Wednesday, 26 August 2015
Crowdcube - the masters of collateral damage
We have been saying this for a while.
When asked about the various companies that have funded on Crowdcube and then gone bust, Luke Lang, CC's PRing man and co founder, has always glibly replied that there are bound to be some failures along the way - its collateral damage which is made worthwhile by the benefits.
We have brought various failures to the attention of our readers and the one very small success to date. One of the failures that is still in its final death throws illustrates just how very wrong Luke Lang's philosophy is.
Ovivo Mobile Communications Ltd raised over £500k on CC. One day shortly after raising this money, all the lines went dead. The company had folded and was put into liquidation.
That was a year ago and the liquidators annual report reveals the full extent of Crowdcube's collateral damage.
The company found no buyer and the assets, which were valued by the owner at £90,000 realised £4,000. Cash at bank was £80,000 and the liquidators bill to date is £41,000. So essentially the company will have nothing to distribute by the time it is closed - sometime next year.
Ignoring the large number of shareholders who believed the Crowdcube pitch, what else did Ovivo owe when it closed?
A lot is the answer. The liquidators report shows debts of just under £3,000,000.
This includes £1,000,000 of customer credits but more alarmingly £650,000 of trade creditors.
Now Ovivo was only able to trade because Crowdcube presented their projections in such a way as to entice investment. Without the Crowdcube money, Ovivo would not have been allowed to build debts of almost £3m and leave over half a million pounds worth a trade creditors hanging out to dry. And all of this was done with the blessing of HMRC via EIS rebates.
So Mr Lang the next time someone asks you about the collateral damage you are causing, do try to have a proper answer ready.