Zzish........... we'd like to know

The Zzish Crowdcube pitch has to be a first. Target of £1.150m but declared investment already raised off the platform of £1.24m. So why bother?

We have heard but cannot confirm, that the statement on the Crowdcube pitch that the £1.24m was invested on the same terms as the crowd invested (the pitch closed at £1.318m) is not exactly correct. 

The very fact that Syndicate Room raised over £600k for the company a while back but gets no mention in the funding section, as with the Idleman pitch, says more about Crowdcube than anything else.  They put themselves first before information for their investors. Childish but true. 

So if there are any investors who took up their pre emption rights and know that the deal was different to the one offered by Crowdcube to the crowd - we'd love to hear from you. We really would. 

Syndicate Room's E-Go swallows pride and pleads for more cash.

E-go, which raised £950k on Syndicate Room in 2014 for its micro aircraft, has issued an urgent plea for £1.5m before it runs out of tarmac.

An article sent to us here has more detail.

It does seem to us that all three of the UK's main platforms are currently in a tussle to see who can produce the biggest disaster. Our money is still on Crowdcube.

RPS shares selling for half price

RPS share sale at half price

If you would like to purchase shares in RPS - see here  - at a 50% discount to their Syndicate Room price only a year ago, then contact

Nicky Cole

Radio Physics Solutions Ltd

The Elms Courtyard

Bromesberrow

Ledbury

HR8 1RZ

There is a small private holding of just over 6000 shares going for £12 each. The Syndicate Room price was £24 in July 2015.

Bon chance!

September MADNESS has arrived

If it wasnt serious this would be hilarious. Seedrs and Syndicate Room have both issued entirely bogus 'valuations' of their portfolios  - on the same day. 

Both valuations show healthy gains for investors - but the catch is there have been no real gains because neither company has achieved an exit. Investors are locked in until this happens so its a paper exercise in PRING. It is also highly misleading and they should really know better. Its the kind of stupidity that Crowdcube excel at. 

Its all really very disappointing. Seedrs held a secretive press briefing this morning which Syndicate Room clearly got wind of and pushed their announcement to 10.30, leaving Seedrs looking into the middle distance as SR disappeared over the virtual horizon.  

Meanwhile the Syndicate Room PRING stated '' We’ve calculated that SyndicateRoom’s 2014–15 portfolio is valued at 135% of the original investment (as of May 2016, not including (S)EIS tax reliefs)''. 

The first word is the giveaway!

When are the main three UK platforms going to grow up and give as an ECF investment structure that works? Inventing returns, when its just as likely that all these so called increases will be expunged by failures, is just irresponsible.

3,2,1 and we're back in the room. Nothing's changed.

We had hoped a break would bring some change but alas same old same old. GamesGrabr latest Crowdcube pitch is a great illustration of why Crowdcube will never work.

Looking at the new Grabr pitch on Crowdcube, the platform has very kindly given us a comparison against the last raise. It makes for interesting reading and explains why the pitch has failed so far to get any backing.

Forced to try this new honesty, Crowdcube is trying to fit a square peg into a round hole. Its seems pretty obvious that projections showing 12 months revenue of over £400k which turn out to be around only £65k in reality, will not encourage enthusiasm in the management or their new, massively diluted plans. Halfway through their pitch and 15 investors have manged to hand over a meagre £1,420; despite the pitch highlighting a GOLD BADGE from Crowdrating ((: and using indirect quotes about the industry as if they are about their business.

Idleman - funded via both Crowdcube and Syndicate Room, posted healthy losses of £1.8m against projected losses of £1.3m.

Angel Alerts, by its own 2013 Crowdcube predictions now looking for an IPO or trade sale, posted a £7k profit on very small trading. Still at least they actually made some money which is very rare here.

Oh and while we were away the good news that Hybrid Air's Airlander had at last flown, turned into bad news as the airship crash landed. OOOPS.

September has some very large and juicy accounts to be filed  - so dont go far. We may even find some good news!!!   

