Dragging it out

Last week I gave a run-down of a few Crowdcube campaigns struggling to hit their targets, one of which was Sugru… They didn’t get their last minute spurt, so CrowdCube have generously let them extend their campaign so they can grind out the full 100%. Yesterday they were up to 96%, today they’re very close at 99%. With no active discussions for over a week, the reason for extension seems perfectly reasonable.

It’d be interesting to know the mix between new and existing investors increasing their pledges since they were granted their extension. It’ll also be interesting to see if they get their ‘fully-funded’ boost as seems to happen with most other companies who hit 100%.

No more Readbug

After recently trying (and failing) to raise more funds to pivot their ‘Netflix for magazines’ product into a reading material platform for universities dubbed ‘Readbug Academy’ they have today (26th April 2017) updated their Seedrs status to ‘Winding Up’.

Their security flaws certainly didn’t help, nor did their very niche range of magazines and with the likes of Readly heavily investing in advertising and partnerships with the like of McDonalds I’m afraid I could see this one coming.

Over the course of three funding rounds they took £344,621 from Seedrs investors, Matthew Hammett’s final update tells us “with no assets or liquidity it is the boards view that we will now look to have the company voluntarily struck off” – I’m sure in a day or two the discussion board will be full frustrated comments and the same old questions about claiming tax relief.

Squeeeeze

This story on Bloomberg tickled me this week. Juicero have taken a significant amount of money from investors to come up with their raw Juicer and single-serve pulp sachets. The juicer itself will set you back at least $400 and the sachets don’t come cheap either. Ars-Technica have been following the story and found this recent tear-down of the machine – Wasting money Over-engineering at its best!

Get Paid for Your Ideas

Unless you’re called Six-To-Start, in which case if you give them £250, they might listen to your idea.

Despite this, I have a funny feeling this pitch is going to do OK. Their original app ‘Zombies Run’ has an avid following, I know of at least one user who raves about how good it is and I’m sure there are plenty more who will take the plunge as the discussion board already suggests.

With their sky-high and in my view unjustified £12m valuation, I can’t say that the company or their app is for me.

Missing the Target

I’ve not really paid much attention to CrowdCube in the last few weeks, I’m still catching up with things. I managed to take a quick look on the train this evening and it seems I haven’t missed much.

It looks like Hydro+, Meame, Millenia and even Sugru are going to miss their targets in the coming days – All of these were listed before I took my two weeks out, the only one I’m a little surprised at is Sugru, but only because of the sheep-mentality momentum of the crowd they appear to have behind them. I was going to buy some and do a little review with a view to potentially investing, but I didn’t get round to finding a stockist and I don’t think my investment would help them over the line anyway – That said, they’re close enough to the line for one of those last-minute spurts CrowdCube are becoming famous for.

Millennia is a shop I’ve visited in Westfield, based on my experience of the shop I wouldn’t invest, it’s only ever been empty when I’ve visited – It might do OK for the owner, but I can’t see a return or even anything about it that might be interesting and that’s not because I don’t like comics or Sci-Fi.

As I’ve said before, I like cycling and spending silly money on cycling related items but even I’m struggling to see the point of a cycling jacket that doesn’t look like a cycling jacket – especially when it costs the best part of £300, has been out for several years and is made by a brand I’ve never heard of (Meame). The rest of the range doesn’t inspire confidence, it consists of just 6 unique products, some gloves, a cap, two women’s jackets and two men’s jackets, none of which are new, have they run out of ideas?

Finally we come to Hydro+, A vending system for gyms, providing calorie free electrolyte rich sports drinks dispensed directly to the users’ own receptacle. Users are expected to signup (not sure how, couldn’t be bothered to work it out) in order to get access to these drinks. I see a lot of responses from the company in the discussion board around around saving the planet because they are cutting out disposable plastic bottles, I find these ludicrous.

The last time I went to a gym, I and almost everyone else already used reusable sports bottles, filling them with a free product called water, I (and I imagine others do the same) sometimes used to add my own sachet/tablets of electrolytes to this magical fluid without harming any dolphins in the process. It’s no surprise that they’ve raised just over £60k of a £325k target with just one day to go.

I’m Struck

Take a team of four who’ve known each other for more than five years, a ‘Duke of Edinburgh Young Entrepreneurs’ award, a website that shows you precisely where to steal find high-value items and a company that’s about to be struck off and what do you get? Apparently you get a company worthy of pitching on Seedrs

Daylui (however you are supposed to pronounce that?) are running a pithy pitch on Seedrs, yet another spin on the AirBnB model – This time for everyday items like cameras and power tools. There are plenty of sites and companies already on this bandwagon and I can’t see that this one offers anything new. That hasn’t stopped them slapping a £1m valuation on themselves, that’s an expensive website if you ask me.

