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Thumbs UP. We present Crowdcube's 4Q yearly review. For shareholders, the news, when you can find it amongst the PR, is not good. But as we have always said if you fund crap what do you expect.

A disgruntled (understated) shareholder sent us this. Where, they asked are the ROIs, the successful businesses from the Wonders Darren so readily promotes? It's a good Q but not one you will find the asnwer to here. We know why. Surely time that the FCA really stepped in and sorted this out. A 3 legged, blinfolded, race with Seedrs is not the answer. Oh and can someone explain to Darren that selective Ebitda positive numbers are not the same as profits. GOD!!


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Last year was extremely difficult for everyone as we faced unprecedented challenges in our personal and professional lives. At Crowdcube, we vowed to do everything we could to navigate and emerge from the pandemic stronger. We did this by firstly, looking after our team and secondly focusing on how we support businesses through this challenging period. 

Although devastating, the pandemic also presented many opportunities for us and I realised that the work we do at Crowdcube is even more important during difficult times than when the economy is booming. 

Against the odds, last year we saw growth across all of our key metrics; revenue, funded businesses, amount successfully invested and a number of investments. We grew revenue to a record £8.7m in 2020 and this, combined with tight management of our cost base, meant we were profitable (EBITDA positive) in the second half of the year. We closed the year with £5.5m cash in the bank, which exceeded our expectations at the beginning of the crisis. 

Another bright spot amid these difficult times was my team’s response, which is cause for great personal pride; their determination and passion for the company, and the work we do, was an inspiration to me and the rest of the board. 

Looking forward, despite the new year bringing a new lockdown in the UK and around the world, I remain bullish about our future. The resilience, focus and ultimately growth that we’ve delivered over the past 12 months has given me cause for optimism. While things are far from normal, we continue to cement our position as a vital part of the investment landscape in the UK and abroad; a trend that will only accelerate after our planned merger with Seedrs later in the year.

 

Financial performance

We ended the year with £8.7m revenue, which increased by 6% compared to 2019. Whilst this is well below the target we set at the beginning of 2020, it nevertheless marks a significant achievement given the events of the year. 

The first half of the year was unquestionably impacted by business leaders, rightly diverting their attention toward safeguarding their businesses against the Covid-19 outbreak. However, when entrepreneurs returned to Crowdcube for funding, their communities and ours quickly responded and invested in record numbers. 

The second half of the year was particularly strong, with revenue for H2 growing from £4.5m in 2019 to £5.7m in 2020, an increase of 27%. We posted a record £3m of revenue in Q4; an increase of 30% versus the same period in 2019. 

As mentioned, this performance in the face of adversity, combined with extensive cost savings meant we were profitable in Q3 and Q4, the first time in the company’s history. However, I would be disingenuous not to highlight the challenges we face maintaining profitability in 2021. 

During last year, our cost base was well below the level we’d expect when we’re fully operational. Savings from the furlough scheme, reduced rent, reduced marketing spend, minimal recruitment and virtually zero travel and expenses have played a significant role in managing business risk and hitting profitability during that period. Moreover, as our confidence has grown in recent months I am delighted to begin investing in these key areas of the business again to help further accelerate growth and make up for any lost ground in 2020.

 

Investment trends

As we previously reported, investment activity slowed in March as entrepreneurs rightly turned their attention towards overcoming the crisis. However, customer confidence gradually returned, and the series of measures and new products we launched for our customers undoubtedly helped turn the tide. The resultant increase in businesses raising with us corresponded to a rise in investment and investments that continued throughout the rest of the year. 

By the end of the year, we’d funded 238 campaigns, an increase of 13% compared to 2019. Investments also increased, up 26% to 240,000 and the amount of money invested into campaigns topped £205m, which is excellent. The number of businesses which raised over £1m increased by 10% in 2020, and over 100,000 people made one or more investments into campaigns raising with Crowdcube, the first time we’ve passed that milestone.

 

Team

As I repeatedly said during the pandemic, the response and professionalism from my team continue to be a source of great satisfaction. They have all made sacrifices and worked tirelessly to ensure Crowdcube emerged from this crisis in the best position possible. 

