🚀 Crowdfunding graveyard ⚰️

[David76 (Davide)]

Strange, I like the business and the coffee…

[MohammedMohammed (Mohammed)]

I phoned the canning factory and they didn’t know anything about it!

[Ivy]

@Sanjb4

ROSEMARY WATER LIMITED

Didn’t know this was on CC BUT I remember seeing Henry Cavill endores it on his IG lol

[Ivy]

Looking at my CC portfolio since 2018, so far only one folded and was my very first alternative-seed level investment - Sourced Market. My loss was nothing but equivalent to today’s 2 hours worth of wage, but I’m surprise they lasted well after the pandemic.

If anything I’ve learned in the past 4yrs from my portfolio, companies that don’t provide consistent and/or periodical investor communication is a risk indicator, or what kids call it these days a red flag . I’m growing a bit worried with Freetrade on this side.

Sourced Market shut up shops after entering liquidation

[Sanjb4 (sb12)]

Are you worried about Freetrade? I thought their expansion into Europe was faring well. Valuation is the only concern for companies, hence ASA/convertibles being used with discounts makes sense. Let’s see!

I’m worried about Chip personally… They still have not secured VC funding and previously have used ridiculous valuations. Now they disclose their turnover and it is very low.

Please excuse the brevity of my reply, as I am currently out of the office.

Kind regards,

Sanjay

[Big-g]

@Sanjb4

I thought their expansion into Europe was faring well.

I thought it was going at a glacial pace. I see what @Ivy means as most of what FT bring out are beta type products and feels like they are very small fry compared to other companies who bring out a fully functioning product when they add new functions.

You just have to see how underwhelming the last FT funding was after the first few hours it hardly moved at all. It is a very tough market now and many will fail or be bought out, that I feel FT are primed for. A quick, or not for some, huge profit for owners/early shareholders.

That said I like the underdog and hope/thing FT will be fine, just less confident than I was 18 months ago in the company. That said the app has improved at a better pace recently.

[MohammedMohammed (Mohammed)]

@Big-g

just less confident than I was 18 months ago in the company.

I feel the opposite,the last 6 months have been fantastic for new features.

[Big-g]

My last comment matches that but the features have mostly been potentially good, web is still beta type, auto invest is partly there, dividend info not easy to follow etc.

FT are showing good signs in the last 6 months but nothing excellent and competitors are releasing lots of new features. FT will have to raise the game a lot to keep pace with a great start of a fantastic app so very possible.

It’s a shame the best thing FT released seemed to be the tax thing they did recently but not sure how many would need this as I assume most have their stocks tax wrapped in an ISA or SIPP.

[Radu (Radu A)]

I saw that Move GB is now listed as “In Administration” on Crowdcube.
Raised at a 60M valuation in 2019.

[s_m]

Good catch on MoveGB! From the administration filings:

Sale of the Majority of the Company’s Business and Assets

In accordance with the terms described in our SIP16 disclosure note at Appendix H, a prepack sale of the business and majority of assets of the Company was completed, shortly after the Administrators’
appointment, on 13 October 2022. Further information with regards to the Transaction including full
details of the sale process is provided in Appendix H. The consideration for the Transaction totalled £29,643 and was paid in full on completion. At the date of writing, the consideration funds are being held in TLT’s client account whilst the Administration bank accounts are being opened. Once the accounts are available, funds will be remitted promptly.

Then:

During the marketing process, the sole director and c55% shareholder of the Company, Mr Rollins, expressed an interest in purchasing the business and assets of the Company, should there not be an alternative offer.

On 8 September 2022, MTGL made a formal offer for the business and assets of the Company. MTGL is a company under the sole directorship and shareholding of Mr Rollins, as such Mr Rollins is considered a Connected Person to the Transaction. We understand, for reference, there is also the intention for Mr Wildsmith (a c24% shareholder in the Company) to become a shareholder in MTGL.

The Purchaser was independently advised by Temple Bright LLP and the offer was composed of cash consideration of £29,643 for the Relevant Property as defined in the table on the following page.

So the founder raised >£1m from the crowd at a £60m valuation, then less than 3 years later, acquired the business for £29,643. A bargain. Also, notice how their crowdfunding campaign ostensibly raised £1.3m of their £1m target, but actually, we can see now, over £400k of those commitments disappeared and the final raise was only £900k. Further evidence that the interest of these platforms is in ensuring a campaign appears to reach its goal, even if it doesn’t, and will take the money from investors regardless. What are the odds that the commitments to help them reach the goal were just the founders (or their friends) fudging the numbers? Probably quite high.

(I don’t have a problem with pre-pack sales in principle as it helps protect jobs, and ensures continuity of service. However, in the case of crowdfunding, where thousands of unsophisticated investors have been encouraged to shovel their money in, it feels gross that the founders then wipe them all out and get to reap the benefits of that crowdfunded capital by taking full ownership of the business again. Especially when the crowd pays twice, because this company took money from the government and those debts have been wiped out too, so as taxpayers, the crowd loses again.)

[MohammedMohammed (Mohammed)]

In my opinion it is nothing short of corruption! No if’s or but’s and i might add it is becoming more and more frequent!.

[Bagshaw]

The simple solution would be to change the rules to prevent current directors from being able to be the ones purchasing

[Chrislewisuk (Chris)]

Great idea. So many pre-packs from crowdfund campaigns….Daylight robbery when directors can just carry on.

[Barrakuda]

Surely the FCA can be proactive and do something about this…

[Bagshaw]

They wont… Its not in the interest of the FCA and those who hold their leash.

and thats the simple solution… When you get to the nitty gritty it becomes less simple.

[bitflip]

I have been ill and away from this forum for a while (I think I replied to something by email though a few days ago).