More worryingly, on April 18th they had a compulsory strike-off notice posted on their filing page on CH, very embarassing – They have two months to get this sorted, the fact that they’ve let this happen in the first place makes me question their experience and professionalism, much like their pitch. Still, the power of the crowd never ceases to amaze, somehow they’ve raised £24k so far, good luck to them, but I’m out.

Family

Last updated: April 26, 2017 at 22:23 pm

After spending far too long looking at confirmation statements I asked ‘Fund Manager’ Nicola Horlick if she still owned shares in Times Place Brasserie via Twitter, her response:

“My family have shares in TPB.”

That leaves us with four two one possibility:

  1. She is somehow related to Nathan Engelbrecht.
  2. She is somehow related to Timothy James Whyte.
  3. Someone in her family invested via Seedrs when they initially raised.
  4. The CH confirmation statement and annual return is wrong.

I asked for clarification: – It’s been radio silence thus far.

Update (24th April): Nicola’s responded again to confirm her mother is a shareholder. Still not sure if she invested through the Seedrs platform or if the confirmation statement is wrong. 

Update (26th April): After our conversation on Twitter went nowhere, Nicola and I took to email to try and clarify what’s going on. The upshot:

  • Nicola’s mother still holds shares.
  • The latest confirmation statement appears to be incorrect, Nicola will speak to Nathan in an attempt to find out why her mother isn’t included in the statement. 
  • Shares were transferred from other holders (including Nicola and her daughter Alice) to Timothy James Whyte at no cost because Seedrs would not allow new shares to be issued – I presume because us Seedrs investors cannot be diluted because we collectively hold pre-emption rights). 

Dented

Den’s campaign on Seedrs is still open, they’ve now raised over £2.1m, well clear of their £1m target. A few weeks ago I posted about their last convertible offering, now a few people of the discussion board have started asking questions about definition of the triggering event. Here’s what Seedrs’ Kirsty Grant has to say

“The trigger event of raising £1m did occur prior to the Longstop Date of 5th of April. By 5th of April, Den had raised over £1m through a combination of investors who invested directly in the company and investors via Seedrs who had committed and paid for their investments via Seedrs. Den could have closed the round prior to the 5th of April, but we agreed that given they had already satisfied the trigger event, Den should continue to raise the funds it wished to accept and close the whole round together.

Therefore, the convertible investments will convert into shares at a share price of £3.12 (a 20% discount to the current round) in accordance with the email sent to all convertible investors.

We have agreed with Den that the convertible shares will be issued at the same time as closing the larger round, rather than in two separate transactions, to save administrative/legal time and costs.”

A fellow investor has responded with this.

Interesting. I was under the impression that the Seedrs round was pending a due diligence so can’t really be called “closed”, yet.
Are the investments of other investors already confirmed and signed?”

With £2m pledged I can accept that we are above the £1m monetary threshold, even accounting for drop-outs. What I don’t accept is Seedrs’ definition of a transaction – An open pitch with pending due-dilligence does not constitute a transaction. It’s time for Seedrs to start answering some questions on this one.

Tea-Saw

Another flip-flop from Seedrs to CrowdCube, this time it’s Charbrew, recent holders of the ‘No News is Good News?’ title. Reading the post-investment discussion board I got the feeling the crowd were losing their patience with them after their recent pivot from teabags to ice tea and surprising move into the Australian market.

I briefly read the CrowdCube pitch on the train earlier (no up-front mention of the previous Seedrs raise, obviously, although it has been mentioned in the discussion board) – I’ll admit, I found myself thinking I might invest in this if I had been finding them for the first time. Perhaps this is their angle, however I feel the investor base on CrowdCube has plenty of overlap with that of Seedrs so if targeting new investors was the reason for the switch, I’m not sure it’s a good one.

I’m still waiting for a good reason (from the view of the investor) for switching platforms to emerge from one of these flip-floppers, I’ve been trying to think of a theoretical one for months and I’m stumped.

Us Seedrs investors haven’t been given our pre-emption notice yet, I’m 95% certain I’m going to let it slide when it does arrive.

Silver Lined

I like Silver Curve, I liked it when I invested the first time in August 2013 and the second time in September 2014 and I still like it enough to invest in their latest round.

In their first round Bryan Crotaz introduced their Aperture Engine, capable of running high quality digital signage on cheap hardware, namely the Raspberry Pi. Being a bit of the geek with some experience with the Raspberry Pi platform I saw it as an idea that had real legs. At the time the plan was to licence their graphics engine to OEM manufacturers.

Since then, things have changed some what, they’ve been engaged by MCC to fit out Lords Cricket Club with a new scoreboard and associated screens as well as carrying out work for a LA based film studio. No longer do they have a model where they licence their engine to OEMs, instead they licence their PixelPipe Signage product to businesses through a global re-seller.