Syndicate Room didnt withdraw Fitbug Offer - the time just ran out.

CORRECTION - Our last blog was inaccurate when it said that SR had withdrawn its Fitbug offer.

The offer was due to close today.

Unfortunately it doesnt alter the fact that this is the third failed attempt by SR to launch public offerings.

We note that in the Crowdcube plan to get into profit by 2018, they lead with the plan to start offering similar deals. Hmmmmmm.

More on Crowdcube's offer next.

Syndicate Room withdraw Fitbug offer

We would have to think this is our fault but the day after we posted on the Fitbug public offer on Syndicate Room, the pitch has disappeared from their platform.

Oh well if you dont succeed then try, try again and again and again .................. might help to have offers that make sense! Rumour is Fitbug will collapse if this funding isnt in place shortly. 

Syndicate Rooms Fitbog Public Offering looking ridiculous

So when is it a good idea to buy shares at 0.25p on Syndicate Room when you can buy them at 0.24p on AIM?

Never.

The shares fell to .22p last week.

Can anyone come up a good reason to invest via SR? According to the platform they are offering the public a chance to play with the big boys, as the big boys special price. Eh? 

Look, the idea isnt a bad one in principle but you do have to be able to offer a discount or you just look very foolish.

According to this  from the LSE website, the institutional offer is at 0.15p not the 0.25p stated in the SR offer document. Wonder who has got it wrong??

Syndicate try going public again - with Fitbug!

Syndicate Room have a deal with the LSE - the only ECF platform to be able to offer shares this way.

To date the two attempts to get this new version of equity crowdfunding off the ground, have gone off with whimper rather than a bang. Two tries and two failures.

In what we see as desperation they are now offering shares in Fitbug. This company has a colourful record on AIM - their two year share price graph would be banned from Centre Parks due to its dangerous G forces.

They are now apparently in a remodelling process. However they cant wait for this to return some evidence of traction, so they have resorted to, as one publication put it, scrapping the bottom of the crowdfunding barrel.

We dont see attempt three being any better than one or two.

Droplet's mirage now appears on Syndicate Room

Droplet raised over £500k on Crowdcube in 2015 - valued at around £4m pre money.

This year they tried to raise more on Crowdcube but the pitch was pulled very early on - we wrote about it here. Now they have launched a new pitch, this time on SR raising £433,000 at a pre money valuation of just £3m.

Firstly hats off to SR for being the first platform to have a pitch where the value has reduced since its last round. 

The pitch on SR bears little resemblance to the figures given on Crowdcube in the first raise and even less to those given in the pulled CC pitch only 3 months ago. Because SR have chosen not to compare like with like, its impossible to make any judgement but that in itself should ring some alarm bells. The pulled CC pitch had revenues for 2016 of £400k and the company said it was raising a total of over £3m in equity finance this year. 

The name of Crowdcube is not mentioned although there is reference to crowdfunding - but not to the pulled campaign. we would certainly want answers to these points.  

Syndicate Room raise their own funding

So here we are - Syndicate Room have raised £2.6m of their £2.3m target. On Syndicate Room.

What are we to make of this?

We have a VC investor putting in £1m and turning around the enhanced due diligence its investment criteria stipulates in just 24 hours - according to the site. Some achievement for both SR and Unicorn AIM VCT's.

For some reason SR are not allowed (again from the site) to publish financial data on their pitch. So questions about profitability go unanswered. You can be sure that SR is not in profit - none of the ECf platforms are.

So a valuation of £25m now must be based on what?

Maybe the new development that they are so keen on  - their launch into IPO's. But then the attempts to actually get involved in IPO's to date have been flops. So it cant be that. Must be a belief that they can deliver what so far has been undeliverable -  a large ROI.

I like their Salty the Movie pitch best. How long does it take to make a film? Still waiting for news on this one!

220 investors clearly believe they can.

