Saturday, 31 October 2015
The projections used to get to this stage have as usual proved to be total fantasy.
Accounts filed for YE May 2015 show losses for the year of £250k against a projected profit of of £1.9m in the fantasy version for YE November 2015. Accumulated losses are now £800k as opposed to the projected accumulated profit figure of £1.7m. It's technically insolvent to the tune of £380k. The company will surely be appearing again soon at an ECf platform near you.
How is it possible to be so consistent in getting these financial projections so stupendously wrong? Of course much of this is down to Crowdcube's out to lunch department - the one that will be running their new EIS fund. High valuations based on future fairy tale revenues and profits are the mainstay of the Crowdcube model. This heightens excitement amongst investors, allows grand claims to appear in the business plans and ensures that founders sell minimal amounts of their equity.
In the end however, investors will surely wake up and realise that they are being conned. Wont they?
Friday, 30 October 2015
Hello from the Summer Isles
We were not going to post whilst on a short break in the most serene setting you could imagine and yes it really does look like this even on the 30 October. But needs must - a ludicrous Crowdcube fund launch and an even more ludicrous ending to the farce that has become the Early Bird pitch have demanded a response.
Crowdcube's new £500k EIS fund must be a piss take, right? With only 1 out of 300 funded companies returning anything to investors and at least 10 bust, Crowdcube have now embarked on a managed fund that will, over 5 years, make you loads of money. The £500k will be invested in 8 to 30 Crowdcube pitches - carefully selected by a group of independent and Crowdcube 'experts'. Good luck with that guys, you will be struggling to find 3 let alone 30.
For the privilege of having this expert guidance, you will pay a fee equivalent to 10% over 5 years, on top of your investment. This is the good bit - if the company hasnt 'exited' after 5 years, the management will end and you will be left holding a worthless piece of paper. A cynic might look at this as fairly desperate measure by Crowdcube to increase investment in their pool of increasingly poor pitches. The same guys selecting these pitches are the ones playing with your money. Enough said.
Earlybird have been sending out their latest SOS emails to entice investment in their Crowdcube pitch, which like some over ripe Agen prune, will finally fall and die today. Thank the Lord. The email starts - ''It is our plan to deliver an minimum of 13x ROI based on current performance / growth targets and with our new routes to market this could be upwards of 66x ROI in the next 3 to 5 years.'' We think this is a clear breach of FCA rules amongst other things. Crowdcube have moved the goal posts on this one so often the pitch has now been developed into a new supermarket.
Maybe this would be good opener for the new fund?
PS - The ridiculous farce with Early Bird has just been extended for another 6 days!!
PS - The ridiculous farce with Early Bird has just been extended for another 6 days!!
Wednesday, 28 October 2015
Pimoroni is a new pitch. The financials or more specifically balance sheet is wrong.
Filed accounts to YE June 2014 show retained profits at £191,760 and paid up share capital of £15,370. According to Crowdcube's projected 2014/15 accounts (YE June 2015) net profit was £94,443. No dividends were paid out so this money is added to retained profits leaving it at £286,203. According to these Crowdcube 'accounts' no equity investment was made for the year so paid up share capital should be the same as 2014. However the retained earnings given are £267,290 and the paid in share capital has gone up to £52,870 or an additional £37,500. This addition is not accounted for anywhere.
That aside, take care with the fact that the profits for 2015 appear to be below the ones for 2014, which is not mentioned in the pitch of course. The stock holding YE 2014 was £112k but had gone up to £205k in Crowdcube's accounts for YE 2015 - although as we all now this could easily be an error on their part. Stock maybe a problem as in their first year of trading, they had only £12k of stock at YE but had managed a £87k profit. The build up of old stock after 2012 maybe an issue if you consider the large number of lines they carry.
Poor information does make it quite difficult to make any sort of considered judgement.
Tuesday, 27 October 2015
Syndicate Room have made a strong case for being seen as the most honest and transparent ECF platform. And they should be applauded for that - if its true.
On their platform right now is a pitch by Cell Guidance Systems. Its already completed a £250k raise and is heading for its overfunding total of £500k.
There are various points about the way this pitch has been presented that cause concern. If you take into account the platform's claims about openness then they should really take another look at themselves.
Firstly CG Systems raised £290k on Crowdcube back in 2013. These projections showed that the company would not need to raise more than £100k in that round and would not need to raise again. They also showed a £10k loss for 2013, actual loss filed £240k and a 2014 profit of £100k; actual loss £73k. Projected profit for 2015 was £450k and the actual loss according to the Syndicate Room pitch is £60k.
So not exactly what you would call going to plan.
None of this is mentioned in the SR pitch. In fact the whole Crowdcube raise is not only ignored, it is rubbed out. In the financial section of the SR pitch it states very clearly that there has been NO private equity investment in this company. The Crowdcube money is listed as Angel Investment, with the private equity box left very obviously empty. This is wholly inaccurate and very misleading.