Throughout this journey, from the closing of the first pitch Bryan has been very forthcoming with updates, I’ve checked back and as investors we’ve had news and updates more or less every quarter. As an investor I’ve felt like I’ve been kept very much in the loop with what’s been happening, exactly what I want from a Seedrs investment.

The product and offering might be complex (and I haven’t done it justice above), but in my head it’s perfectly clear what it is and what they are trying to do. The two major clients they have landed so far and their association with what appears to be a major reseller are positive signs and their accounts for the year ending 31st March 2016 even show a profit, a rare thing in the crowdfunding world.

Sadly it seems the crowd doesn’t yet agree, having raised just over £76k of their £325k target (in return for 12.62% equity). Perhaps to the new investor the offering isn’t clear, as an existing investor who has known this company for years its easy for me to read between the lines and my knowledge to fill in the gaps. Bryan has provided a succinct company history on the discussion board, for anyone considering investing, this is well worth a read. I’ll be keeping a close eye on this one, I hope they make it… Especially if it goes some way to stopping scenes like this.

Times are Changing

Times are Changing

I’ve been away on business for the last couple of weeks so haven’t had the time to post or even do much at all when it comes to crowd funding research, so I’m basically two weeks behind.

In my time away I did receive a few company updates and begging bowl emails from companies I’ve previously invested in – I shall leave some of these for future posts. No, today I’m going to dig into a comment I spotted on the Seedrs discussion board for Times Place Brasserie

“Hi there Nicola and Nathan.
Is there any update to the site’s trading and results in 2016?
Also, in the latest confirmation statement issued on the companies house site, I can’t see Nicola as a shareholder anymore. Any news to report?
Thanks and best regards,
S.J.”

A little background for those who don’t remember. Times Place Brasserie pitched on Seedrs back in 2013 and gained funding of £150,000 in November of the same year, the campaign was fronted by Nicola Horlick, at the time of the raise she held 100% of the company. At around the same time as the raise a second Nicola, Nicola Higgins was appointed as director but I can find no record of her holding shares. The raise effectively resulted in Nicola H owning 22,500 (£0.01) shares and Seedrs with 15,000 (£1.00) (a 60/40 split in terms of rights) and a called up share capital of .

The campaign closed, many months passed and much fun was had on the discussion board (worth my £20 investment alone) and the original plan of taking over a restaurant in Chiswick eventually resulted in the opening of a bar in Clapham called the Walrus Room in June 2015. Between which time Nicola Higgins director appointment was terminated in December 2014.

As investors we got sporadic updates usually posted in reaction to comments on the discussion board. Then in November 2015 a document was posted on CH detailing all shareholders in the company. Nicola Horlick’s holding dropped to 4,500 shares (12%), the next biggest named share holders became Alice Horlick (daughter?) and Nathan Engelbrecht both with 10% – Interestingly there is a single annonymous shareholder on Seedrs who invested £38,000 who was really the second biggest shareholder at this time with just over 10%. At this point there are now 43 separate shareholders listed all with holdings under 5%.

Next things were filed on CH in slightly the wrong order, Nicola Horlick was terminated as director on 31st March 2016 and Timothy James Whyte was appointed on 20th April 2016. This spooked a few people on the discussion board and we were assured by Nicola Horlick that she was still a shareholder at about the same time as the appointment/termination filings were made. I hope you are keeping up at the back!?

Then, in December 2016 someone on the discussion board asks if Nicola remains a shareholder as the latest Annual Return filed and made up to 21st June 2016 doesn’t list her as a shareholder. Horlick responds that she is both a shareholder and guarantor for the rent of the premises but a new investor came in but didn’t want her or Alice on the board, the post goes on to talk about the licence on the premises and selling the business. The return tells a different story, it shows both Nicola and Alice Horlick are no longer shareholders and we have a new shareholder in Timothy James Whyte who now holds 8,250 shares, all other holdings remain the same.

Next the accounts made up to 31st December 2015 are filed in September 2016, they suggest the company is out of money with just £2,655 in the bank and a PnL account well in the red at -£166,142, perhaps the new investor injected some much needed cash, we have no idea of how much Timothy James Whyte might have invested, just Nicola’s passing comment about a ‘new investor’.

Finally we come to the filing that prompted the comment made last week, a confirmation statement with what is apparently a full list of shareholders. This statement puts the total number of shares in issue still at 37,500. Horlick is gone, there’s no mention of her name in the document whatsoever, the shares are now split between just 3 parties Seedrs (still with 15,000), Nathan Engelbrecht (now with 14,250) and Timothy James Whyte (now with 8,250).

What has happened here, is Horlick still a shareholder or not!? – I’ll try asking a few people, let’s see if I get a response.

