So now we have what has to be a first - an explanation from one of the UK's leading equity crowdfunding platforms, as to why so many companies miss their financial projections by so far.
And we have this from the horse's mouth.
We were asking about another issue about a specific pitch and its projections, which will become a post later, when Jeff Lynn, the much heralded founder and CEO of Seedrs, explained why projections in this sector had to be so far removed from reality.
Here is what he said -
....financial projections for early-stage businesses are intended to be best-case portrayals of what success could look like, not a conservative view of the most likely outcome. That is how every institutional and professional investor in this space looks at them, and that is how every entrepreneur is taught to build them. I therefore feel, and have always felt, that the premise of your attacks on most Crowdcube-funded companies is very unfair to those entrepreneurs, as it expects something of them that is directly contradictory to the expectation set for them by everyone else you are working with. I don't think you care about that (and I am sure you will post some sort of snarky reply to this on your blog),......
So there we have it. In B&W. Its the norm and we are the only people who dont know this.
We dont agree and we have been involved with company start ups for over 30 years. Our evidence is irrefutable, as the report on Crowdcube will show. Entrepreneurs are not entrepreneurs because they have some idea and put together fantasy numbers to sell equity to 'investors' on Seedrs or Crowdcube.
We'd like to hear from anyone who agrees or disagrees that projections used to sell equity to the public - as in the case of ECF - should be the fantasy figures that the company CEOs dream about, or if they should be at the very least middle of the road sensible, attainable figures. Of course CEOs can always state in the PD, that the figures are conservative and they expect to exceed them. Oh....actually that is what they often do. Which in turn begs the Q; what is that the CEOs know that Jeff Lynn doesnt?
Not sure if this is snarky enough for you Jeff, but we tried.
The big story is to follow..........