Tuesday, 29 November 2016

Savvy Foods heads for liquidation and a quick rebirth - blink and miss it!


Savvy Foods raised £85k on Crowdcube in the Summer of 2015. Now they have liquidated.

All Crowdcube shareholders will either receive new shares in the new Co or be refunded, according to the company. 

Not really sure how any of that works as you are not supposed to put a company into liquidation with the stated intention of buying its assets and starting again, without any of your creditors. Otherwise everyone would do it! Investors also received SEIS, so what would happen to that?

Crowdcube funded companies probably have special dispensation from HMRC as they do seem to do this quite frequently. I think their Out to Lunch Department have a direct line to HMRC Insolvency Filings - must be red hot. 

Here's hoping they get a better result second time round. 

PS - the company are apparently looking for funding for the new venture (well the rebirth) so do get in touch if you want to throw more of your money away before Christmas. 

London Business School and Pizza Rossa cook up a fine mess.



Pizza Rossa funded on Crowdcube in 2014 and 2015 - a total of £600k. Its big claim to fame was its London Business School Entrepreneur Business Plan of the Year Award. 

The specialist square pizza fast food 'chain' filed accounts this month for YE November 2015 - showing a loss of over £300k and leaving the company in the red with accumulated losses so far of  more than £630k.
,
The guy behind the pizza is an Italian, Corrado Accardi, who was on a MBA course at LBS, when he stumbled on a great idea - build a chain of pizza joints. Funding? No problem, with the emergence of the new equity crowdfunding platform Crowdcube. By using an award won at LBS for this stunningly original business plan and his entrepreneurial flair, Pizza Rossa was able to massively overfund on Crowdcube. See here for the LBS trumpet blast that accompanied their success.

The business won Crowdcube's Entrepreneur of the Year or some such tin can and was away. A little while latter all the wheels had come off. Plans to have opened 5 units by now and be in the realms of £300k plus profits, have been well burnt. They have 1 unit open as we write and are producing enormous losses with it. 'The Latest News' section of their website has not been updated for a year. As chains go, its on the small side.

We have written several pieces about them here

Their arrogance and stupidity are in equal measure. In the original LBS 'award winning' plan they had Saturdays as City trading days. Even though it was pointed out at the time on the Crowdcube forum by us and another helper, that Saturday in the City was not a great place to sell pizza, they ignored the advice. The response was, well we won the LBS annual award so we must know what we are doing. Then once all the money had been wasted, they admitted that Saturdays in the City were not strong trading days for pizza - in fact they had the cheek to blame their awful performance on this! They did open a second site but it was closed within a year.

All in all, we think that this has been one of Crowdcube's biggest ever calamities. Based as it was on the very shiny medal issued by LBS  - see this video if you want to have a laugh here. This guy is just taking the P. He hasnt a clue what he is doing and nor do LBS from this evidence.

So can we learn anything from Pizza Rossa? LBS shouldn't get involved in enterprise and certainly shouldnt allow their brand to be used so blatantly for such a farce. And simply do not believe what they tell you. We were warning about this outfit from the get go - it was clear the guy had no idea.

The final joke is that in 2015 Crowdcube raise, the valuation for Pizza Rossa had gone up 2.5 times - so that should make all shareholders feel so much better! Che disordine.

Monday, 28 November 2016

That Glentham Fund is a right Horlicks


Glentham Fund, run by the Capo di Tutti Capi and media star, Nicola Horlicks,  has raised money a number of times on Seedrs. To date the company has done nothing and has raised little if any of the promised £50m investment fund. 

In the last raise, which we wrote about here, Nicola Horlick stated that there was an investment of £250k from an external investor, that had already been agreed. This money has never materialised. 

Geoff Lynn, Seedrs CEO, when questioned in October 2015 by The Evening Standard, stated that the money would be in place by the end of the year. He is quoted as saying that he was not worried because ''Nicola will be putting the money in herself if for any reason the external investor falls through''. http://www.standard.co.uk/business/anthony-hilton-nicola-horlicks-film-investment-vehicle-is-making-slowmotion-progress-a3084996.html

Not only has the Glentham Fund done nothing since its inception - except totally change its MO and spend its £393k equity cash, but the assurance of its CEO and founder is, more than a year later, looking a little flimsy. As is the forceful statement issued by Jeff Lynne in October 2015.

We wrote to Jeff but he was out, so passed us onto his PRing. She wrote back today - 

'Thank you for your email Rob. 
As nominee shareholder on behalf of the Seedrs investors we are comprehensively dealing with this matter and are keeping the investors up to date throughout this process. 
We are in the middle of working through a solution so I don't feel it's appropriate to get into our private discussions at this stage. 
Best wishes,
Lucy
Lucy Sharp
PR & Communications Director | Seedrs'

Thing is Lucy, we only got to hear about this because one of your investors contacted us yesterday saying that Horlicks had not paid the money; despite Seedrs chasing her all year for it. Seedrs had emailed shareholders to tell them this. Maybe that is what Lucy means by 'comprehensively dealing'? He was clearly not impressed, which is why he came to us.  