Passive Aggressive

Seedrs posted what they’ve called their ‘Annual Update’ (a clandestine way to tell us they’re only providing one update a year?) this week, they were getting close to the top of my quiet list so its about time. They didn’t include any real financial numbers, apparently they’re waiting to file with Companies House before they circulate.

The update is essentially a review of 2016, going through things like investor numbers, a features review and office expansions/openings – Nothing too offensive.

One section did stand out, what they are calling ‘carry monetisation’. For anyone not already aware, Seedrs makes its money by taking a cut of funds raised and a cut of funds returned. Thus far they have obviously made a lot more money on the raise side as opposed to the return side. I don’t know the exact numbers but I’m pretty sure the number of Seedrs exits could be counted on the fingers of the average person and they go on to admit that they “would not expect to begin seeing a significant volume of exits for quite some time”. So with that in mind, they have managed to strike a deal that allows them to realise a monetary return today by pledging a portion of the return to an as yet unknown third party. We know that they’ve done this once during 2016 but that’s about all we know. What this means for investors is difficult to say, I would only hope that if a company with an exit on the cards has also had Seedrs’ carry monetised that this fact is declared to investors when the action is being discussed/actioned.

The only other thing of note to say about the update that it has prompted a discussion about the launch of a passive fund. Someone seems to think it would be a “very good idea” for Seedrs to launch a passive fund. I along with at least two other investors think this is a bad idea.

I personally think there are already people out there investing through Seedrs and CrowdCube in a pretty passive way, i.e. they punt on everything that’s listed regardless of valuation, the merits of the business or any other discernible criteria. Obviously I can’t prove this, but that is my hunch. I have an even bigger hunch that there are people investing in a slightly less passive way, whereby they invest in anything that seemingly funds quickly and/or goes into overfunding.

If you are just investing small sums and you really do know that you are highly unlikely to see any form of return then all this might be fine but I fear there are people out there pledging money, spreading their risk with an expectation that one or two investments will provide a return that outweighs all others. Exits so far haven’t yielded anywhere near the kind of multiples needed to offset the losses of a diversified crowdfunding portfolio and there needs to be many more exits before we can judge if they ever will.

Further to this, it is also my opinion that there are many funded campaigns that have come and gone where crowdfunding was the last or only resort in terms of raising money. If a company was truly as amazing as the some of the pitches would have you believe they would likely not be on a crowd funding platform in the first place. I will admit that there are exceptions to this rule with founders out there who truly want to give the crowd the chance to be involved either instead of or alongside VC investors and even then VC investment is no guarantee that the company will do any better.

There’s no way that I can see to effectively assess risk that would enable investors to set a risk appetite that would effect the makeup of a passively built portfolio – Perhaps the only thing such a passive fund should ask is “How much money are you prepared to throw away?” at least investors would be under no illusion as to their expected return.

Jeff Lynn and Seedrs seem to be pedalling so-called paper returns as positive news for crowdfunding and proof that it can be profitable, they took the passive fund discussion as yet another opportunity. This drives more people onto the platform who think they can do the same. With a limited number of pitches and a growing investor base, it’s no wonder all but the most questionable pitches get funded. The worse the company is in the first place the more likely it is to fail, the more companies that fail the more bad press there is for crowdfunding and the more noise investors make.

It’s a tricky one to solve, but I do have a few ideas that the platforms wouldn’t be happy with, I think I’ll let them develop and leave them for a later post.

Bugged Out

As I expected, Readbug didn’t reach its funding target during its latest campaign, the latest cache of the raise (25th March 2017) has the raise reaching the dizzy heights of just £5,972 of their £80k target.

As mentioned previously, the update we investors received before the campaign began didn’t paint a pretty picture so it came as no surprise that this campaign was well off the mark.

Now that the campaign has closed, Readbug today issued an update to investors – It seems they are suspending their B2C product on 31st March 2017 to put all their efforts into the B2B business, they’ve as good as admitted the B2C product is not viable at this stage, with no forthcoming investment I’m not convinced the B2B product is going to fair any better.

This must be the third or fourth nail in this particular coffin, I think they’re going to need a pretty special crowbar to get them out again.

Extended Deadline

Browsing CrowdCube today I noticed LightVert still had 8 days to go before their deadline… Strange, I’m sure they had 9 days left over a week ago. It turns out CrowdCube had generously extended their campaign by 7 days citing “ongoing investor discussions”.

One of the few things I prefer about CrowdCube (over Seedrs) is their shorter raise period, limiting businesses to 30 days (vs 60 days on Seedrs) – Quite right, if you can’t raise the funds you need in 30 days then you need to start questioning the merits of your business and/or the terms of your offering.

Apparently it’s fine to bend your own rules when the businesses raising money are having ongoing discussions with investors. I find it increasingly more difficult to take the platform seriously when things like this so obviously tilt the playing field in favour of the businesses raising money.