch. 
Optimism is inherent to entrepreneurship otherwise none would leave a secure and comfortable life and get exposed to the risks of starting a business. 

The projections in the business plan for the second pitch incorporated the initial results after opening the second outlet (which opened 5 months after the first). The third outlet opened 10 months after the first (in a progression aligned with the initial business plan). We started commercial agreements with third parties ahead of the initial projections. There were a number of contingent, cultural, commercial and market conditions that forced our decision to close down the second and third outlets.  We were looking to raise more equity in the second round to target a different part of the market and rectify some of the initial assumptions that were proven wrong: we did not achieve that. Our bad, but the above delayed our plans.

3- An an LBS alumnus I found interesting your comment about having done a "real MBA at Cranfield".


4- Crowdcube clearly states that investments in start ups are at risk. It is up to investors to review the business plans to form their idea about investments. The Q&A section in each pitch is generally a very good platform for criticism and skepticism to be exercised on every projection/information included in the pitch. 

We have highlighted the 'reasons' for the closure of units 2 and 3 almost as soon as they opened. We thought this was highly informative.

Pizza Rossa sums up much of what is wrong with Crowdcube's model of equity crowdfunding. 

They came to Crowdcube in 2013 boasting the top award from the LBS enterprise competition. The CEO was typically arrogant - throwing back any advice and denying that there could anything wrong with the model. As it turned out it was fundamentally flawed for the most ludicrous reasons - which says volumes for the LBS enterprise programme.

Even when they returned at the start of 2015 for more cash, they refused to accept that things had not just gone badly wrong but had essentially not gone at all. Attempts to trade units in the City on Saturdays, a point made to them in the first round and flatly contradicted by the CEO, proved disastrous as did new unit openings. Promises in both rounds of a 'chain' have been shown to be total nonsense. There is still, after 4 years, just one unit costing an incredible £600k plus to open. 

Losses have mounted and the latest accounts due out any day will show us more of the same. It has been a total shambles.

Why?

Put simply the CEO and his team didnt have a clue what they were doing. And the same could be said for Crowdcube; although they still picked two lots of lovely commission. LBS seem to have gone to sleep in handing him his ace card of the award - he was not shy in bringing it out to hit people with when they commented on the flawed plans. Crowdcube lavished him with further awards and allowed the company back for a second round at the usual ridiculously increased valuation - £1m to £1.5m. 

Crowdcube vetted and allowed plans that were obviously flawed and projections that were Trumponian. Investors partly dazzled by the hype and in the second round, too afraid to cut their losses have kept this disaster afloat, burnt money and claimed back tax reliefs. 

Another great story for UK plc.