Maybe Seedrs should be stumping up the cash as they were the ones who promoted the whole scheme in the first place? The only people suffering here are those who were stupid enough to believe what was in the Seedrs Glentham Fund pitch. As we are repeatedly told that these Seedrs people are sophisticated investors, it has to have been quite a comprehensive misdirection that persuaded them to part with their cash.

In the end the lack of the £250k matters not a jot, as the whole scheme has been a farce from the start. There is no fund and therefore there is no business. 

 

Saturday, 26 November 2016

Lovespace boxed in by large losses.


Lovespace stores things for you. Its just a shame that it doesnt seem able to store or handle its own numbers.


Lovespace has funded twice on Crowdcube once in 2014 when they raised £1.5m and then again just 5 months ago when they raised £700k. 

As you can guess, the gap between what was projected in 2014 and what happened in 2015 is large. Crowdcube projcetions showed losses for 2015 of just £327k. Actual losses filed are sitting at £1.7m.

No real surprise there you might say - this is Crowdcube we are talking we talking about after all.

What is slightly more worrying is that the raise completed in July this year, had a loss for the 2015 (YE December) of only £1.577m - so about £120k less than the figure filed a few days ago. The difference appears to be in expenses - the turnover is roughly the same and the depreciation is well below the predicted figure.

Its really not possible to tell exactly where this overspend occurred - Directors' salaries were £182k for the year up from £100k in 2014 but the Crowdcube projections do not break these down.

In the Crowdcube 2016 pitch, the 2015 figures are given as historic. So you might quite rightly expect them to be accurate - to say within a couple of thousand pounds. 

Well this is clearly not the case. If the company cannot get a fairly small set of accounts to add up 5 months after the YE, then the company is in trouble. We have written a few posts on Lovespace here 

Il Capo di Tutt'i Capi, Brett Akker, left a month ago.

Friday, 25 November 2016

Bluebella makes the most of EIS pants.


Bluebella has just completed a £500k raise on Crowdcube and will most probably go on to stretch that to a far higher figure.

Its a sound enough business, good stockists, good team and quality product. It has moved away from licensing and intends to sell its own brand on line and in stores around the world.

All of that aside, with Christmas coming up, the deal for investing just £100 was a no brainer. The company is EIS eligible so your investment is already just £70. The company then offer you a 25% on a purchase. So lets say you need some new lingerie or lots of lovely Christmas pressies (not for your Granny), all you have to do is buy £300 - or roughly 10/15 items - and you have already made a profit even if the company goes bust tomorrow. Now that's exactly what HMRC had in mind when they set off EIS - cheap underwear.

If you invest £2000, then you get 35% off for a whole year. So all you have to do, is spend £4k in a year on all your girlfriends (and who knows maybe you might like to try some yourself) and again you have made money even if the company goes bust the following year. 

£25k gets you a lifetime offer of 40% off. Of course the lifetime offers do depend on the company lasting that long. As the stated intention is a trade sale in 3 years these 'lifetime' offers seem a slightly dubious.

It's a been a very well organised campaign where the rewards have made a massive difference - if you like designer pants and things. And for once Crowdcube have not hidden (well its not that well hidden) the fact that £400k of the £500k had already been raised by 'cornerstone' investors. Hey ho.

It only received one gold and two silver medals from CrowdRater but has been an enormous hit with the Christmas Crowd. Or at least with £100k of them! You might be inclined to think it's yet another sign we are up the crack without a paddle. 

Lawbit continue with more losses.



Lawbit T/A Lawbite, the online law experts, who raised £400k on Crowdcube in 2013 and another £170k in 2014, have filed new losses for YE May 2016 - against what were their Crowdcube projected profits for YE November 2016 of £3.7m.


Still they have managed to raise another tranche of capital which should see them through another year. 

If its not going to work after 4 years and £1m of losses, then when is it going to work? 2017 of course. Losses for the last year at £120k, are smaller then previous years, so just maybe this company has turned a corner. However nothing can hide the embarrassment about their projections.

Thursday, 24 November 2016

Virgins up the Swanee



We think its about time Richard Branson had a real look at the sort of tripe Virgin Start Up are promoting. 


Under the heading

Virgin Startup Masterclass - How to Mastermind an Equity Crowdfunding Campaign

Virgin are selling tickets to an event purporting to have a level knowledge about this topic - https://www.virginstartup.org/content/virgin-startup-masterclass-how-mastermind-equity-funding-campaign

The expert guy giving this expert advice is one the typical modern crop of self promoting geezers who has no real experience in business whatsoever; despite his claims. No wonder people have had enough of 'experts'. A brief search through records shows no evidence of any hard yards or even real experience in this specialist field.  As if that wasn't bad enough, he is backed financially by Virgin, so we are now in the realms of Agent Orange.