Syndicate Room's new public offerings

We wrote this piece before the Healthcare Royalty Trust IPO was cancelled and the Scancell offer was heavily under subscribed. We decided not to publish it before both had 'completed' so as not to cause any distress. Looks like this has some way to go before it becomes a force to be reckoned with. Scancell's share price is as we read it below the 'offer' 'discount' price (as we predicted below). 

Syndicate Room is breaking new ground - changing the face of SME investment. Or that is what they claim.

The new IPO/public placement deal they have set out makes for exciting reading. You as a member of SR can partake in the sorts of deals that only well connected City types, VCs and Angles usually have access to. IPO's, new placings and offerings.

So what can we make of the first two deals on offer?

One is a slightly dull Health Trust IPO and the newest one, announced today with a royal fanfare, is part of a private offering. SR have called this second, incorrectly, the first Public Placement to be crowdfunded. It is not a public placement unfortunately. Oops.

Scannell Holdings PLC recently issued 20m new shares in a public placement on AIM. This was fully subscribed and none of it has gone via SR. They then offered existing shareholders a private offering - a kind of Rights Issue. As part of this offering, they have invited SR investors to tender for shares at the offer price of 17p. However this is not quite as good a deal as SR would have you believe.

1. SR investors will only get the scraps of what is left once all existing shareholders have decided to take up their allotment or not. So they may get nothing at all. Regarding EIS, SR say that if you buy £10k plus, then you can claim back EIS. However, again, that is not quite true. Scannell's brokers say that only if there are left over EIS funds, will SR be able to utilise them.

2. OK the offer price is the same as as institutional and existing shareholders, but it is hardly at a fantastic premium and given that the company is due to talk about its future as a US convention in two weeks time, an event which often brings the share price down, it may not be at a premium at all.

3. It strikes us that looking at this deal from the brokers side, they are happy to have SR investors clean up any morsels which may be left. SR investors are not standing side by side with the big boys or even existing shareholders. In fact they might get a better deal if they waited for the price to dip in April. The premium is so small as to make it almost irrelevant.

So at the moment the earth is not moving for us. But it is early days.

Idleman's lazy figures make for a Foresight Saga

Idleman, an on line cloths retailer, has a current pitch on Syndicate Room. We like Syndicate Room as they do try very hard to be open and up front about information.

Idleman raised a heap of cash in March 2015 on Crowdcube. Most of the raise was funded by the VC group Foresight and as usual on Crowdcube this was not made plain but it all came out in the end. Foresight are now backing Idleman again. Strangely this Crowdcube raise has now been removed from their list of successes, or at least we couldn't find it.

The real problem we have with Idleman is the constant use of lazy figures.

In the Crowdcube March 2015 pitch they stated -

 ''TheIdleMan is growing rapidly, with revenues increasing 70% month on month and totalling £235,585 for the last quarter.'' 

The 2015 revenue projection was £2.2m and based on the above stated growth rate this certainly looked achievable, given seasonal variations. The Crowdcube pitch duly successfully completed.

Now that the Idleman is back for more, we have the 2015 actual revenue figures - they took just over £600k in total. So a very long way from the £2.2m projected on Crowdcube. Either the statement above is simply wrong or something must have gone quite badly awry with the business model. You would have to say it is most certainly very misleading.

None of the above gets a mention in the new Syndicate Room pitch. According to the SR pitch sales for December 2015 were £200k, which makes the rest of the year a nightmare if you have access to the figures and the projections. Interestingly when asked about this, the CEO of Idleman said that they had new projections now, which appear on SR and that they had been using these for the last 9 months. Do the maths and this means they changed to the new projections just after they had completed on Crowdcube. QED you cannot believe a single thing you read on Crowdcube.

No one expects companies to be able to predict exactly what will occur 12 or 24 months out, these are simply guide lines. But if these guide lines are so far off track that they lead over the nearest cliff you have to question the ability of the company's management to create a profitable and sustainable entity.

We certainly would.