What's more the lead investor in this SR pitch is one Dr Steve Chambers. It transpires that he was one of the largest investors in CG Systems pitch on Crowdcube in 2013. SR fail to make any reference to this and it is left up to us and one of the Q&As to winkle it out. Its important because this 'lead investor' has given various statements about the company that are simply not true. He states that they have been sensible with their projections and fulfilled them - no hyperbole. Sorry but the information above makes this look very foolish. Of course it is material to a new investor's decision that the so called 'lead investor' has a massive vested interest already in this company.
It is also worth noting that the description of this lead investor's experience is in our opinion misleading. It claims he was a founder of Adgen, when in fact this was originally founded by the SAC and was later spun off. He was listed as the sales director.. See - http://craigcorporate.com/cc/paul-yacoubian-othermenu-128/the-adgen-journey.html and here http://www.neogen.com/Corporate/PR2003/2003-03-06.html. The description on the SR platform is not in line with the story told here. Whats more when Adgen was acquired by Neogen, a company it already had a major distribution deal with, its turnover was only $1.6m. These facts would be more useful to potential investors than the hyperbole used to describe Chambers' career. You might also think that if SR call this guy a lead investor then surely we all could be?
According to CH CG Systems has two directors, according to SR they have 3. Its not that important but we do love some degree of accuracy.
So it seems that Syndicate Room are just as apt at not telling investors what they dont want investors to know, as Crowdcube et al. How very sad.
Liquidators for Soshi Games have just filed a first report. Soshi was highlighted when Syndicate Room, though which it had raised ECF, published a video of the founder telling us why it failed. It was a first in transparency but the jury is still out on what exactly went wrong. His explanation was full of contradictions.
The report shows a secured debt owed to Creative England for £150k and an estimated total o/s balance owing of £334k; none of it recoverable. Overall the company has used about £1.5m to get to here. There was only one current asset of any note which was an amount due of £84k for uncalled share capital - there is no indication as to who might be liable for this.
The very odd declaration that this report confirms from the filed accounts, is that this company had absolutely no fixed assets. For an operation that was creating a brand and had already established at least one blockbuster app (their description not ours), this strikes us as very odd. If they dont own the Queen game, who does? It must surely have some value or what was the point? Not inconsiderable amounts of money have been used to develop something which now appears not to exist.
Monday, 26 October 2015
Chilangos are back
Having raised £2.1m in a mini bond last year on Crowdcube, the Mexican restaurant chain is now looking for £1m for just over 3% - in equity this time.
We are not fans - of Mexican food that is. And we are not fans of this investment either. The company has been trading since 2007 and is yet to get close to showing a profit even with 8 London sites. It has gobbled up over £7.5m in losses and is now looking to expand outside of London.
This expansion can only take place if it raises another £4m and then borrows another 5.5m in the next two years. This gives the business a gearing ratio in 2016/17 of almost 60% which is high for a company without any record of profit making. The projections show a steadily increasing margin and a steadily decreasing relative cost base - including property costs for new openings. This we feel is on the chilli side of optimistic.
Right from day one they have traded at a loss and just kept on opening more loss making units - it reminds one of the fated Whittard model. The PR has always shown them on the up and up but the figures do not lie. 2007 one unit lost £100k. In YE 2010 a turnover of over £3m produced a loss of £1.2m. You get the picture. Call us old fashioned but we think business is about making a profit. What is a brand worth if its only asset is a loss making facility?
Chilangos have already tried to expand outside of the capital - twice. Both times the move proved to be a disaster and both units, one in Bluewater and one in Sheffield have closed. Setting up new restaurants costs them roughly £450k so closing them shortly afterwards is expensive.
Take a careful look at their leeway to make similar mistakes again - there isnt any. With spiralling costs this move is the company's last chance to get into profit and everything has to go exactly to plan. It strikes us as a slightly desperate one. New food trends develop over time and the Mexican fad will not last forever. They have already had almost 10 years to prove something. Ratings for their offer are ordinary at 4/5 - not exactly fire eating.
On Crowdcube you generally know something is up when a pitch's major opening gambit is to tell you who the famous people are that support it. We'd like to know what amounts these guys have invested - from the AR it looks like not a great deal and in ever decreasing amounts as the business has raised yet more capital. You may also notice, as with many CC pitches, the latest accounts for YE 03/15 are due out in 2 months time so they could easily have been brought forward if they had any good news in them.
Sunday, 25 October 2015
Of course the new pitch doesnt mention the old pitch. It's a fairly typical example of the phoney claims made by the platforms that ECF is transparent and for the people.
Here are two examples we just happened to stumble across.
Earlybird is trying (desperately) to raise more money on Crowdcube. It's not going very well, despite increased equity offers and numerous extensions. However dont worry because the same company is on Angles Den - with its chairman as ''lead investor'' and open for investment now of £300k for 16%. They are offering 20% for the same amount on Crowdcube right now. Both campaigns are running together with different % - eh? We havent looked but you can probably find them in Aldi for £300k for 25%. What is a lead investor you might well ask when it comes to using your chairman.
Silkfred raised money on Crowdcube a while back and has failed to deliver on its projections since. It has just completed a £850k raise on Angels Den and is now overfunding. Looks like CC may have missed out on this one. Clearly Fred felt he didnt want to answer questions about dilution and projections.