The tickets cost £35..............each. I know. Better to put that on the dogs.

Just to convince you, here is an eample of a Virgin backed enterprise where if Branson knew what was going on, he would surely put a stop to it. 

Branson's gleaming smile can still be seen on the Home Page of Bank to the Future with a quote from 2011. Bank to the Future was involved in some highly irregular equity crowdfunding dealing in the early days. It is now operated off shore from Hong Kong as the FCA licence in the UK 'expired'. 






Mara Seaweed slides onto Morrisons Supermarket shelves



Just over a year after Mara raised £500k on Crowdcube, the Scottish based seaweed producer has announced that two of its products are to be listed in 400 of Morrisons' stores.

Despite filing accounts for YE Dec 2015 that show considerably larger losses than the Crowdcube pitch projections, the company now has a chance to crank up its sales and deliver on sales forecasts which we thought at the time were very optimistic. We have written quite a few posts on their CC raise which had some interesting quirks - http://fantasyequitycrowdfunding.blogspot.co.uk/search?q=+mara

Of course as anyone who reads this blog will know, getting a listing is just one foot in the door. As Righteous found out to their cost, being delisted is easier than falling over. Can Mara cope with Morrisons' consumers - price conscious and on the whole. well below the premium target that one might expect this product to be aimed at? It will be fascinating to see.  

We will probably not get a good idea until September 2018 when their YE Dec 2017 accounts are due. It seems unlikely that Harrods, which is currently listed as one of just 100 places you can buy their products, will want to be associated with Morrisons' produce.

In the meantime hats are raised here for this achievement. We will certainly be buying some of their Furikake. After all, if we are wrong about them, then better to be eating their seaweed than our hats. 

Twenty Nothing.

Twenty Something London Ltd raised £157k on Crowdcube at the end of 2014. The Crowdcube projections showed them raising another £500k in 2015 and £600k in 2016.

Problem is, they have only managed to raise another £30k since. Their site seems to have gone a little dark since mid September when the new marketing director left. Of three directors, only one remains.

Anyone with any news on this company please get in touch.

We would also like to hear from the guy who sent us a very supportive message via the blogsite but didnt leave any contact details. You clearly have very important information on equity crowdfunding and we respect, of course, your anonymity but we cant take what you have told us any further without first checking the facts - we are not like Crowdcube.  So please do get in touch via rob@ecfsolutions.co.uk

Tuesday, 22 November 2016

A Righteous Offer


This is a bowl of Cauliflower rice - it takes about 3 minutes to prepare fresh. As an alternative to rice rice, its been around for quite sometime. It's very good for you.


You could of course choose the instant, packaged option which is prepared by Cauli Rice, using a patented system, which is now sold in 2800 UK supermarkets. That you would have to agree, after a few teething problems, is a success story. Personally Id choose the fresh version every time but then I enjoy cooking and never eat pre-prepared food. Ignoring the price difference, to me there seems to be an inherent contradiction between a pre-prepared packaged food and something so simple to make fresh.  

Cauli have run out of cash  - again. And they will shortly be back on Crowdcube asking for more - despite the last raise bringing in over £1m against their target of £500k. To date they have raised almost £2m on CC in three tranches - none of them predicting the need for a another raise and all of them using projections which have proved to be pure fantasy. Still as they are keen to stress, who knows what will happen with a new product and a start up. To be fair to them, listings in 2800 stores is a great achievement. 

Interestingly, we went to an angels investors evening recently and listened to an astute, experienced engineer pitch his patent protected widget. He had  had statements of intent from large multinationals and when asked after the pitch why his year 1 and 2 sales figures were so low, he stated that in his experience, promises and intentions have to be aggressively watered down to deliver a realistic sales forecast. Better to under promise and over deliver, he said. It was very refreshing and the way we believe projections should be prepared. Of course it's not a sentiment shared by anyone on Crowdcube.

The same couple who run Cauli, Gem and Jamie Harris, run Righteous, a salad dressing range that we recently wrote about. Righteous has now been delisted by the UK supermarkets - 4 years after its first listing. Righteous promised a lot but delivered little in the end and who knows what the future holds. You have to take a view as to whether Cauli, which was started when Righteous was still a fledgling, will fare any better. 

Gem was quoted in Management Today in February 2015 '''The great thing with Righteous is that it's been four years running so now it's running quite a lot on its own.'' Maybe it needed a little more attention? Still for now she is concentrating on Cauli.

