Friday, 3 February 2017

Hats off to Cauli Rice


Cauli Rice smash their target of £400k in just one day on Crowdcube.


One can only admire the sales craft of the Cauli Rice ex Righteous, team. They have done it again. For the umpteenth time they have raised capital on Crowdcube. Yet in all of those raises for both this company and their previous wizard idea Righteous, they have never ever once got even close to the projected sales and profit figures they use to sell the equity. Not once in all those attempts. Not even close. Often not even half way.

And they have done it this time on a valuation of £8m - up from around £5.5m PM just over a year ago (in the current pitch their valuers, Blue Box, say the last round was at £7m, which is wrong). An increase that is the consequence of missed targets and larger losses. This is a valuation suggested by their hired valuers - the same ones who were involved with the business in the first raise at the end of 2014 and appeared in that video, when the company was valued at around £2m. All this based on future prospects and a patent. The patent is genuine. No mention in the plans of the winter cauliflower disaster that marked their initial progress. Not that important - just gets in the way of the projections I suppose. 

Projected GMP is to rise to 50% from its actual 21% level today - which should have been 29% according to the 2015 set of projections or 34% if you like the 2014 pitch projections. Take your pick. But as they like to say there - if we had a crystal ball, we would be millionaires. Apparently making the product in the US for the US market by 2018/19 will bring about this margin gain. Of course if the actual margin in 2018/19 is around 30% then the figures this valuation are based on look a little different.

Call it crazy but they do now need to deliver. £2.5m of Crowdcube investors cash, not to mention the Righteous money, has backed them. Surely their time has come - new projections and very healthy but also very new, current listings must see them succeed. Great plans for the US and for development in the EU.What on earth could go wrong? On second thoughts maybe keep a tight hold of your hats for now.

6 comments:

  1. I've seen this in stores and tried it myself. Tasty no doubt but expensive at £1.99 when Sainsburys and Tesco and perhaps other multiples are now doing their own brand of cauliflower rice, not to mention broccoli rice, courgette and butternut spaghetti. It's a commodity and at the whims of the market. 21% margin is diabolical, even double that is only marginally respectable. The only way out for investors is a PE exit. It's never going to be a profitable company, it simply has to get it's store count up, it's revenue up then go and shop itself around to one of the food groups who can buy it. As it currently stands the business will continue to bleed funds. Not to mention it will need to raise funds again in 12 months time. Not sure how much value is in the patent but that is really the only thing going for them. Would it be that hard for Tilda to come into this market and run it at a loss to squeeze out Cauli rice? Wouldn't be the first brand to do such a thing.

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  2. Previous round is not wrong - it was £7m. They overfunded to £1,073,090, for 15.17%.

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    1. Ah you have made a basic mistake - easily done if you are not used to these things. The valuation in the current round is £8m pre money (PM)and the last valuation was in fact £6m pm not 5.5 as we stated above. Maybe you are not used to investing in new issues?? The way pre money works is simple. Its the current valuation worked out by the amount being raised versus the % being sold. Then and this is the bit you forgot - you take off the amount being raised to get to PM. As Crowdcube have used the PM value on the pitch and state so in black and white - then you need to do the same. So no weare not wrong.

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    2. So how does £400k for 7% come to £8m?

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    3. Real target is ~£600k - which gives around £8m pm. CC have a habit of using this method to lower the line that needs to be crossed (ie increases their chances of getting commission) and then overfunding to the real target. You would need to ask Gem. I know that £8m is the value they placed on this round as I spoke to her about it. They didnt want (nor did CC) a down round which is what should have happened given the poor sales figures.

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    4. You can see that Crowdcube have corrected their error and the % is now correlated to the amount raised using £8m as the PM value. So just a CC typo.

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