Is it really acceptable that companies run simultaneous or end on end campaigns on different sites - without giving any indication that this is what they are doing? We dont think so but then we are maybe over critical of some of the ECF practices which claim to be totally transparent.
Friday, 23 October 2015
The London Distillery Company raised money on Crowdcube back in 2011/12. Its subsiduary Dodd's Gin is attempting to raise £1.5m here - https://doddsgin.myedash.com/deals/583 at a pre money valuation of £8m - this is a pre sales and profit business 98% owned by LDC.
So LDC - how have they done since 2012? Accounts for YE March 2015 are due out end December, but the previous two years have not been good - large losses against projected b/e. Sales are clearly not going to plan. We wonder why LDC has not simply joined the ranks of past Crowdcube businesses who have run out of money and come back for more? Maybe they figured they would get a hostile reception.
The artisan drinks sector is heaving with wanttobes. We were involved in a Gin tasting only a year or so ago and the number of alternative small producers was staggering - LDC was not even there. Breaking into this sector is not easy as LDC have clearly found.
Dodd's accounts show no sales to date and the idea behind this raise is to promote the new brand. Thats fine but how do you get a value of £8m pre revenue?
This raise is not eligible for any EIS tax relief as Dodd's is a subsiduary co. Makes you wonder why they havent put this in with a LDC raise which would have been EIS. We wonder how the crowd investors in LDC feel about havving one of their products diluted in this way.
Our advice is try the free gin they are offering at their pop up at 26 Greek St Soho and wait for the results of the parent company LDC to come out. We find it very hard to believe that these results will enthuse you buy into Dodd's but at least you will be armed with real information. Had they been good results we are sure they would have brought them forward.
Thursday, 22 October 2015
It looks like the Skin Analytics pitch on Crowdcube may have passed its due diligence whilst the DD dept at CC were out to lunch; that would be anytime, any day apart from Sunday.
In the pitch the company makes various claims - we covered one earlier relating to its link up with Vitality Life.
One such claim is -
"Our innovative machine learning algorithms work in two parts....... By combining these two features, we will meet the NICE guideline for melanoma diagnosis."
However the NICE Guidelines published only 3 months ago state they...
".....do not routinely use ... computer-assisted diagnostic tools to assess pigmented skin lesions."
So in fact Skin Analytics do not and will not meet Nice guidelines, despite what they claim.
This is clearly a specialist area and has complexities that we wouldnt wish to claim to understand. The problem here, however appears to be that neither do Crowdcube. If they do have a DD department, which we find unlikely, then why didnt they read the NICE guidelines? Skin Analytics may well be able to change the NICE guidelines in time but this does not alter the fact that under the current guidelines, which are only 3 months old, their system would not be considered acceptable. So why claim the contrary?
Finding a diagnostic tool for melanomas is an important aim but making claims that your company meets NICE guidelines in order to obtain investment from the public obviously shouldnt be allowed. Where are the FCA?
Following the clearly misleading statements made by this pitch and the acceptance of them by the Crowdcube out to lunch dept, the pitch and Crowdcube have now changed these claims. Instead of the company's gadget meeting NICE guidelines, they now say they will work with NICE to ensure the guidelines are changed - so that the gadget will then meet them! Surely this sales approach should be looked into seriously by the FCA?
If someone had not bothered to point this gross error out on the forum, then investors would have put money into this company under what they have now admitted are false pretences. Are we therefore to believe that the Crowdcube forum is the new FCA?
Wednesday, 21 October 2015
https://www.companisto.com/en/ - Companisto is a German ECf platform.
Their website has useful information on it - its not filled with Dragons Den style promotions. Since inception in 2012, this platform has raised 26m Euro for 46 businesses - it has to date had 5 failures. It does have a due diligence department and they dont take lunch.
They list these facts on the site - they could go further by listing the failures and perhaps looking at why they failed but its a start. This would be far more useful than the tenuous 'share' value nonsense they have on there at present.
Crowdcube on the other have in a time frame only marginally longer, raised over £100m or 160m Euro for 314 businesses. They do not disclose the number of failed businesses but there are many.
ECF is crying out for both transparency and quality - it's common sense. Crowdcube seem to believe that their figure of 314 businesses is one to be proud of. This shouldnt be about quantity.
The Companisto model has some oddities which may yet prove it's downfall - one being the legal set up for investors who have a fixed time frame for what is essentially a loan. If the business is sold within this time frame they benefit but we'd guess that many founders would want to jettison the Companistos before selling - in which case they get a tiny 1% annual share of profits (if there are any declared) plus their original stake.
They would probably say that this is better than holding shares which have no liquidity and we might agree.
Companisto do not go in for the type of blatant misleading that appears to be Crowdcube's hallmark. Things like ensuring the projections on the pitch do not match up with the accounting dates for the company, so that direct comparison is difficult. Stating a pitch has 30 days but then extending it until it completes, changing the amount raised with no explanation and no new projections and so it goes on. Completions are the only driving force here.
