Fake news is all the rage in Equity Crowdfunding

Just when you thought it was safe to go  - BAMM - more crap hits you in the face

We wrote about this here  and now we have the finale to prove the point we made before.

Satago was one of this high flying jam tomorrow internet nonsenses we are seeing so frequently. It burnt through its money raised on Seedrs and promptly arranged a pre pack deal to sell itself out of administration. The cash realised was enough to pay off some of the creditors debts but investors lost it all. 

This was reported by none other Beauhurst as a successful investment!

They wrote - 

What happened to the startups of yesteryear?

This week has been rewarding for investors in high-growth companies: Xafinity Consulting raised £190m in its IPO on the LSE; Ramsdens raised £15.6m with an IPO on AIM; and Satago, Customade, Root6, and SecretSales were all acquired.

What they say is not untrue - it was acquired but investors might baulk at the idea that got any reward. 

This is what Jeff Lynn CEO of Seedrs said about Satago in June 2016 just after they had secured further institutional funding - it makes for great reading when you consider Seedrs claim that any of their businesses that go on to raise more money at a higher value have produced real ROI for theie investors. This proves that to be total BS Jeff -

Satago was one of the first businesses to raise funds on Seedrs, shortly after we launched in 2012 so we’re thrilled to see their on-going success. The £4.6 million institutional investment they have just raised is wonderful validation for a great company, and shareholders who invested in Satago a few years ago on Seedrs are enjoying a huge increase in share value as a consequence.”

As administrations go this one does look legit - creditors did benefit or at least they got some money back. But isnt it time that with the rise of ECF we started to consider ECF investors as creditors? As ever the only people really making anything are the insolvency practitioners.

Note - we had previously stated here that Satago raised £1m on Seedrs. This was incorrect and has been altered. Thanks to Steve Renwick for pointing this out. 

Who can you trust?

Crowdcube claim to have raised over £27m in Q1 of 2017. Beauhurst have just produced what they call a report that analyses all ECF funding in non listed Companies for Q1 2017. In it Crowdcube had only £23m. £4m is large gap even for Crowdcube.

We know the Beauhurst report is wrong as it doesnt include several established platforms and does include the bizzare one hit wonder, AllBright. This sexist platform (girls only) has achieved just one raise in the period   - an astonishing £50k. Whatever happened to bra burning?

Growthdeck, not included at all, must have done better than this?

You have to wonder with Beauhurst if they ever consider taking money for inclusions?

How Crowdcube come to £27m is a mystery. No doubt some clever number play at hand. Crowdcube are nothing it not clever with their numbers. 

You definitely cannot trust the man in the picture either. 

Latest Beauhurst Report is debunked as fake news

We had an email today from Beauhurst -  you know Beuahurst the experts on Fintech News. It stated that Satago had been sold for an undisclosed sum to Oxygen.

We reported in this on this blog - Satago was funded via Seedrs. How often do we get the chance to report some good news about equity crowdfunding?

It was a Kellyannism.

Satago went into administration with Seedrs telling shareholders that they would receive nout back. Oxygen bought the company out for next to nout in a pre pack deal. 

Then all of sudden its a roaring bloody success - here is what they said........

What happened to the startups of yesteryear?

This week has been rewarding for investors in high-growth companies: Xafinity Consulting raised £190m in its IPO on the LSE; Ramsdens raised £15.6m with an IPO on AIM; and Satago, Customade, Root6, and SecretSales were all acquired.

So its all complete BS. Someone needs a grilling. You simply cant have fake news outlets trsuted with financially sensitive information in the public domain. Beauhurst are a total sham. 

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. 

Beauhurst Crowdfundig reports skates around real issues

The new Beauhurst report here on the decline in investment into the UK start up scene in H1 2016, is worth a read for anyone interested in the sector.

By their own admission, the key reason they give for this decline is guesswork. The uncertainty around Brexit, they say, is the prime driver.

They make absolutely no mention of the lack of ROI for Crowdfunding investors, despite highlighting the fact that this financing channel is the dominant one. Surely some consideration has to be given to investor fatigue. Back in 2011, 12 and 13, this was all good fun and early adopters poured in. However the total lack of credible business plans produced in those three years by the largest player, Crowdcube, has led to nothing but utter and total disappointment. Its one thing to tell people that investing in start ups is unlikely to give you a return but if the next sentence mentions Facebook and Dragon's Den, the original warning is lost.

Just look at the facts. Up until the result of the Brexit vote, everyone expected a win for Remain. So on the 23 June, we all got a massive shock. But H1 ends in June so the figures only include 7 days out a possible 180 in the half, when the result could have had a real influence. Looking through the report the deal numbers are holding up well for the first 4 months of H1. Isnt it far more likely that the series of failures and scandals that have marked HI have dented investor confidence? Certainly investors we talk to think so. H2 will show if Brexit is having an effect or not.