Back to the heading of this post - The Righteous Offer. For once we can say that this is a genuine and wholehearted attempt to put things right for their investors. Gem and Jamie are offering to give Righteous SHs stock in Cauli Rice from their own holding, to replace the Righteous shares they hold. We dont know at what value this offer is being given but assume its at the new CC campaign value. Which does call into question the whole valuation of Cauli......but that's for another day. 

For now we raise hats to this bold and generous attempt to repay shareholders' trust.  


Thursday, 17 November 2016

Seedrs latest portfolio Report is out and things are looking great!


So Seedrs have now produced a follow up to their initial portfolio report and according to the figures presented, on average, they are showing paper gains for investors.


We were curious about how Seedrs find out the information that enables them to place each company into each category. These categories are the mainstay of the report  - they are Appreciated, Depreciated and Even. They are self explanatory.

So for example it is quite easy to see if a company has 'appreciated in value' post a Seedrs funding round, if it then raises more money at a higher paper valuation. We get that bit. And we assume it takes into account the dilution factor.

How though, do you go about assessing if a company is in the Even or in the Depreciated section? Depreciated includes those that have closed.

We asked Jeff Lynne the CEO of Seedrs and he was quick to respond - he said that where they believe a company is a zombie company they mark it down to zero and put it into the depreciated segment. He was also quick to point out that the methodology they use has been passed by EY. 

But how do they 'believe' that a company is a zombie? For this post a zombie company is one that is still open at CH but is trading at a very low level or not trading at all. 

We find it quite hard to believe that these companies, if asked, will come clean and admit that their plans have gone west and they are treading water. Why would they do that?

We gave Jeff a specific example, which will remain nameless for now, but he declined to comment on it. The company has done little since raising finance on Seedrs in 2014. 

Where is the information this Seedrs report is grounded on actually coming from? Jeff says if they 'believe' a company is a zombie they will write it down. But that isnt a fact, it's a guess. According to the information provided they have 3 ways of achieving 'Fair Value'. 

1. If a company (they call them investments) has raised new funds since its Seedrs' round, then the new valuation is taken and indicates an Appreciation. 

2. If a company has not taken on a new round, but was Seedrs funded in the last 3 years and it is believed it is still trading, then it is considered Even. 

3. If a company has not taken on any funding within the last 3 years, then Seedrs carry out what they call a substantive valuation - they dont say what that means. This group are then marked as Declined. The explanation here goes on to say that none of 375 companies have been subjected to this analysis. This is hardly surprising given that 3 years ago takes us back to September 2013 and Seedsr was only  a year old.

Seedrs go on to state that because of the share structure they operate, they have access to all the latest trading information from these companies. What they mean is they have access to the information that these companies want to give them. 

So the whole Report is based on paper values made up around whether a company has refunded or not. If you havent then you go into the Even Section - why? Well because you havent refunded of course. Eh?  But why does a new funding round indicate a real increase in value and equally why does not having a new funding round indicate you have not increased in value. 

We have examples of companies that have refunded at increased values and then gone bust. In this report, they would be in the Appreciated section if they were trading in September 2016. We also have examples of companies that have not refunded but are clearly doing quite well, ie they would be worth more if they chose to re-fund. In fact they dont need to re-fund precisely because they are doing well. Re-funding, unless it was in the plans, is often a result of a miscalculation by management - not a success story. 

In the entire Seedrs Portfolio, 375 deals in total,  Evens represents 56% of the total, so over half of all the companies are in this segment. They are there simply because they funded in the last 3 years on Seedrs, have not re-funded and have not gone bust. 

If you take the three segments and move some of the Evens over to the Declined side, you get a very different picture to the one Seedrs conclude with. You could also move them to the Appreciated side - after all they are only in Evens through their lack of new funding activity. You cant hide this fact behind the corporate massif that is EY.  Its mainly all pure guesswork.

To conclude the most interesting diagram in the whole report is on p24. Here they have divided up the three segments discussed above into 4 aged sections. This very clearly shows that as time progresses, the Evens section is initially by far the largest, then recedes and we end up with a fairly even split between Appreciated and Declined - for the figures we have so far. So Evens are totally distorting the real outcome. 

We like Seedrs and think they are doing a much better job than Crowdcube. But this type of PRing is really unhelpful. 

Wednesday, 16 November 2016

Early Bird Resurrection



The saga continues.

We really cant be bothered with this outfit any longer. Anyone dealing with them needs locking up. 

Here is the latest version http://www.earlybirdtea.com/all_about_us  which claims to be the old one transformed. In case you dont know the old one lost shareholders and creditors a shed load according to the liquidator's SoA. They are now emailing their old list with a tea offer - the list the liquidators gave them?? The liquidation is not yet complete let alone cold. It's all so very wrong.

How is it possible for the website to be claiming that this new company is recommended by Vogue and the Times? Or is that EarlyBird - the company in liquidation - that was recommended before it went bust?