The need for a central reservoir where all of this information can be held independently of the platforms is an ever pressing issue.

Salty Film in production

y

Further to our last post on Simon West's film Salty.

Harry Stourton, who is in charge of the production, has confirmed that West's resignation from Salty Ltd is standard industry practice now the film is in production. See Q&A on the last post for full text.

West is going to be busy with this film, already delayed and the launch this month of his long running saga with Thunder Run, which dates back to 2012. Maybe some news on the website would help?

Still it is good for investors, who can sleep easy in the knowledge that their £2.3m investment is about to see some Lights, Camera, Action.

Simon West resigns for Salty Ltd - which raised 2.3m on Syndicate Room.

y

Back in the Spring of 2015, Simon West, the film director behind blockbusters like Tomb Raider and ConAir, raised £2.3m in equity crowdfunding on the ECf platform, Syndicate Room. This was to make a new film entitled Salty.

The vehicle used to raise this money and to make the film was called Salty Ltd -  a company where West was one of the directors and a shareholder. Their website has gone a little cold - latest news dated in the summer of 2015 - http://www.saltymovie.com/index.html No news on the web about the film that we could find and certainly no film.

Syndicate Room described the set up - The company Salty Film Ltd will coordinate the production of Salty with West at the helm as lead director/producer.

What is interesting is the fact that West resigned from Salty Ltd on the 18th January this year and incorporated a new company a few days later, called Simon West Films Ltd. He is this company's sole shareholder and sole director.

The film has a signed deal with Carnaby for distribution and West had brought his production team from ConAir and Tomb Raider.

We have asked for some clarification on what this means for the film, if anything but have, as yet, had no response. It does seem slightly odd that the central figure in all of this, the famous director, is no longer part of the project that 145 film enthusiasts put £2.3m into, less than a year ago.

This was originally billed as an adventure comedy, we hope it isnt going to turn into a disaster movie.

Equity Crowdfunding's praying for a Second Dawn

There can be little doubt that the UK equity crowdfunding sector needs a new approach.

With two of the three main platforms making very pointed public comments about the behaviour of the third and by some way largest platform, it has to be time for some action. Privately these two are saying far more about the conduct of the third platform, which as this blog has illustrated time and time again, is verging on the absurd.

You do have to give Crowdcube some credit. They were the trail blazers. But right from the get go, they have used methods and published pitches which have no place here. One of the main problems has been that despite their claims, the two founders, Luke Lang and Darren Westlake, have very little if any entrepreneurial experience or flair. They have been unable to sort the wheat from the chaff and to be honest seem unable or uninterested in making any real effort to do so. Preferring to issue a constant stream of PR, which has been lapped by the on line altfi media in a fashion that is not far short of sick making.

Just as an example, in the week that the FT,  The Times and the Sun newspapers carried stories related to Crowdcube misusing investment to encourage interest in pitches, what do Crowdcube do? They release more PR about their enormously 'successful' 5 year history and simply deny the allegations.

What is so surprising is that you might forgive Crowdcube for starting off this way before realising the mistakes and changing course. But far from it. Current pitches now live on the site show the same disregard for basic honesty and the Crowdcube out to lunch department (aka Due Diligence) has not yet ordered its pudding course.

As the CEO of Syndicate Room pointed out just last week, without a return for investors, equity crowdfunding will die as quickly as it sprang up. Of course this type of investment is high risk and of course there will be failures. That is not the point.

The point, which both Seedrs and Syndicate Room have openly accepted but which Crowdcube denies flatly, is in the nature of the failures. Read this blog for examples - there are plenty of them!

Maybe the problem here stems from the platforms themselves being seen by investors and VCs as a way of making money. We dont believe they are - certainly not in the short or medium term. But the investment has been flying in so some serious people must think otherwise. The drive for revenues, only obtained by completed pitches, has encouraged the very behaviour that must be eradicated.

One thing is for sure, the market is wide open for someone to get it right.