We give you one current example - the pitch has projections that are already almost two years out of date, and the dates do not match the accounts. When asked by an investor if current sales (Jan to Dec 15) were matching the projected Yr1 sales, the founders replied yes they were and that new client orders were due on line in Feb 16 which would ensure the projections were accurate. But Feb 16 is not in Jan to Dec 15!
Tuesday, 20 October 2015
These major discrepancies aside, they have joined the ever increasing band of companies that have filed accounts which bear no resemblance to the projections used to sell the equity - the projections which were so carefully and thoughtfully vetted by the Crowdcube out to lunch department.
So NewGalexy at YE Oct 2014 (the accounts were several months late) show a pretty sorry picture. Projected profits for this period were over £200k, actual losses were £290k. The company has no cash and owes stacks. It is being kept afloat by the directors.
We wish we could bring you some good news of Crowdcube pitches that have at the very least managed to get close to their projections but we cant. Maybe that is a function of the Crowdcube model - like night following day.
However the schemes were never built to house the rapidly increasing investment via ECF platforms. The platforms and ECF would never have been able to build such a rapid increase in business without them - the tax savings are something all sites major on. Very few pitches on ECF platforms complete without either EIS or SEIS reliefs for the investors.
Where does all this money come from? Simple - its all part of the massive pot we as taxpayers put our money into annually to allow our elected government to spend on services, like the NHS. So rebates will mean that this money will not be in the pot - it is instead in a private individual's hands as part of his choice to invest in a company. Government has essentially handed the power to spend part of the tax pot to anyone willing to back an ECF pitch. These decisions are now being made by mainly unqualified people - bit like having Jonathan Ross as PM.
This works out fine if the net result is an increase in GDP and jobs - the money has been well spent. But what if most if these companies do not grow, some go bust and the rest remain like so many SME's, a vehicle for earning a living for the owners? To what extent could we say that this is a good use of taxpayers money?
Why would Government expect the man in the street to be better at picking a winner in business terms than a business expert - say a banker, VC or entrepreneur? Surely that is completely counter intuitive. Certainly from reading the forums on sites like Crowdcube, the evidence is that most people have no clue what makes a business run well or fail.
In an age when we are very obviously struggling to pay the basic running costs of the NHS, does it make sense to keep throwing money at these 'businesses' when there is evidence that they may not deliver and no evidence after 4 years that they can. Sure we can sit and wait a few more years for the outcome but isnt Government about steering a future course - one that is prudent and doesnt throw away our hard earned money. We can all look backwards.
We are contacted weekly by professionals who agree that this ECF bubble will end badly. It is time to tighten up the criteria used to hand out EIS and SEIS. Our taxes need better protection than to be placed at the whim of the man on the street.
Platforms need to be more accountable, EIS and SEIS criteria more stringent. At the moment we are freewheeling towards the precipice.
Monty Hall's Seadog Productions tried to raise ECF in the summer - it was not a great success. Now he's back.
We have one question for Monty - why if this is such a good investment opportunity have you and your fellow founders not put a single penny into the company? If you dont want to lose your money why would we?
And why is he charging Seadog for use of his services at £40k pa and use of his other company's (Monty Halls Ltd) equipment? Monty Halls Ltd according to Monty owns a Dive Boat, two filming drones and two HP vehicles but the fixed assets of the company were only £25k in Feb 2015 with little cash and even less profits.
Its a nice little earner for the team - if productions materialise - but its not an investment opportunity for outsiders. Go on Kickstarter and raise £50k, put 50k in yourself and raise another £50k from F&F.
One investor has put in £60k - so this must either be Monty's dad or a raving lunatic.
Brewdog is not the first and wont be the last to have multiple extensions to what was a set period - complete or not. Today they have extended their pitch yet again for another 11 days. For the first time we can see people actually cancelling their pledges to this company - they should be very careful. There is no comment on the pitch about this - for a new comer they simple have 11 days left on the original pitch which in fact should have finished weeks ago.
It make a complete mockery of the Crowdcube 'system' which is explained on the platform. Pitches are given a time frame to raise their money or they get nothing. Crowdcube have already allowed pitches to change their 'total' to help them to complete, now they are using the time frame. Research shows that this time allowance affects investment decisions. So it might be ok to say that a 90% completed pitch should get another week to make up the shortfall, but not to extend pitches ad infinitum.
If you are going to have timeless pitches then just be honest and say so Crowdcube and stop taking the Michael out of your customers.
Sunday, 18 October 2015
It's always worth checking the claims made in ECF pitches, especially if they are on Crowdcube.
Skin Analytics have a new melanoma detection service. All good so far.
They have chosen to team up Vitality Health - an off shoot of the Pru Insurance Group and a company that has recently launched an online GP service. SA think this a is brilliant move on their part. We are not so sure.
Checking out the Vitality service, its reviews stink. 2 out of 10 on Trust Pilot, 1.5 on itunes, 2.5 on NHS,2.5 on Android Apps and so it goes on.
So if you are investing in this business, do a little homework into how they will manage to market their service as it doesnt look likely to be through Vitality GP.
Vulpine is a new ECF pitch on Crowdcube - looking to raise £500k for 9%, so a healthy valuation for a company with only losses to show.