I have always liked your honesty @Big-g and the way you say things as they are. I think at a fundamental level you are right here. I would like to add that IMO, and please bear in mind that my background is technical with a good smattering of international negotiation and dealing with execs and VCs, is that ideas and companies have a window of opportunity. In Dr Who style that window closes. Perhaps a different window opens up later … but it is a window to something different.

Ignoring the seemingly fraudulent behaviour of some the companies discussed in this thread I think that many companies and managers don’t seem to appreciate how little time they have on their hands to get things done.

Moving specifically to Freetrade: It was obvious to me that Freetrade had problems earlier this year (long before the CNL). I still loved (and love) the idea of Freetrade. And I did (do) so because for many years I have felt that we should all be able to participate in our countries institutions. This is what democracy is about. These should not be the preserve of the fabulously wealthy. IMO company share ownership is one of those core institutions in a democracy that everyone should have easy access to.

Then I have had to put on my “business hat”. I have to be honest. The problems I have seen in the past year (I started active participation in the forum merely a year ago) suggested to me a fairly weak senior management and lack of a clear vision about who the customer really is/was. This is critical. Think about the comments that you see on the forum (and I mean over the past few years not just past 12 months). You will quickly appreciate that there are many different types of people here. They stretch from bored fun seekers in the lockdown times and gamblers who could now trade and pretend they were “investing” (gambling is a dirty word, investing is such a wonderful cloak) to some very serious investors (and also budding investors). Freetrade strategy should have more clearly navigated this spectrum and more clearly defined an execution plan (pivoting as necessary) to fit with this strategy. The apparent slowness of “features” is one of the consequences of this mismatch. But here is the fallout of “slowness of features” … you miss the window of opportunity. So when you release the new feature it no longer excites and/or results in a “meh” from customers. And btw, some of the features that Freetrade has come out with … seem to me as though someone is trying to show that they are doing things: what is the point of prioritising things that are quick to do if they don’t really move the needle? I think this point helps to explain the incompleteness you refer to in your post: it’s about saying “we have done something”. BTW, I would argue the even if it was complete does it really capture the interest of your customer base? You know some features are hygiene factors or as my US friends say table stakes. You should have had them all along and very very early. Your marketing boasting that those features are now available doesn’t wash.

Which brings me to the feeling that Freetrade marketing has forgotten that has time goes by expectations change. Early in its evolution it was impressive when a post went out saying “Look all these new ETFs or shares”. It was a time to rejoice. I remember reading a post a few months ago asking the person who put out one of these sorts of posts (paraphrasing) “Dude we don’t care about these crappy 20 companies. There are loads more important things like a, b and c that we want”. It got me thinking … it made me think I think Freetrade really doesn’t understand customers. There are many manifestations of this.

For avoidance of doubt, I don’t think that the technical people in this company are weak. You would be wrong to think that features coming out slowly is their fault. As a technical person, myself, it is obvious to me - so many signs - that the issue has never been one of quality of tech people. Having said that, it also obvious to me that this is not a company with a technical culture. Just because you develop things doesn’t make you a “tech company”. And I don’t think you can retrospectively make a company a technical company. Hiring a CTO doesn’t make the company a technical company. Remember that thing about “window of opportunity”? Yeah, it applies to culture too.

It wasn’t surprising to me that Freetrade laid off a bunch of staff … it was obvious it was coming. You really had to not understand business to think otherwise. I am a bit surprised that more were not laid off. The lay-offs that they had, particularly the ones that had an immediate effect on customers, should also tell you about the companies de facto priorities. The priority was survival.

Management can get away with all sorts of things when the times are good. It is a bit like a bull market. Many a fool can make money: no special knowledge needed. Some may make more than you, but you will, nonetheless, in all likelihood make money. In a bear market you want to lose as little as possible. You want to survive to be able to join the next bull market. Problem is that, in building a business, there is a crucial difference: even if you survive you might no longer be flavour of the month. And the VCs will not want to pump more money into you. But my guess is that (for example the European strategy) Freetrade needs lot of money. Survival is not enough.

So in conclusion, the points being made about a a bunch of features at the moment are almost certainly not going to cut it with the VCs. There is much competition out there and there isn’t a super duper USP for this business other than cheap trading. Cheap trading means, volume is necessary. Volume at scale means money injection required. Money injection means a heightened level of confidence from the money givers.

I think that what Freetrade shows, as do its competitors, is that there is a market (i.e. a business opportunity) out there. In a way this was shown before by companies like the “Share Centre” (which was eventually acquired). Freetrade, in some senses is a modern app based take on that. However, personally, I don’t think that Freetrade in the form it is today is the one that will emerge as the winner. I would be very surprised if the companies board is not already weighing up the options. Whatever happens my belief is that Freetrade’s customers’ investments are secure.

[SlimShadey (Mr X)]

@Sanjb4

Freetrade’s customer investments will be secure (up to a limit) because they will be FSCS protected for funds. Otherwise, it depends what the underlying asset is for individual stocks.

No, users investments are safe because the company can’t sell shares as they are ring fenced.

[SlimShadey (Mr X)]

I’m not in doubt of anything.

The shares we own through FT are ring fenced.

Of course the value of them can go up and down…but they are still our shares no matter what happens to FT.

[mandreou (BOSE)]

would be nice if we have an official response from Freetrade on that

[SlimShadey (Mr X)]

@Chrislewisuk

Everyone thought that about FTX…and then found they did not actually have the underlying assets. Interestingly spotted this just now; Freetrade considers sale as buzzy ‘fintech’ valuations crumble

This is just nonsense comparing the two.

FT is regulated by the FCA.

FTX was an unregulated scam.