Wednesday, 22 July 2015
Crowdcube's newest pitch - no added salt.
Mara Seaweed or Celtic Sea Spice Company is looking for £500k on Crowdcube - valuing itself today at £3.65m. So in order to make investors a good return they aim to be worth £25m plus in 5 years.
We like the idea - using seaweed to make condiments. It ticks a lot of the right boxes in today's world, has good branding and the Scottish angle is all the rage.
However firstly the valuation suggests that since the company started trading in 2011 they have made considerable progress. Unfortunately the figures do not back this up. Annual losses have escalated to the point where for YE 12/2014 they made a loss of £375k on a turnover of next to nothing. That's the year Harrods launched the product. So why is the company worth so much now?
Secondly, expenditure of the nearly £500k investment to date has not been on assets or building sales - it has just been burnt. We dont know what on but suspect the ship is not very watertight. For example the accounts filed for 2013 show a large £250k cash balance which when the following years accounts were filed has become a debtors balance. Debtors are not cash.
With growth set at the usual Crowdcube stratospheric levels, investment in this business is very high risk. When you balance what they have achieved in 3 years compared with what they have to achieve in the next five just to break even let alone make investors a return, it looks unlikely.
The pitch talks about being stocked nationally by M&S - which may well be the case. However the brand doesnt appear on the M&S website (or the Harrods one) and M&S are not listed on the company's own website as a stockist. The list of stockists is very small considering the very large spend that they have used to build it.
Finally, Mara Seaweed has been very cunning. The pitch launched today and already has £236k of the £500k raised. This is indeed impressive and makes the crowd immediately very interested. However on closer inspection, one person/organisation has invested £200k of this and we have to assume this was pre arranged as so often happens on Crowdcube.
Given the burn rate, the poor performance to date and sleight of hand, we'd take this pitch with a pinch of salt.
Addendum - The largest single investment just went up to £275k (from £200k) as the pitch seemed to have got stuck. As this is clearly the same person/VC who put up the original £200k this all smells a bit fishy - which you might say is a good thing. Still very few other investors so maybe better if this person just puts in £500k and be done with it!