Wednesday, 17 February 2016

Response from Seedrs on Hokkei demise


We had this posted by the CIO at Seedrs on our last post on Hokkei. Whilst we agree with lots of what he has said, none of it news to us. He hasn't addressed the main issue - how could these guys spend over £350k in a few months and have nothing to show for it? The liquidator will tell us maybe. This was a bricks and mortar operation not some internet dream.  As the first unit never opened the point made about lack of customers seems a little off target. 

You do also really have to question his comment that a business could possibly get to the stage of raising a large sum on Seedrs, only to find that no one wanted the product - I thought market research and customer research were invented in the last century or possibly the 17th.

Another strange feature here is that accounts due to be filed for YE Jan 2015 were extended to July 2015 and only filed in Dec that year. They show fixed assets as of July 2015 (so before any investment was introduced) of £213k  - assets which had been purchased new that year. How is it possible that these assets were worth nothing only 5 months later?   

Hi Rob

Thomas Davies, CIO of Seedrs here. I just wanted to confirm that we are in constant contact with the Hokkei team as well as the liquidators who have now been appointed. We are updating the investors through each step of the process and will be providing them with a report on our findings, including a detailed explanation of where the money was spent. This will be happening within the 'closed' portal, accessible by only those who invested. I understand that this therefore means that it appears that Seedrs is not involved, but I wanted to confirm that we very much are. 

I completely understand that whenever these companies go down, investors are quite rightly frustrated and angry. It is also why I dedicate a lot of our resources to helping both the companies and the investors through the winding up process, so that we can ensure that everything is above board as well as educating them that just because a company fails, it does automatically mean that something dodgy happened. It is worth noting that Larkin, one of the founders of Hokkei, is the personal guarantor on that HSBC loan you refer to, and that remains with him long after the Hokkei winding up is complete. 

It is important for everyone to remember that this is a high risk asset class which will result in a lot of failures. As long as those failures are for the right reasons (people just didn't want to buy the product) rather than the wrong reasons (the company ran out of money because the founders bought a Ferrari) then crowdfunding is experiencing exactly the same as the top VC's who have been doing this for years. But I believe it is the platform's responsibility to be involved when things go wrong to ensure that this analysis is taking place, as well taking action on behalf of those investors if something untoward has happened. We see no evidence of that with Hokkei at this stage, and as anyone in the restaurant business knows, if you don't have any customers, you can burn through capital quite quickly. 

I think your comment about banning the guys from using this type of funding is a little unfair. I see a guy who tried something, worked 16 hours day while taking next to no salary, it failed, and who is personally left with some quite substantial financial scars. That represents the majority of the entrepreneurs in this space, and I hope that investors see this as an inevitable part of investing in this asset class. There will be some winners, and they will provide a healthy return to their investors: But I can assure you that even they would have been close to failing on more than one occasion. 

Best wishes

Thomas Davies
Chief Investment Officer




2 comments:

  1. Just to clarify, Hokkei did have one operating restaurant which opened in November 2014.

    Best

    Thomas Davies
    CIO Seedrs

    ReplyDelete
    Replies
    1. But it reported it was a dormant company? We will just have to wait!

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