Tuesday, 7 April 2015
BEER52 - Yet another epic failure for Equity Crowdfunding. Here's why.
Beer52 is a online craft beer subscription site run out of Scotland. It has taken the internet and the upsurge in craft beers to create a new demand.
In January 2014, Beer52 raised £100,000 on Angels Den. This ECF platform purports to be different to others - but we will go into that later.
The pitch has all the usual misinformation you might expect from an ECF platform. It states that year one will deliver a NP after tax of £316,000. This allows for the usual ridiculous company valuation. Year1 filed accounts now show a loss of £86,000. So a difference of ~ 450% on their projections.
Looking in more detail at the pitch plan, there are some obvious reasons why they have missed by such a large margin. As with a few other ECF pitched businesses, strangely run by the same people, Beer52 launched with a Groupon heavy discount deal. This was a Christmas deal and as you might expect was jumped on by bargain hunters.
In the plan it all appears rather differently. The plan states that they had 6,500 subscribers in their first 3 days and sold 30,000 bottles in the first month. No mention here of the Groupon deal. Its uses these figures to extrapolate its Yr1 projections - the ones it has just missed. Groupon is not a sensible way to up your retention rate. We all know that.
This technique was also used by Flavourly.com, who funded on Angels Den and then Crowdcube, after their results missed projections. The Flavourly.com founder is an 'advisor' to Beer52. So I suppose we can expect to see Beer52 on another ECF platform anytime soon.
What Beer52 dont tell you is that for them to be able to offer these beers at a good price, they have to deal mainly in bin ends - lines that the brewers cant shift. Subscribers will not hang around for long to put up with this sort of con.
So how do Angels Den fare in all of this? Well the platform has had a number of successes - successful funding that is. It claims to have a 90% rate of funded businesses still active. Well ahead of the sector norm, it proudly declares. When you look into this claim, it proves to be totally spurious. The platform has only been funding businesses for just over a year - so its is hardly surprising that few have gone bust. It took Crowdcube almost 2 years to see its first collapse. It is just another example of the ECF platforms' desperate attempts to sell themselves.
As a footnote Angels Den seem to have a large number of pitches that have either raised money on other ECF platforms or worse have failed to raise money on other ECF platforms. It appears you can do the circuit now, selling your wares to the first idiot willing to buy.