Nothing wrong that we can see with the product, with the market and with the potential - valuation aside.
However when companies try to raise money they really should understand the basic mechanics of business. We dont think Vulpine do.
For starters, take a look at their balance sheet and projections. Stock holding figures often give clues.
At YE 2013/14, the company had stock totalling £600,000 on its books in a year when it turned over £416k. This was up from £230k the previous year. The 2014/15 figure was £365k for turnover of £995k on a GPM of 31%. The projected stock holding for 2016-17 when the turnover is £2.5m is only £580k so not even as high as 13/14.
This is a fashion based business and they seem to be struggling to get rid of their old stock, which will impact new lines and cash flow. Poor buying - as the 2013/14 figures imply results in a quick death.
Another oddity is the fact that they state they have sales of their new Hoy brand of £335k for this its first year. Yet the total turnover for the whole business for 2015/16 (YE April 16) is only £1.35m or just about £350k above 2014/15. So the 'old' stock had a flat sales year which is not exactly encouraging.
Yet another strange figure is the accounts receivable for an online retailer - projected to stand at £275k for this year. Last year it was £32k and year before was £35k - more in line with what you would expect. The follwoing two years project receivables to be in the £80ks - so a very inconsistant picture. Dead stock can suffocate a business like this very quickly.
Variations in the GPM may be explained by stock dumping but if this is a regular need then the GPM growth from 31% to 53% seems very ambitious.
So you see the numbers do matter and if a business has either no clue what they are or has misunderstood how important they are, they can hardly expect investment.
Saturday, 17 October 2015
Take as an example the current pitch by Playrcart.
This company raised £150k on Crowdcube in January 2014. Whilst the pitch was live, a potential investor asked a very simply question - ''Will you be raising more money in the future before you exit?''
The answer was also very simple - ''we will be raising a Series A round from VCs and then we will exit''. So no more rounds on Crowdcube then? Yes that's right no more rounds on Crowdcube.
Ah. Glad we have that on record. Of course Playrcart is not the first and certainly wont be the last pitch to expand the truth balloon.
You might also like to know that in this brief exchange back in 2014, the potential investor was informed that discussions with VCs were ongoing and looking good - clearly a nice little tempter. They didnt go that well as no VC has invested in Playrcart. This may well explain why they are back on Crowdcube.
Also, the founder of Playrcart, promoted himself using the success of another company he founded, Gas Agency for which he claimed he had been offered a six figure sum. The last accounts filed before this company was subject to a compulsory dissolution (its 5th attempt to close) showed profits of £744. No assets and no investment.
Of course its clear to see the progress this company has made since January 2014 - its Crowdcube value then was £1.25m and now its Crowdcube value has more than doubled to £3.5m*.
These are busy time for Pinocchio.
* Please note that Crowdcube values can go up as well as up but never never down. Of course Crowdcube take absolutely no responsibility for anything, ever.
Friday, 16 October 2015
As with so many of the completed pithes recently, the founders will move the equity offer in your favour, often by as much a 50%. Crowdcube will oblige by extending the pitch ad infinitum - its their only way of paying their £2m annual administration costs and you will end up with a far greater share of nothing.
Current examples are Early Bird up 25%, Empiribox up by ~20% and GF Foods up by 55%. We wouldnt recommend any of them but we like the idea that the Crowd is at last learning that it has some say.
Brewdog have extended their Crowdcube pitch - well it ended and they have put on another 15 days.
The message clearly hasnt got home yet - your offer is not of any great interest. Why would extending it by 15 days persuade people, who yesterday did wish to invest, to invest tomorrow?
Well its an old dog but we bet they have a few new tricks to show us in the coming weeks. Like the latest trick Crowdcube are using of having a bond pitch which states it is raising Z but only gets to N and then declares that Z was in fact a maximum raise target and the N is the real target - only they didnt tell anyone as it was double top secret and commercially sensitive. Woof Woof.
Thursday, 15 October 2015
Beerbods raised £150k on Crowdcube in 2014 - we think.
We are hesitant because the AR for the investment vehicle Drink Beta Ltd, which owns 100% of Beerbods Ltd, has no shareholders listed apart from the CEO. A 'group' shareholding is listed.
Anyway Crowdcube think they helped fund this company so lets assume they did. It projected a profit for YE May 2015 but made a loss - albeit a small one. What is more curious is the way the subsidiary company owes Drink Beta £140k but has no money to pay this. It is technically insolvent.
All totally transparent and legal as usual. We expect them to be back on CC shortly. Cheers.
The strap line says it all.
We dont usually comment on P2P but for such an outrageous event we thought we 'd make an exception.
TrustBuddy is a Swedish P2P platform that started doing business in the UK two year ago. They offer lenders 12% or at least they used to.
It now appears that there is a £3.5m lending hole in the company and the Swedish authorities have essentially closed the site with everyone's money in it. It appears that the company was neither trustworthy or anyone's buddy. The company has been good enough to issue a statement - '' An investigation has indicated serious misconduct within the company' - which will make lenders feel much better.