We dont want more regulation.as this will put up the costs of pitching and remove this important SME funding facility. The situation in the USA is a good example of this. It is now estimated that to raise $300k using the recently sanctioned equity crowdfunding channel, it will cost the company a minimum of $50k - up front. This is down to SEC regulations which require both platforms and businesses to carry out far more rigorous due diligence. The risk of losing $50k if the pitch is not successful is going to prevent many SMEs taking part.

What we do need is some responsible behaviour. We have to hope for a new dawn.  

Call to action from Syndicate Room's CEO

We post here an email presented by the CEO of Syndicate Room calling for the equity crowdfunding sector in the UK to get its act together and grow a pair - before it is too late. We along with Goncalo, have been saying this for years - it is time for some action.

Hi Rob, Equity crowdfunding has an enviable track record. More than 300 businesses have been funded to the tune of over £140 million in the UK alone. This puts innovation in the UK at an advantage over the rest of the world and there can be no doubt that this type of investment has been great news for entrepreneurs. However, the last few days have seen the UK’s equity crowdfunding ship hit choppy waters: The Financial Times: Rebus becomes largest crowdfunded failure (or Google “Rebus becomes largest crowdfunded failure’ and click on the top link, to get around paywall)  The Times: Crowdcube uses neat trick to fool investors The Sun: In with the wrong crowd (you will need to scroll down to the article) In response to these articles I want to repeat what I have been saying for years. For equity crowdfunding to be sustainable, it has to work for investors. As an industry, it has to be profitable for investors. This has been my belief from the beginning and I have built SyndicateRoom on these very principles. Access to the same deals as the professionals. That’s access to the same deals in which the professionals are investing. No longer will such deals be closed to online investors, available only to a privileged class of professional investors   Fairness. It shouldn’t matter if you’re investing £1,000 or £1 million, online investors must enjoy the same economic benefits as professional investors, institutions and any other ‘big boys’ in the round. On a £1-per-£1 basis, all investors, big and small, should make or lose the same amount of money, equally sharing both risk and reward   Transparency. It’s vital to provide as much information as possible to enable investors to make a well-informed investment decision, and to continue that transparency through the life course of a funded business I call on the wider industry to embrace similar best practice to ensure we all deliver on the huge promise of this exciting new asset class. As an investor, carry out your due diligence not only on the company in which you’re considering investing but also on the platform, and support those you believe are fighting the good fight. All the best Gonçalo

Gonçalo de Vasconcelos CEO and Co-Founder www.syndicateroom.com

Syndicate Room's Soshi Games mystery

Syndicate Room have made a big thing about their openness and honesty, especially when compared to other ECf platforms. It is certainly something ECf badly needs.

When Soshi Games went bust recently, SR's CEO, Goncalo de Vasconcelos, had the CEO perform in front of a camera to explain what had gone wrong. All in the spirit of openness you understand.

The video actually told us very little apart from the fact that the CEO didnt seem to understand some basic facts about how his market functioned. We thought at the time that if you wanted to cover something up, this would certainly be a good smoke screen.

As we pointed out elsewhere here, there is something rather odd about this company. All Syndicate Room pitches have Lead Investors. This one was no exception. The Early Advantage fund, run by Midven, were according to SR the Lead here.

Certainly if you check the ARs for the company, they are a substantial shareholder. That is until just before the business' collapse. In the final AR their holding has vanished - it's simply not there on the list of shareholders. So whilst all the other investors and creditors are sitting licking their wounds, it would appear that Midven got out in the nick of time. That's what you call leading from the front. Of course it could be an error with the AR.

So we asked both Midven and SR what had happened. Midven never replied but Goncalo has. SR do not see anything amiss with what has happened and it seems likely that the information is privileged. Door shuts.

Ours wasnt a difficult query - what has happened to the large shareholding that SR's the Lead investor had in this company?

Given that the holding disappeared just before the company went bust, owing investors and creditors well over £1m, it seems a fair ask. Of course it is possible to hide behind client confidentiality - it always is. However it says a lot for SR's openness claim that they would even consider trying that one.