The pandemic and resulting restrictions have forced everyone to consider their mental and physical health like never before. We’ve been acutely aware of the challenges our team has faced and to ensure they got the support they needed we offered every employee a pot of money to spend on their mental and physical wellbeing. This was enthusiastically used by the team and has undoubtedly had a positive impact on everyone's wellbeing and company performance in 2020. 

I was delighted to be able to reward everyone's hard work and our company-wide achievements by repaying the 20% of their salary that we’d asked them to sacrifice in May and June as part of our cost-saving measures. We also restarted our annual salary reviews that were paused throughout 2020. Needless-to-say, these gestures were warmly welcomed by the team and morale and satisfaction remains good.

 

Product and customer experience

Our ability to respond to market needs rapidly and deliver new products, features and an improved customer experience, sometimes with a reduced team, is also a source of great pleasure. 

A new convertible product, plus enhancements to private listings and pre-emption rounds proved to be very popular with businesses and demonstrated we understood the needs of our customers during these times of great uncertainty. Our new Direct Community Offer (DCO) product was also launched in the autumn, and several improvements to our internal systems, processes and infrastructure have increased our resilience, efficiency and productivity, which has led to a better customer experience. 

We have continued to enhance our investors’ experience throughout the year with the portfolio section of the website and investment process benefiting from a major overhaul. The introduction of multi-currency in the autumn is also a major milestone on our journey to help fund even more ambitious European businesses.

 

International

During 2020, €25m was invested into campaigns based outside the UK. We funded 24 businesses, including Mintos, which became our most popular campaign when it raised €6.5m from over 6,000 people. However, the pandemic did hinder our growth in 2020 with investment and investments both declining 17% and 10% respectively. We are determined to return to growth in 2021. 

As mentioned previously, the European Parliament approved new cross-border crowdfunding rules that were agreed in July. The rules, which harmonise regulations across Europe, will be introduced later this year and present a major opportunity for us to help even more European businesses to raise investment with Crowdcube. 

Challenges

Clearly, the ongoing pandemic and economic fallout remain a serious threat to our business. However, we have demonstrated our resilience and the vital role we can play during periods of economic uncertainty. It goes without saying that we’ll continue to navigate the challenges in the best interests of all our stakeholders. 

While many of the businesses we funded this year are thriving during these uncertain times, we are also mindful that many have struggled. The hospitality and leisure industries have been particularly badly affected, and things remain far from normal for everyone with the severity and length of the economic fallout still unknown. 

26 businesses have sadly closed their doors or are in administration, and while this figure is down 30% compared to 2019, the long-term impact of the pandemic is still unclear. We continue to work closely with all our funded businesses and remain committed to helping them navigate the crisis. 

Brexit has been somewhat overshadowed by the coronavirus pandemic. As I’ve said previously, we do not anticipate an adverse impact on our operations from the UK leaving the EU. That said, there remains a good deal of uncertainty around how the UK will trade with the EU, particularly around financial services. This is a situation we will continue to monitor closely and respond accordingly. 

On a more upbeat note, we expect the Competition and Markets Authority (CMA) to approve our merger with Seedrs in the coming months. Whilst this will certainly bring its challenges, we’re eager to begin the process of bringing together the best of both businesses. We will keep you posted on progress.

 

Diversity & inclusion

We have a proud history of breaking down barriers and making investment more accessible for businesses and investors. However, last year was a wake-up call that there’s plenty more we can do to help improve the diversity of founders who get equity funding. 

I am personally spearheading a team dedicated to improving diversity and inclusion at Crowdcube. We have already kicked off a number of initiatives and projects that seek to understand the situation better and have a positive impact in this area. We’ve already signed up to the Fintech For All charter, which aims to improve diversity and inclusivity in the fintech industry. I look forward to updating you on more of our progress next quarter. 

Finally, thank you once again for your continued support. I believe my team and our decisiveness when faced with tough decisions, has been instrumental in our remarkable commercial performance in 2020 and will be the difference again during the year ahead.

 

Best wishes,

 

        Darren Westlake | CEO & Co-founder

Thursday February 4, 2021

Hardman and Co’s Brian Moretta in conversation with ECF Buzz Founder Rob Murray Brown on start up investing, equity crowdfunding and what’s a good read.