The question is - Is the Bird Dead or just resting awhile? 

Where are They Now Part 2 - More of the Same


As the results roll in, we get a better picture as to how equity crowdfunded companies have fared.

Property Moose 

Raised £160k on Crowdcube in 2014. In 2015 they made a profit - which is we think a first for a Crowdcube funded company. Before we all take off our clothes in celebration, this was a profit of £75k against a projected profit on Crowdcube of over £800k. When assessing their achievement you also have to take into account that 2014 saw a loss against a projceted profit of £400k and shareholders have been diluted several times - again no mention of this on the Crowdcube version of events.

You should also know that James Cadbury, who resigned as director of Moose, has opened a new chocolate (surprise surprise) venture Love Cocoa, which he intends to crowdfund (surprise surprise). He appeared in the Crowdcube Moose campaign as one of 3 key team members. Only one remains. 

Scaramouche and Fandango


UPDATE 22/11/2106

We have now received more information on S&F. They are in fact doing rather well and will most probably be ahead of the Crowdcube projections for 2016 - yes that was ahead. So firstly many congratulations on what will be a first for Crowdcube and apologies for not being up to speed  - although we cant take too much blame as we can only report on the information we have. Thanks to the SH who shared this info.

Now renamed the Galileo Group, they seem to gone off map. According to the Crowdcube projections (where have we heard that before?) 2015 saw the company make a small profit. 

Well, accounts filed for 2015 report a £150k loss, on top of accumulated losses of £250k, which means the bank was empty on their BS. S&F raised £150k on Crowdcube in 2014 and have raised more funding since, despite not forecasting this in the CC pitch.

Sorry the news is all the same but we can only report what actually happens  - we leave Crowdcube to make things up. 

Free Agent

Free Agent raised £1,2m on Seedrs in 2015 at a valuation of £30m. They have just completed an IPO on Aim at a  pre money valuation of £26m. But apparently at least now the shares are liquid. Maybe investors should wait for the IPO before investing in the future? Institutional investors seem to have benefited. Of coure what the management of Seedrs have ignored (we presume on purpose as they are not stupid) is that you cannot simply sell your shares now unless you want to make a net loss. EIS dictates that you must hang on to them for 3 years - so 2018 would be the earliest you could sell and keep the 30% rebate. So no Seedrs, these shares are not now liquid. Privately Seedrs have admitted that this is a down round. Hmmm.

Tuesday, 15 November 2016

Where are they now? 3 of the Best - Our version.


Just Park raised £3.5m on Crowdcube on a business model that has now been shown to be a little fluffy.

The Crowdcube plans showed the company making losses. in 2015 but only £400k not the £1.7m just filed.

We said at the time that the main flaw with their car park sharing model was that the people projected to make all the money were not the owners of the spaces but Just Park. This has proven to be spot on. There are numerous examples for the past year of people booking a space and arriving only to find that the space is taken and there is no way at such short notice to sort out the problem. Some people end up with £100 parking fines as a result. Customer service appears to be poor. Looking at Trust Pilot reviews. we are struck by the complete contrast between the 5 start reviews and the 1 star reviews - not much in between. A bit like Marmite.

When we questioned JP on this flaw they just said na - it's not a problem. We now have £1.3m of extra losses to prove it. They may yet get to grips with it but we doubt they will be able to scale to a level that will see any CC investors getting returns. Their main hope now must be that JP don,t fold just yet. There has been more money raised and will no doubt be more in the future - all diluting the CC shareholders. 4 of the Directors left in 2015.

GrubKlub

Yet another internet business that only makes losses, Grubclub or Klub, showed exceptional growth in their Crowdcube pitch when they raised £288k in January 2015. They used the unlikely metric of GMV to big up their sales pitch or show traction as they put it. GMV for those not in the know is the total sales value for a company that is say commission only based and gives a highly misleading image of a company's size. So for example the GMV for Grubklub in 2014 was a projected £400k (which at the time of the pitch was in reality an historic figure). The real sales value as reported in the filed accounts at CH for this was £34,994. Now the 2015 accounts are also filed and show a net revenue of £34,189. In the Crowdcube pitch this 2015 figure was given as £157k on a GMV of £1.7m. From the figures it looks like the real GMV was around £400,000 - so zero growth.

We emailed Grubclub and were told that our numbers were all wrong; although when asked they failed to provide the numbers that were correct. Either the filed accounts are wrong in which case this is for HMRC to look into, or they are way off target.

Angel Berry

Raised £190k in 2014 on Crowdcube. Despite the fantastic projections that Crowdcube allowed them to use to sell the equity - Angel Berry have made actual real losses of over £340k to date  - breaking most records in 2015 by filing losses of £150k against Crowdcube projections showing EBITDA of £612k. That's worth a gold medal surely.