We'll keep digging, it may all be perfectly innocent and above board. Only the facts will tell us that. At the moment, the facts show the Lead investor had left the building before it fell on everyone else.

Soshi Games update

Soshi Games raised £285k on Syndicate Room in April 2014.

The company went into liquidation this October.

We commented before here about the SR's video they had asked the CEO to produce, which tried to explain the business' failure. It was a refreshing approach for an ECf platform to show some concern for its investors.

As part of this crowdfunding, as with all SR pitches, Soshi had a Lead investor - the Early Advantage Partnership, part of Midven.

So when the last AR was filed, it was strange to find that the Early Advantage shareholding was no longer listed. It had been in the previous years' ARs.

Shortly after this last AR, the company folded. In the liquidators initial report Midven is listed as a creditor owed £10k. When you consider that the company had raised £1.4m in capital, £10k is not taking much of lead. The report also shows that £85k of share capital remained unpaid.

We have asked both Syndicate Room and Midven if they can caste some light on what happened to this shareholding. And also to comment on the fact that whilst the Lead investor seems to have off loaded their holding in the company, the likes of Creative England have lost all of their £150k investment, along with a large number of creditors. Not forgetting of course all the crowd investors.

We havent had any answers yet. As SR pride themselves on their open approach we assume one will be coming shortly.

Are Syndicate Room really as transparent as they claim?

Syndicate Room have made a strong case for being seen as the most honest and transparent ECF platform. And they should be applauded for that - if its true.

On their platform right now is a pitch by Cell Guidance Systems. Its already completed a £250k raise and is heading for its overfunding total of £500k.

There are various points about the way this pitch has been presented that cause concern. If you take into account the platform's claims about openness then they should really take another look at themselves.

Firstly CG Systems raised £290k on Crowdcube back in 2013. These projections showed that the company would not need to raise more than £100k in that round and would not need to raise again. They also showed a £10k loss for 2013, actual loss filed £240k and a 2014 profit of £100k; actual loss £73k. Projected profit for 2015 was £450k and the actual loss according to the Syndicate Room pitch is £60k.

So not exactly what you would call going to plan.

None of this is mentioned in the SR pitch. In fact the whole Crowdcube raise is not only ignored, it is rubbed out. In the financial section of the SR pitch it states very clearly that there has been NO private equity investment in this company. The Crowdcube money is listed as Angel Investment, with the private equity box left very obviously empty. This is wholly inaccurate and very misleading.

What's more the lead investor in this SR pitch is one Dr Steve Chambers. It transpires that he was one of the largest investors in CG Systems pitch on Crowdcube in 2013. SR fail to make any reference to this and it is left up to us and one of the Q&As to winkle it out. Its important because this 'lead investor' has given various statements about the company that are simply not true. He states that they have been sensible with their projections and fulfilled them - no hyperbole. Sorry but the information above makes this look very foolish. Of course it is material to a new investor's decision that the so called 'lead investor' has a massive vested interest already in this company.

It is also worth noting that the description of this lead investor's experience is in our opinion misleading. It claims he was a founder of Adgen, when in fact this was originally founded by the SAC and was later spun off. He was listed as the sales director.. See -  http://craigcorporate.com/cc/paul-yacoubian-othermenu-128/the-adgen-journey.html  and here http://www.neogen.com/Corporate/PR2003/2003-03-06.html. The description on the SR platform is not in line with the story told here. Whats more when Adgen was acquired by Neogen, a company it already had a major distribution deal with, its turnover was only $1.6m. These facts would be more useful to potential investors than the hyperbole used to describe Chambers' career. You might also think that if SR call this guy a lead investor then surely we all could be?

According to CH CG Systems has two directors, according to SR they have 3. Its not that important but we do love some degree of accuracy.

So it seems that Syndicate Room are just as apt at not telling investors what they dont want investors to know, as Crowdcube et al. How very sad.