Wednesday, 1 April 2015

Have the Australians beaten us again?




According to all the PR, ECF was invented in the UK in 2011. Again according to all the PR the UK is largest proponent of ECF in the World.

Why is it then that the Australians have had The Australian Small Scale Offerings Board (ASSOB) for the past 8 years. ASSOB has to date  enabled $142m of investment to go to its companies - more than all the rest of the world's ECF platforms put together.

Looking at the ASSOB site and say Seedrs or Crowdcube in the UK, there is an immediate striking difference. Seedrs and Crowdcube have all singing and dancing platforms. Sexy and enticing - come on,  they implore, 'Try Me'. ASSOB would be considered staid in Belgium, let alone brash Australia. It has a very measured approach, no gimmicks. They wouldnt do the Crowdcube style, London Underground ad campaign - its businesses, not some lingerie they are promoting. To prove the point they have a secondary market for their businesses shares - try that with underwear.

Looking in more detail at their conditions for pitching, the differences again are stark. ASSOB really do vet the businesses before they pitch. Businesses have to pay a fee to pitch , so ASSOB is not wholly reliant on completions for its revenues. This up front fee also deters the sort of punters who can been seen pitching on the UK sites - in the off chance they can fool enough people.

The UK sites deal with the pitch and then the business is added to the list of 'successes'. The site then moves onto the next pitch. They only deal with that business again if they want to raise more cash. ASSOB have a system where pitches sign up to provide quarterly managements accounts so that their progress can be tracked. Many businesses in the UK, funded through Crowdcube, will take the money and not report to shareholders until their accounts are filed. Under the UK system, these are more often than not small accounts so they tell you very little - just a basic balance sheet, which by the time it is filed is at least 9 months out of date. We have examples where even these accounts have been shown to be incorrect.

Surely the system would benefit all if it had reporting systems that were more open and clear. ECF PR claims that this is what ECF in the UK is trying to do - democratise SME investment. Well it is not working. Businesses are being enticed into using their business plans as equity sales pitches.They are missing these projections by very great margins. They are going bust or trying to raise more cash to fill the gap. Investors are seeing no returns and with every new raise a diminishing likelihood of any.

Cut the PR and BS. Take a lesson from ASSOB. It isnt perfect but it does at least have a track record. It has avoided the worst excesses of the UK's ECF propaganda machine. It has achieved all of this without the sugar coating of the UK Government's EIS and SEIS tax rebate schemes. It might be a hard lesson but surely we need to learn it before we end up like the England Ashes team.

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