Crowdcube #FundedClub member, Droplet, announced on Friday it is officially “being withdrawn” and will be shutting down its services for good. Founded in 2011, Droplet was the creator of a fee-free mobile payment app, which allowed users to pay without having to queue, and collect rewards on their phone each time they spend.
Droplet raised capital on Crowdcube in May 0f 2o15 when Droplet raised £549,020 from 298 investors. Droplet went back to Crowdcube registered users earlier this year but the offer quickly disappeared from the pages of the crowdfunding platform.
We’re sad to announce that Droplet is being withdrawn at midnight tonight. See: https://t.co/nagHsbPOSW. Thanks for joining us for the ride.
— Droplet HQ (@DropletPay) July 15, 2016
Crowdcube’s co-founder Luke Lang also stated around the time of the second funding round;
“Tech businesses, like Droplet, are always popular with our crowd of 245,000 members who have invested £45.5m in the sector, so it’s great to see the business return for a second round of funding on Crowdcube.”
In a letter, which is seen on the Droplet website, Aquarone revealed that the company (and its app) just simply wasn’t meant to be:
“We started Droplet in 2011 with the hope of making payment simpler, friendlier and mobile-first – and more recently to allow merchants to offer better loyalty rewards to their customers. But sometimes things don’t work out. We always knew it would take significant investment to give Droplet the scale it would need to succeed. In spite of being well supported by our investors through thick and thin and having tens of thousands of customers and hundreds of paying merchants, we never got to the scale to make Droplet viable as a profit-making business.”
Aquarone noted that after midnight (GMT), the app will no longer be available. He and his team will then remit automatically any remaining balances that are in user’s accounts. He then stated:
“On behalf of myself and the founding team at Droplet: we’d like to thank our families, friends, investors, merchants, customers and most of all – our team – for your help and support over the past few years.”
The failure comes at a dicey time for the crowdfunding industry. The Financial Conduct Authority is in the midst of its regulatory review. One of the areas of concern for the UK regulators is the fact that some early stage companies fail soon after raising funding online. According to the FCA;
We are potentially concerned, however, that this approach may not be working as well as it might. It appears that some businesses that successfully raise capital fail shortly afterwards.
While such failures are likely for the young businesses raising capital on the platforms, we are concerned about the potential for investors to be exposed to risks they are not well placed to assess in advance.
While early stage investing is intrinsically risky, the FCA is weighing platform diligence requirements and transparency demands.
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