P2P lending is far is by far and away the mainstay of altfinance here and everywhere else - it makes ECF look like shrimp. So how many other sites out there are liable to this sort of corruption? The money lost is not covered by any Government backed compensation scheme so it is truly lost.
The story has a way to run yet.
Wednesday, 14 October 2015
Congratulations to Cauli Rice for completing its £500k raise in just a few days.
We noticed that the sales figures put out in the last couple of days by the CEO of £127k for month 1 - which is way ahead of the pitch's projections - have excited great interest.
We would humbly point out two things. Firstly this CEO has a history of promoting stunning 'sales' figures that in the end turn out to be not quite so useful. Righteous, her other company which is now running itself, used a new large overseas contract it had recently signed for export to push through one its raises on Crowdcube. When the company came back for more cash a few months later, it was forced to reveal that this deal had not been followed through with further orders - cashflow had crashed and its was back to the drawing board. Why - well simply because the product had not sold as the importer had hoped. The contract was cancelled.
The point being that Cauli Rice has only just gone on sale in its current listings. This £127k will be the first invoicing for the initial stock and it does not mean that this level of sales is a given - the public have NOT purchased £127k of Cauli's product. Supermarkets are notoriously fickle and delisting is far quicker than listing. Its push not pull through sales - the follow on orders for Righteous never materialised and to assume that these initial orders for Cauli will result in pull through follow on ones, is dangerous.
Of course all of this is left without comment on Crowdcube but Caveat Emptor.
Crowdcube announced their new partnership with Braveheart in November 2014 - together they were to launch a new investment fund based on ECF.
However only a few months later in April 2015 Braveheart, having already announced the first four companies they were investing in from the Crowdcube stable, suddenly changed horses; ditching Crowdcube for Seedrs.
We havent been able to find any explanation - The Crowdcube machine closed in as it always does on its failures and Braveheart simply talked of Seedrs being the best run ECF platform. This does imply that Crowdcube is not being well run but we knew that.
So in the space of 4 months in which nothing in the landscape changed, the team at Braveheart executed a fundamental volt face. Surely the evidence was there for them all along.
As you might expect, Braveheart's share price nose dived to a level where it remains today.
We would love to know if anyone has the reasons for this move.
Tuesday, 13 October 2015
When you read in the heading of a Crowdcube pitch that the company ''is backed by Ariadne Capital'' you tend assume that means they are funded by them - no? To have such a well known VC 'backing' you is a genuine help in raising ECF.
Playrcart are trying to raise money again on Crowdcube. Their pitch claims this in its opening. So you check the records - no mention of Ariadne Capital, you check Ariadne Capital - no mention of Playrcart.
Then you read the pitch in full and hidden away under 'People' is a statement - ''Ariadne Capital is an adviser''.
Adviser is the same as backer - yes? Hmmm.
Tigmus initially strikes you as a great idea - using the power of the internet to solve one of those really irritating problems - connectivity. As a concept it looks good.
However this is one hell of a punt. The business has not completed a years full trading and has certainly not been pressure tested. It has valued itself at £1.2m even so. Whats more it has ambitions to be turning over almost £10m in three years with no further fund raising and a marketing budget heading rapidly down the fret board in the wrong direction.
It states that one of its main selling points is the ability to link a band with its fans in a venue that suits both. But wait on there - you can easily do this for free on Facebook (the medium Tigmus say they will use) by creating a Facebook Event, linking it to the venue and away you go.
From our rough calculations they have facilitated 52 shows to date with an average income of £800 per show. So to reach their Yr1 revenue targets they will need to put on another 147 shows in the next 5 months or more than 3 times what they have achieved over the summer. They currently have only 28 events listed to end November 2015. That isnt to say they cant do this but its worth looking into.
They have no track record of delivery when comes to GPM - the only figures they show have a negative GPM. So their assumptions may well be achievable but it certainly hasnt been tested. Again they have been trading for such a short time that they couldnt possibly have winkled out all the problems yet - like dealing with larger venues who want booking fees up front, having gigs which flop etc etc.
Where then does this valuation come from? Maybe the School of Rock?
Our advice to investors looking at Cauli Rice is do your research. Be aware that the CEO has, since 2011, managed to raise considerable sums on Crowdcube for this and her other business Righteous - neither of which have managed to get even close to the sales forecasts used to sell that equity - ever. We are sure the many investors in Righteous will be delighted with the CEO's comment last February to Management Today '' 'The great thing with Righteous is that it's been four years running so now it's running quite a lot on its own,’ - !! What you might call a little bit flitty?
This is Cauli's third raise - in the first there was no mention of another one let alone another two. In fact the figures given for the previous 12 months in this pitch have nothing in common with the ones presented only months ago for the second raise.
Then you have the valuation - enough said. Of course it may be the next sliced bread but there is no evidence it is yet.
Look carefully at the sales projections - the first year now has twice the sales volume projected for it only months ago based on only a months sales figures in their new listings. Those are high stakes. Look at the GPM - it has jumped around all over the place since their first predictions - as has EBITDA. Timescales are completely elastic. One thing we can guarantee - the company will not follow the path they predict. It's like they dont know how to plan ahead.