Monday, 14 November 2016

I'm an empty teapot, short and stout, where's my handle and where's my spout?? Is this Vapourware?


Look it really is time for investors on Crowdcube to wake up. Brew promised a tea pub opening in Balham in Autumn 2015. Over a year later, the tea has gone cold waiting for something to happen. 

In what has to be close to a con, the Tea Brew pub business that raised £180k on Crowdcube over a year ago has done nothing in 12 months. Projections showed a turnover of over £500k in 2016.

We contacted Brew to see what the story was. Apparently they are really close to opening their first unit - more than a year late. This story put about by the Brew PR gurus illustrates the problem -http://www.standard.co.uk/goingout/bars/somethings-brewing-specialist-tea-pub-set-for-balham-10313667.html.   and is dated June 2015. He claimed in it that they would have the first unit open in Balham in 2015 and then role out 9 more units in 4 years - well that is now 10 units in 2.5 years.

Investors have been misled. 

Why when there are a few good investment opportunities on Crowdcube - one on there now in the form of Happy Finish, do you insist on investing in this tripe? 


Dine In Collapse a great example of the dreadful mess at HMRC


Dine In liquidation shows filed accounts were inaccurate

As yet another liquidation following funding on Crowdcube, draws to an unsatifactory conclusion - it has been stated that the accounts filed by the directors of Dine In were inaccurate. 

Baker Tilley LLP's final report to creditors shows that filed accounts had missed off shareholder funds - thereby presumably making the filed balance sheet as worthwhile as a Trump tax return. As usual nothing will be done about this - its fine apparently to file incorrect accounts at CH. We wrote about this here

What's more, this liquidation has resulted in the director being able to purchase the 'code' that the company had invested in, for just £12k. According to the report this is a fair price given it is midway between expert's figure of £7k to £35k. You do the math!

So anyway, now we have caste iron proof of what we have been saying since we started - you cannot rely on any information at CH. It's a mess that needs sorting. 

Wednesday, 9 November 2016

Red Advertising planning new funding - what you might want to know before you invest!!

Red Advertising have funded 4 times on Crowdcube - each time they failed to come even close to the projections they have published. That's FOUR times in case you missed it. 


Here is the evidence from Crowdcube's own site - 


Crowdcube Funding History
Date
Amount
No. of Investors
12/02/2014
£484.35k
86
05/07/2013
£180k
35
20/09/2012
£97.49k
49
16/02/2012
£125k
64

So where do we go from here?

Well Red Advertising are about to launch a new funding round , according to the email sent to shareholders by CEO Richard Clarke. The email states that they are currently in advanced discussions with VCs Concentric Capital and the ECF platform Envestors. Envestors when we spoke with them said that they had been approached last week by Red and had asked for more information - advanced??

That aside, it would be fine if Red Advertising was raising more cash if it could be trusted to be straight with the information it provides, especially as this email is asking existing shareholders to cough up more money. Accumulated losses to YE May 2015 are over £1.5m against Crowdcube projections which from the raise in 2014 had them making profits of around £3.8m by now. 

More worrying is the failed attempt at the end of 2015 to raise P2P finance via Thin Cats - a company they had used twice before. In the Thin Cats prospectus which we have, is the following declaration of previous funding - 

Equity:-
In March 2014 the business completed a £ 485,000 share placement led by Johnson Capital, the company’s corporate advisors, including existing investors and new crowd investors via CrowdCube.
That is it - no mention anywhere of the other raises on Crowdcube  - of course it's very possible Crowdcube's records are wrong but we dont think so. Johnson Capital sounds very grand but its just a small FS company with called up share capital at the time of £10, that Red claimed in the Crowdcube pitch was a VC outfit. At this time the pitch also appeared on Syndicate Room but was taken off by the platform because of a discrepancy with its EIS status. There was an interesting and telling exchange between the CEO and an existing shareholder on the Thincats forum. The shareholder wanted to know if the company was close to its Crowdcube 2015 EBITDA figures - the CEO declined to answer the Q. 

We have written quite a bit about this company and have been threatened by them  - they seem to us to be one of the main problems with ECF. The information supplied to investors is never quite all there. It's always slightly skewed. Projections as pure fantasy.

Now it maybe that the 2016 accounts, not due for a few months, will show that Red has turned a corner but if that was the case, wouldnt you think that the company would want to get those accounts out now - before they try to raise more money. The YE was May 16 so it cant be too difficult to get them prepared if they are serious about an open approach to this raise? Hell if I had profits to show after £1.5m of losses, Id be getting them out there!

There is no mention of any profits in the shareholder email, just a request for more money. The shareholder who sent it to us says that they only ever get in touch when they want more cash.

Caveat Emptor!! Or should that be Mickey Mouse.

