Crowdcube Addresses Failure of Rebus. Explains 90% of Applying Firms are Denied from Raising Capital on Their Site

Rebus LogoIn response to Rebus being called the “biggest UK crowdfunding failure to date,” Crowdcube addressed the company’s failure on Friday.

Back in February, Rebus, a company that raised over£816,790 on Crowdcube in 2015, announced that it was filing for bankruptcy.  According to data provided by Crowdcube, the company sold a 6.63% stake in the firm to 109 investors and the largest single investor committed £135,000 to the now failed firm.

Crowdcube shared in a blog post:

“As clarification, Rebus had two meetings with ReSolve in May 2014, a corporate finance advisory firm unrelated to Crowdcube, to discuss potential funding options prior to Rebus’ raise on Crowdcube, we were not aware of these meetings and it was not disclosed on the company’s pitch. However, it is normal for businesses to explore different funding options in their early stages, so Crowdcube would not have been surprised or alarmed by the ReSolve meetings. As many entrepreneurs and investors will appreciate, raising finance is difficult and not every conversation with an advisor or investor will result in an investment. Disclosing details of previous fundraising attempts is not standard practice even in traditional fundraising.”

Disaster Thud KaboomCrowdcube then explained that investments through its platform are not risk-free and that its team always encourages entrepreneurs to reveal as much information about their company to investors as possible.

“The verified financial information given in Rebus’s case was fairly extensive, showing the company’s profit and loss, cash flow and balance sheet from May 2013, all of which was clearly displayed on the company’s pitch for all potential investors to view.”

 

“It has been suggested in the media that the Crowdcube pitch was used to cover up cash flow issues at Rebus. This is simply not the case. Verified financial information about Rebus was provided on the pitch, including cash flow and financial statements, as well as an additional warning that the made clear that the company’s business model meant that it had variable cash flow. Our aim is to provide potential investors with a fair an accurate representation of the business and its financial position and we are satisfied that this was done properly in this case. Crowdcube has a team of legal and compliance professionals dedicated to this and ensuring that all pitches on the platform are fair, clear and not misleading.

The funding portal went on to add that it is planning to conduct additional due diligence on Rebus, its legal structure, financials and directors.

“It is worth noting that as a result of our stringent due diligence processes, around 90% of the businesses that apply to Crowdcube don’t pass our vetting and therefore don’t make it onto Crowdcube. We take due diligence very seriously with around a third of Crowdcube’s team of 85 employees working in compliance and due diligence, including legal personnel and financial analysts with backgrounds in global financial services corporations like Goldman Sachs, KPMG and Citigroup.”

Transparency is a very important part of the equity crowdfunding process. Many, if not most, early stage companies will fail and each investor is notified their capital is at risk prior to making an investment on an equity crowdfunding platform. While failure or bankruptcy is disappointing to all stakeholders, this risk is intrinsic to the capital formation process for early stage firms. It is encouraging that Crowdcube is taking additional steps in explaining the Rebus demise as an important lesson to all investors.

 

 


Have a crowdfunding offering you'd like to share? Submit an offering for consideration using our Submit a Tip form and we may share it on our site!

Sponsored Links by DQ Promote

Send this to a friend