Why we ask is this not even considered?

Brexit hits investment into equity crowdfunding

As predicted here, the Brexit vote has slowed the money coming into equity crowdfunding pitches, research from Beauhurst shows. 

This is something we noticed almost immediately the result was announced. Investors we talk to and companies that had asked for our help with their campaigns, started to pause and many have now put it all on hold.

The total uncertainty as to what Brexit means and what the end result may look like is a killer for inward investment in what is a very high risk sector at the best of times. That, coupled with the lack of any real ROI after almost 6 years and an increasingly large wave of collapses and scandals, is taking its toll on the armchair investors brigade.

Crowdcube's now stalled cash grab is proof. 

They raised £6m in 24 hours when they opened (much of it pre pledged) but have only managed another £750k in the two weeks since - despite valiant efforts by Luke Lang's PRing Dept to pick up the beat. Even Luke cannot beat investor sentiment and their brash claims now look slightly foolish. Beauhurst found that the total number of investments offered across the various platforms had fallen by 17% in the first half of 2016 compared to the same period in 2015. 

With no end in sight to the void in information that our government has now hoisted upon us, things are likely to get much worse before they get better. 

Beauhurst recommend Droplet as fintech success

We found this published by Beauhurst here - supposedly a fountain of knowledge in the fintech sector. They selected only 5 to write about. They should have known that Droplet had failed to raise funding before they wrote this in March 2016. That failure indicated Droplet's demise and ultimate collapse just 3 months later.

If you are still watching the space as they recommend, the telly has been turned off.

Just goes to show you cant trust anyone or anything - except your own judgement!

Back in June 2013, Mashable published a list of the UK's top 25 tech startups, notably highlighting that the UK’s innovation ecosystem was not solely confined to the then burgeoning London startup scene. But which ones made the cut?

Droplet 

What does it do? 

Droplet is a mobile payment and loyalty app which allows indie businesses to build better customer relationships. The app allows users to pay without queuing, and to collect rewards as they do. But businesses are winners too, as Droplet operates on a fee-free transaction basis.

Where was it then?

Droplet was a pretty savvy bet by Munford, considering the startup had then completed just one unannounced equity deal for a paltry £50k. That said, it was at a relatively sizeable £1.1m post-money valuation. 

What’s changed?

The fin-tech startup has gone on to secure a further 4 rounds of equity finance since June 2013. And this doesn’t include the company’s second Crowdcube campaign, which is currently live and set at £450k. 

Who’s funding?

Ascension Ventures, Finance Birmingham, Crowdcube

What does the future look like? 

Stephen Aquarone, Droplet founder and CEO, says: 

“We’re at the stage where we’re very nearly ready to raise the sort of money that powers the likes of Deliveroo. Once the growth is predictable, larger financiers come in to speed it up, which is how challenger banks like ours get so big, so fast”. 

Well, you heard him – watch this space…

New Beauhurst report on UK funding is out

It makes for interesting reading and is free to download here http://about.beauhurst.com/report-the-deal-2015-16

Some of the ECf highlights - showing the numbers of deals done in 2015 from the different funding sources.

Seed Round

Investor Type    No of Deals

ECF                    228

PE                       116

PIV                      114

Incubator              80

Government         45

Venture Round

Investor Type    No of Deals

PE                       150

PIV                        90

ECF                      89

Government          68

Angel Network       64

Growth Round

Investor Type    No of Deals

PE                       175

Government          30

PIV                         30

Corporate              23

ECF                       17

New research is deeply flawed

New research published by Beauhurst shows failure rates for businesses funded via equity crowdfunding are much higher than normal start up and SME failure rates.

The analysis is deeply flawed but not for that reason.

We have been saying forever that most of the businesses funded via ECF have been ones that would not survive and so it has proved. This is the fault of the platforms who have dressed up these old ewes as minted lamb to display in their shop windows. Investors have been taken for a ride and its leaving a bad taste in the mouth.

One conclusion that Beauhurst comes to in their analysis, is that the failure rate for 2012 and 2013 is high but drops off to a level much more in line with the norm in 2014 and 2015. See below

Their conclusion is that this is all part of the ECF learning curve ie platforms are promoting better businesses. This is very clearly nonsense from our research. ECf only started in 2011 and really only got going in any volumes after 2013. So what we are seeing here is a simple result of the time lag. It takes months and normally a year or more for a failed company to be struck off. So the drop off is only a result of the failures not appearing out of the system yet. Sure ECf is on a learning curve and it has to be hoped that it learns a lot before its too late. But please do not let's make things up to hide the truth.