Saturday, 27 June 2015

Self ceritfication Crowdcube style - 2008 all over again.


There have been a couple of recent articles questioning the basis for Crowdcube's model - at last. Both sort of ended up rubbing up against Luke Lang - he's so cuddly.

One of the claims made by Crowdcube is that 'investors' are not simply members of the public, they have to join the site and to do this they have go through a series of FCA approved Q&As. We thought we'd test this so asked a 9 year old to join. All he needed was an email address and user name and password. He self certified that he was conscious by ticking one box and hey presto he had joined. It took him 2 minutes - half of that spent eating a banana.

So how is it that the FCA and Crowdcube and these journalists are happy with this clause at the very top of the Crowdcube Disclaimer section -

''This investment opportunity is not an offer to the public and is only available to registered members of Crowdcube.com who have qualified and categorised themselves as able to invest.''

Qualified? Catergorised themselves? Not members of the public??  We remember 2008 and the joy brought about by self certified mortgages. Who are they kidding?

2 comments:

  1. Hello Rob,

    You are doing a commendable job with your blog.

    When I came across the concept of Crowd Funding, one of the initial things I did was trying to find some source which would rate the pitches and rationalize the pitches. It is very strange that except your blog I have not come across any so far concerning pitches on CrowdCube.

    Any public offering has analysts rating/giving feedback. Considering the fact that CrowdCube is the "introducer" of these pitches, they must have some rating system/mechanism to classify the pitches and the people involved on the following parameters:

    1.) Past success of the promoters
    2.) Any financial/economic offences of the promoters in the past
    3.) Logic of the projections or the feasibility of the projections

    Whenever I look at the financial projections I find them ridiculous as every pitch hits a million turnover/profit within 1-2 years of starting.

    And most of the pitches are valued at a minimum of a million by default.

    I strongly feel CrowdCube has a moral, ethical and profession obligation to clear the murky valuations and projections and save investors (majority of the investors would be small investors, when you look at the number of investors in each pitch it is clear that majority investors would be making small investements).

    Kind regards,

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    Replies
    1. Thanks. My concerns are not really for investors - they should be able to look after themselves. I came across Crowdcube in 2011, just after they had funded their first 'success' - Bubble and Balm. This success quickly went bust owing large sums not just to investors but to creditors and Crowdcube removed it from its list of completed pitches. It all smelt a little fishy to me.

      What concerns me is that as someone who has spent 35 years in SME start ups, good and bad, the need for sustainable SME growth as a key part of our UK economy is obvious. Banks never were too keen to lend unless they had belt braces and your bollocks and after 2008 became totally risk averse. The gap is being filled by crowdfunding. So it had better work. To date there is NO evidence that it will create sustainable, successful businesses. The evidence very clearly all points in the opposite direction - people making up businesses because they know they have easy access to cash, making up or certainly being creative with their past successes (failures) and as you say valuing themselves at £ms. The last government under Vince Cable's shaky hand, has whole heartedly endorsed Crowdcube - it gave them £5m. EIS and SEIS mean that a punt of say £200 only costs you £100 (SEIS). Despite what some people think, we live in a system where all our tax is required to be paid to cover the total spend - so this missing tax will have to be replaced. Fine if its creating jobs and successful companies - all well and good. But if as the evidence shows, its creating very temporary jobs and then company closures with all that entails - it really is not sensible to carry it on.

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