Tuesday, 1 September 2015

The Crowcube conundrum

Crowdcube's conundrum appears to be that it cant make the real Crowdfunding work - the one for start ups and it cant make its latest attempt to recreate it for more established businesses work either - because there isnt enough in it for investors to get excited.

Take the latest two examples of the latter option. Emoov at £20m and Brewdog at over £300m are valued to prevent the Crowd being interested at the levels they require - £1m and £25m respectively. Despite Emoov starting out with £250k already pre arranged - when will the FCA sit on this practice, it just doesnt seem to make sense to have a punt at these levels. It's a bit like the Lottery offering you a 20% chance of winning but only winning small - you just wouldnt bother. It's just not in our psyche.

Of course the main problem is the fundamental one that will eventually bring this all crashing down. Crowdcube has raised almost £100m for nearly 300 businesses over the last 5 years. With one tiny little and to be frank slightly forced return of £1m or 3 times the investment versus losses heading fast towards £5m, the picture isnt a good one. Add to this all the dross in between reporting accounts that show what we all really know - that very very few businesses return the sorts of value that Crowdcube has and still is promoting in its glossy sales pitch.

What the appearance of the big boys like Brewdog will do for the many struggling pitches is obvious - it will soak up any investors who have only just noticed this platform. Leaving the small hopefuls to die on the outskirts of success. You do have to wonder if any of Crowdcube's claimed 200,000 'investors' have been fast asleep for two years if they hadn't already heard of  Brewdog's own crowdfunding campaign.

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