BREAKING NEWS 15.35 09/11/2016 - Envestors now tell us they are not taking a deal with Red any further. But do shareholders who have been told that the deal is at an 'advanced stage' know this???

Beware the DeListing - Righteous succumb to an inevitable end


The curse of DeListing strikes again. Isnt it time we all learnt the very obvious lesson?

Righteous have often been held up by Crowdcube, where they raised all of their finance, as a shining example of a great funding success.

Now in a letter to shareholders, Gem has offered to buy back their shares after the company's salad dressings have been delisted by many of their main clients. It now appears, according to the email, that salad dressings are not the guaranteed success story that was sold by Crowdcube to its investors - or at least not in this country. It's not clear what has changed - maybe the whole thing was made up from the start?

Righteous is a classic example of how not to do things. There is no doubt that they work very hard, but their business judgements have now been proven to be very poor. A deal recently struck in the US has been a disaster, their own words, and the company appears to be being prepared for mothballing. They cant say what they can pay shareholders for their shares - but acknowledge that they are strapped for cash  - so not much. 

Investors might feel slightly misled. In one of the early raises they carried out on Crowdcube, they had a contract with a US distributor as a mainstay of the offer. Not long after promising the earth, it turned out the first shipment had not sold well so the contract was cancelled.

Then Gem discovered cauliflower - creating Cauli Rice as a separate company and using Crowdcube to raise money for it. Despite some serious problems with a failure of the their product using winter cauliflowers, this business appears to be going quite well. But then, we all thought that about Righteous - right? Did investors in Righteous really sign up to a deal where the two founders walk of into the sunset through a field of cauliflowers - somehow we doubt it. It will be interesting to see what they offer to pay back  - maybe a share deal with Cauli would be a better option?

So the obvious lesson, in case you are a little slow, is that you cannot believe what they tell you and if the listings are mainly with the big boys, they cannot be relied upon. Do you think anyone would have invested in Righteous had they known what Gem has just told them - 

Because salad dressings is a shrinking category, supermarket buyers are giving it less space and cutting down the brands in the range - and sadly Righteous has been part of that cull  

- that it turns out salad dressings are not an important market in the UK after all?  

Tuesday, 8 November 2016

Founding Director of Quantock Brewery resigns



In amongst all the high level statistics that the Altfi 'Where are they now' report has produced, we think that they have left out the more important indicators.


Quantock Brewery funded via Crowdcube in 2013. Its a good small brewery. But its made increasing losses since 2013 and has now lost 2 of the four directors in its Crowdcube team - the team it exulted as being so important to its future in the Crowdcube pitch. One would be careless...........!

Needless to say, the Crowdcube pitch has the company well into profit by this time and also well into profit last year, when it made another loss.

Is it fair to assume that the resignation recently of one of the founders, Ken Oxley, indicates that things are not going too well? Would he leave if we were about to see record profits? If anyone has information that sheds better light on this  - then please get in touch.

You can get this information here, because we bother to do the hard yards to find it for you. High level percentages often based on tainted information produced by the ECF platforms themselves will get you nowhere. 


Solar Cloth Company new owner files for Liquidation


The Saga of the Solar Cloth Company, which we revealed some months ago, keeps on going. Funded via Crowdcube and bought out of administration shortly afterwards, the purchaser has now also gone bust.

It was not clear for sometime who had bought the assets of SCC from Irwin and Co - the insolvency company dealing with SCC's administartion. However it has now come to light that it was Base Structures, who had entered into a JV with SCC before all this kicked off.

So now Base Structures have filed for Liquidation. 

According to the filed documents, SCC had invested £1.5m in Base Structures. One of the Base Structures directors, Chris Ives, is also to be found on the documents filed for SCC, verifying them. 

The liquidation of Base Structures is being handled by the same company, Irwins, as the one that is still in charge of the administration of SCC. they have not filed any documents since the initial report.

Draw your own conclusions. 

Monday, 7 November 2016

The Gadfly is back - this time on Bloomberg. Now we are getting serious.



Ok, so its not a Gadfly but its a nice pic and we are on Bloomberg today in the written word and the spoken one. 




I love the bit where Adam takes the Crowdcube investor test - the one that is supposed to weed out non sophisticated investors - and fails it on purpose. This is a multiple choice test with 2/3 answers  to each very basic Q. So having failed, the computer invites him to take it again!!!!!!! This time he gives the other answer and passes!!!!! Ridiculous.

Anyway we had a very amusing evening in St Andrews after his wee mishap with the car - the road was the normal width so how he came off it is anyones guess. Followed by a really good slap up meal. Thanks Bloomberg. 

Other journalists are also welcome. 

Sunday, 6 November 2016

We want to hear from you - investors, company founders and lovers of small business


We thought it was about time to give a voice to the people who really matter here - the investors and the companies they are funding.

So we hope to be running some posts which will feature both - but we cant do that without your help.