On the plus side, they have excellent listings and according to the company these are going well - but then this company has always said that but never actually delivered. Righteous, which has never achieved its targets, is at last starting to see some level of profit.
It does strike us a enigmatic to be majoring on health, as Cauli does, when they are producing an easy eat, mass produced version of a home made healthy product that takes a few minutes to prepare. It's a bit like presenting large volumes of home made bread, sliced and packaged already buttered with massed produced jam. Just eat.
Be sure that Cauli will be back for more funding at least once and that your holding will be diluted to infinity. It will complete as its already 75% there with one investor (VC?) putting in £150k. Have a fun ride.
Monday, 12 October 2015
Square Pie have just completed a mini bond raise on Crowdcube. But it isnt quite that simple.
The original bond was for £750,000. The pitch did not go well and by the end of their time, Square Pie had only managed to raise just over £300,000 - less than halfway. So as usual on Crowdcube they 'extended' the pitch, but this had little effect and the amount raised remained below £400,000.
Then in a new development for this platform, the amount being raised was suddenly reduced from £750,000 to £450,000. No new financial projections were produced with this reduced capital and questions about the legality and prudence of such a move on the pitch forum suggested that this may not have been a wise move. Square Pie's CEO had said publicly that if £750,000 was not raised then nothing would be. We expected the pledged money to disappear.
Well blow me down, the pitch closed yesterday with £680,000 raised - another £280,000 more than when the total was reduced. Why?
We havent got a clue - the terms were the same, the financial stability of the company was considerably worse and there had been no explanation. So why did punters who would not put money into the orignal bond suddenly jump in with an extra £280,000?
If anyone has any clues we'd love to know.
Saturday, 10 October 2015
Cliff Dennett of Soshi Games tells us here what went wrong - https://www.youtube.com/watch?v=kESsIMYuCwE&feature=youtu.be&utm_source=All+users+regardless+of+certification&utm_campaign=8606123b3c-The+lessons+of+failure%2C+and+coming+back+stronger&utm_medium=email&utm_term=0_a9f559f533-8606123b3c-121775249
This was sponsored by Syndicate Room who helped them raise £286k in 2014. All in all we believe they have lost investors over £1m. The liquidators report will be out next week so we'll let you all know what the damage was.
Interestingly Cliff opened a new business last week. In the video he states he hasnt decided what to do next. The video was published yesterday.
The video suggests that the collapse was a result of rapidly changing circumstances. They didnt see the landscape changing - ? Surely free apps have been here since 2013 at least - probably earlier, so why he didnt know this was a factor before raising money with SR is a mystery. The video is full of contradictions - 'we had a very low advertising budget' he says but then goes to explain that the costs of customer acquisition went up five fold. This Cliff, is the advertising spend.
He didnt anticipate a lot of things that have now sunk the business. His explanation is the business was far more complex than he anticipated, the raw materials were far more expensive than he anticipated, the purchasers would not part with money as he anticipated. Yet he manged to get at least two VCs to fund it. So do VC's really know what they are doing?
We feel that SR have been bold to come out and promote the failure - we got an email from SR's CEO telling us about it. Its all a little too apologist but until we see what the liquidators say we will hold judgement. Maybe he was just unlucky or maybe he's just not that good.
One aspect of this which seems strange is that the filed accounts for the company have no fixed assets - none at all. So the money being piled into building their apps like the Queen game, which under normal conditions would have appeared either as tangible or untangible FA, must have gone through a third party who still owns the rights. It is not possible that this would have been written down to zero. Maybe this will come out in the Liquidators report. Where are they now?
Tuesday, 6 October 2015
The newest pitch to appear on the Crowdcube platform has to be one of the most ridiculous.
OnGallery is an online sales platform for rubbish - sorry 'art'. The major claim in its pitch is that two very important people are investors. When you check out this claim these two individuals appear to have invested tiny amounts. It is hardly a vote of confidence. The art is nearly all limited edition print so would be totally worthless to a purchaser apart from as wall paper.
They hope to take a first year turnover of next to nothing to a year 2 figure exceeding £3m, then £9m and so on up to many many million. Using telepathic sales techniques presumably as they dont seem to have much of a promotional budget.
As an idea this pitch is laughable, has been done to death without any success and will most definitely fail should it be funded. Avoid.
Saturday, 3 October 2015
Early Bird are trying to raise money on Crowdcube for the second time. The pitch has gone poorly, mainly because the projections from the first raise have been missed and they are over valuing their company.
So the pitch reached time up today with under half the money raised but as usual with CC, it's been extended. Two days ago we posted that the company were offering free food for life if you invested, now they offering free tickets to Glastonbury and free food.
How can Crowdcube make any claim to be offering a serious grown up service with this type of pyjama business? If this company wants to raise capital then it should offer investors a deal that makes sense and show that they can really build a solid business. Attaching tacky sales gimmicks to their shares is truly pathetic. Mind you, it rather sums up Crowdcube.
At last we have managed to find a Crowdcube funded company that has filed accounts showing a profit.
