Monday, 16 March 2015

JustPark breaks all records

Today is the last day of Justpark's pitch on Crowdcube. The pitch was to raise £1m. It has broken all records.

The current investment stands at over £3.5m and who knows by the end of today it may well hit £4m. There seems to be no upper limit.

The pitch never presented a business plan - for 'commercial reasons'. It is backed by VC's Index Ventures (or will be if this ECF is successful) and has BMW as a business partner. You would have to admit its a neat idea, although questions over security with hidden cars in central London garages for months on end do seem to be unanswered. Likewsie their site pretends to offer parking in places where they do not have any spaces - St Andrews in Scotland for example. Asked why, they said they liked to be seen as offering spaces near all major attractions, even if you have walk 7 miles from your car to get there.

Its backers are certainly gold plated.

We understand that Crowdcube was not the first choice of platform. Crowdcube's model doesnt under normal conditions allow for a VC/crowd hybrid, where the crowd's investment is held by the platform under a nominee arrangement. The main proponent of this model in the UK is Syndicate Room. We assume Syndicate Room lost out to Crowdcube because they have a larger crowd base and this is essentially a consumer product.


What is interesting about this outcome is where it leaves crowd investors. Index's  history shows they more frequently enter at a later stage than this seed funding. The deal for the nominee shareholders is not exactly a good one. They have no rights and do not even need to be asked if Index wish to change the various share arrangements.

One thing is certain - to reach its goal JustPark will need several more rounds and each one will dilute the nominee shareholding. You just need to look at the types of funding that Index have been involved with in the past. The argument that increased company value protects the crowd is we feel a spurious one. Already valued at just over £20m in this round without really doing very much, it wouldnt take a great deal of dilution to make it difficult for the crowd to make any serious money.

From Index's stand point, the Crowdcube pitch offers the best of both worlds. They get to test ECF and the product JustPark are offering, They gain some great PR and several thousand evangelical JustPark supporters. Finally were the pitch to have failed they could have withdrawn their offer of funding. There is something of the guinea pig in all of this - well several thousand guinea pigs to be exact.

4 comments:

  1. Justpark was not at seed stage when it came to crowdcube?

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    1. Not really - it already had agreement from Index Ventures that if the CC round completed they would invest. Index are blue chip when it comes to VC and had in place special arrangements which mean that CC investors will have no say in the future of Justpark but they will. Interesting new trend for ECF pitches is for VCs or angels to put the business up for funding with their 'backing' so that they get to test the market, a group of ardent fans and free cash - BEFORE they have to risk their own capital.

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    2. Very true- do you think Robin Kein and Index are being a bit naughty by attaching themselves to campaigns in this way, at (potentially) the expense of the CC punters investing?

      Do you think they are intentionally doing so?

      For example withe the adzuna campaign - which is being sold on a multiple of revenue for a year not yet complete- there is the strong association of a couple of VC's to draw one in.

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    3. I read a v interesting comment by a VC/angel on an article recently about ECF. He said quite openly that he loved it. He could push all the high risk start ups in that direction, wait for them to fund or not and then pick up the best ones afterwards. He said he felt towards investors like one of the conscription people must have done during WWI when advising people to enlist - giving them the gungho stuff knowing their chances of returning where next to nil. Summed it up well I thought.

      I suppose they are just milking the possibility - people are very very stupid and ECF just proves it.

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