So if you have a business that has used equity crowdfunding, successfully or not or if you are an investor in these companies, we'd like to hear from you. 

In order to ensure that we only print real information, we will have to verify who you are and what you say but we wont publish your details if you dont want us to. 

So come on lets get this debate going for real - 

CONTACT US at info@ecfsolutions.co.uk

Wednesday, 2 November 2016

Well that didnt last long. More bad news from a Crowdcube success Rater Agent







Rater Agent raised £150k on Crowdcube just over a year ago. Now its main man and founding wizard Mal McCallion has left.

In the Crowdcube pitch Mal was Rater Agent. Portrayed as a highly successful entrepreneur who was

 '' a veteran of property/technology start-ups Primelocation and Zoopla,'' and '' Mal was headhunted to join Brent Hoberman, co-Founder of lastminute.com, in an interactive floorplan business which let people build Computer Generated Images (CGI's) of their actual homes with up to 125,000 new furniture items in them. 
Having sold that to Floorplanner in 2013, in 2014 Mal went to run Fine & Country / Guild of Professional Estate Agents .........''
Now we think it is fair to assume from reading this text taken directly from the pitch, that Mal was part of the sale of this unnamed company to Floorplanner. A little research in the right places tells a different story.
MyDeco 3D ltd was founded by Hobberman in 2006 and Fox joined shortly afterwards. The controlling company was By Design (UK) Ltd. No mention at CH of Mal in this deal. He was never a director or shareholder in either company from the records. So we think this Crowdcube text is at best highly misleading.
To be honest the software never did much and although the deal to purchase it by Floorplanner was a share swop we dont think it valued MyDeco at much if anything.
So back to Mal - the driving force behind this Crowdcube funded Rater Agent. Well that was the case for a year post funding. Now he is pursuing other interests as MD of Callwell - maybe he just got bored? Now again he is not a director or shareholder in Callwell. How many entrepreneurs do you know who act as managers at other people's companies?
We were contacted by an irate shareholder, so decided to look into this. Its a bit of mess for 70 or so shareholders in Rater Agent who surely expected this entrepreneurial wizard to deliver a huge ROI for them. Then again maybe his departure is a good thing? We are expecting Callwell to be crowdfunding shortly.




A Hat-trick of good news stories for Crowdcube investors



At last some good news.  Like buses, you wait and wait and then three come along all at the same time.


Here are 3 companies all funded via Crowdcube, that are heading in the right direction - long way to go but they are now at least on the right track.

Hop Stuff - a London based brewery has received new funding and has grown its revenues exponentially this year, topping a turnover of £1m, according to a letter sent to shareholders. Now they seem set to make some real progress in this very challenging market. They raised £65k on Crowdcube in 2013 at a value of £180k. It seesm the latest round has shot them into the millions bracket; although as we all know this is only on paper.

Fantoo - a company that has raised several rounds and been taken under the Dell wing, has just launched its first product. It sounds exciting, they are excited, so maybe they are also on the right track.

Silk Fred - complete the hat-trick. On the back of rapid growth over the last 6 months, SF are now confident they are on the same track. Losses however are also up so this maybe a longer journey. Over trading is still a possibility.

If you know of any other good or bad news, why not share it with us and we can all help to make this a more open way of funding.


Tuesday, 1 November 2016

Beauhurst Report for third Q 2016 shows sharp fall in equity crowdfunding.







The new report just out from Beauhurst on PE/VC and Crowdfunding investment in the UK shows a dramatic decline in numbers if the Deliveroo £210m deal is removed. Read it here


They make no real attempt to analyse this decline but the figures are very clear. For equity crowdfunding the picture is even clearer.

The quarter saw a 20% decline in investment through ECF platforms, with Seedrs ahead of Crowdcube for the first time. The deal numbers are now down below where they finished at the end of 2013.  

As a guess we would say that this decline is partly due to the tarnished image ECF has been given by its leading proponent - Crowdcube. You cannot expect people to continue to throw money away on the basis that they will get 30% of it back via tax rebates. Not everyone is that stupid. Where are the real deal pitches?

For 5 years now we have been consistently promised 3-5 years exits at multiples that would make you very rich. What has actually been delivered is 3 exits at multiples that will pay for the postage and a large pile of failures - many of which are yet unrealised. It's totally unsustainable.

For a company that is heading rapidly from the breakeven line in the wrong direction, you do have to question how the two founders can justify paying themselves around £250k per year. 

Clearly with the decline in PE and VC investment, all the blame cannot be the platform's. We are seeing a general reluctance to invest which can most probably be put down to uncertainty - caused by Brexit and all that it might or might not imply. You would be surprised if this was not the case, given the utter confusion being expressed by the Government.

Anyone interested in this sector really should read this report - it reflects exactly what we have been saying here for 18 months.