BigBarn CIC raised money on Crowdcube in 2011. The latest accounts show a profit for the year of £4,000. The accounts state that the Director took no remuneration for the year. The previous year the company made £13,000 profit and the Director took no remuneration.
One has to hope that the investors get a return before the Director expires. At this rate any return will be some decades off.
Still the good news is this company has not closed like so many funded via Crowdcube. We expect Crowdcube's PR to run with this success story shortly.
Friday, 2 October 2015
Southern Dreams raised money on Crowdcube in 2012. It 'specialises' in trading in South America and persuaded punters that with the World Cup and the Olympics both coming to Brazil, this was the time to jump in. We can think of few things it specialises in but trading is not one of them.
Well the WC came and went and the company managed to complete no business - that's none. In fact it would be fair to say that the company hasnt completed any business since 2012, anywhere. Latest accounts are out, confirming this with almost zero activity.
Despite repeated attempts by shareholders to get the company to change its way of working, they have consistently refused, with the net result that nothing has been achieved. Promises have been liberally emailed showing grand schemes with weighty bottom lines but they all disappear like the morning dew. It has a Darien ring about it.
The good news is that it hasnt closed.
Kinopto raised money on Crowdcube in 2012. They were 'inventing' a new way to view films.
The company was closed by HMRC last month for failure to file accounts. No word about what was owed or what happened. Just goes to show that you invest money in these companies via sites like Crowdcube and you have absolutely no control over what happens next.
It does strike us as odd that not only have all the creditors and investors lost money, but at a time when reports are showing so much of the UK's health service is in financial meltdown, the Government is throwing tax payers money at companies like this and all the other ones we have listed on this blog. We estimate that the money wasted so far across all platforms is around £50m and growing exponentially.
Where the hell are the FCA?
The real story is much sadder. Since coming to Crowdcube to raise the rest of its required funding - a whopping £14m - Brewdog have managed a pathetic £1.75m and its not going to increase by much before their deadline. They may of course resort to the usual Crowdcube game of extensions. The equity offer has already been tampered with by the platform who have suddenly given it a target to raise of £500k - which oddly enough is just above the amount raised to date! The real target was never stated at the outset of the pitch.
Over priced on their equity offer and under generous on their bond offer, it was a nice try boys but no one is going to believe you.
Timbergram is raising money on Crowdcube. Crowdcube claim to thoroughly vet all pitches before they are published. Anyone reading this blog will know what we think about this claim.
As an example of Crowdcube's DD department's long lunches, we thought we would check out Timbergram's claim, made explicitly in their Crowdcube pitch, that they plant a tree in Africa for every 10 cards they sell. So they claim to have sold 200,000 cards to date and that means they must have planted 20,000 trees.
Their projections show them selling 1m cards a year, equating to planting 100,000 trees in Africa pa. That clearly starts to build up quite a forest.
When questioned about this, the company has decided it does not in fact plant any trees, anywhere, ever. The truth is that it donates a small amount of money to a charity, who are involved in tree planting in Africa - they have no idea how many. The numbers used by Timbergram are complete nonsense and to date they have contributed enough money to plant a small copse. They admit this and have now changed the pitch accordingly.
The equity offer made by Timbergram and 'vetted' by Crowdcube with the inclusion of the tree planting, is wholly misleading. Lunch anyone?
Thursday, 1 October 2015
This is just another example of the lack of transparency Crowdcube operate under. This pitch was extended having failed to get close to £100k, then it suddenly, a day before this extended period was up, had a single £50k investment taking it just over its target.
Of course we will not know who this money came from until they have to file their AR01 by which time any funny business will have become irrelevant. Plus ca change.
Accounts filed to YE 03/15 show losses for the year of £105,000, accumulated losses of £175,000, zero cash and £50,000 owing.
Needless to say the projections used to sell their equity showed a very different picture - profits in fact by this stage with loads of cash in the bank.
Now that sounds familiar.
So Kammerlings - one of Crowdcube's major 'successes' - has just filed accounts to YE Dec 2014. More losses which make an accumulated loss of £500k since investors were relieved of their money.
Kammerlings sell a liquor branded Kamm and Sons - they have raised money on Crowdcube at least twice and we believe tried again this year but failed. As with most Crowdcube pitches they have never come close to their projected turnover or profit figures since taking investors money.
What is interesting in this filing is the use of Kammerlings Investments Holdings to cushion the apparent disastrous situation in the trading company. KIH have also just filed accounts which show a healthy balance sheet of £663,000. Looking further into this, the company has 'investments' listed in its fixed assets of £662,000 or near enough the balance sheet value. So where is this investment?
This £662,000 is owed by Kammerlings to KIH and is listed in long term debts on their balance sheet. KIH own 100% of the trading company Kammerlings and Crowdcube investors hold shares in KIH not the trading arm. However this £662,000 no longer exists - Kammerlings have a balance sheet value of minus £635,000 - made from annual losses. The investment in real terms has been burned and both companies are insolvent.
As they do not look likely to be able to trade out of this mess, this accounting looks liberal at best. Just more of the sort of shenanigans that ECF encourages.