Crowdfunding eg snowball effect, pledgeme et al

[Stranger_Danger]

I know this is slightly off topic but I've been looking into this area over the last week, as part as some research I'm currently doing to try and answer the following question :-

"Given the time elapsed since the GFC, the fact many people seem to have no memories of it or even respect for risk, and the fact that global interest rates are still at emergency levels, have capital allocation decisions got so bad - chasing both yield and growth - that we're a year or so away from another "shock" - and that most assets are becoming dangerously priced?

My question about crowdfunding, having reviewed every offer I could find, is, who is funding this crap???

I didn't see a single one that was remotely investable, just garbage, dirty, stinky garbage. I've tried to keep an open mind, but things that would make no sense at a fraction of the valuation are being swamped with more money than they ask for, instantly.

So, who are the buyers? Anyone on here? If not, do you know anyone investing in these things? If so, what sort of age/background are we talking about? Do they expect a return? Do they care?

All genuine questions -answers appreciated.

[777]

There is a thread with comments

http://www.sharetrader.co.nz/showthread.php?9711-Snowball-Effect

[Harvey Specter]

Me

I've done a couple. Very small sums and small % of portfolio and have used to diversify that part of my portfolio which includes punakaiki and powerhouse.

Sure the valuations are bad but they are moon shots - the drone one being an example should they choose to relocate from raglan!

The alcohol ones are no worse than Moa and hoping for the 1 in a million chance that 42 below got.

So with bad valuations you have to believe in the opportunity, and I can't see how anyone could with sellshed or chariot.

I know they were a suckers bet but I have put less money into than my grandparents put into lotto. And probably less than most spend on coffee each year (which I don't drink).

Since I have answered your polite question ;) can you answer mine. Ignoring valuations (if you could have got in at 1c in the $1), which company/s so far has the best opportunity to get to profitable status, be bought out for its IP/Brand, or get liquidity (ie. NXT)?.

[Harvey Specter]

Follow up question, how do you compare them to SNK, MOA, WDL, Sealegs, Rakon, Martin Jetpack, etc

[Stranger_Danger]

Me

I've done a couple. Very small sums and small % of portfolio and have used to diversify that part of my portfolio which includes punakaiki and powerhouse.

Sure the valuations are bad but they are moon shots - the drone one being an example should they choose to relocate from raglan!

The alcohol ones are no worse than Moa and hoping for the 1 in a million chance that 42 below got.

So with bad valuations you have to believe in the opportunity, and I can't see how anyone could with sellshed or chariot.

I know they were a suckers bet but I have put less money into than my grandparents put into lotto. And probably less than most spend on coffee each year (which I don't drink).

Since I have answered your polite question ;) can you answer mine. Ignoring valuations (if you could have got in at 1c in the $1), which company/s so far has the best opportunity to get to profitable status, be bought out for its IP/Brand, or get liquidity (ie. NXT)?.

That is the thing, even if I ignore the valuations, they still seem like dogs. Most are bad ideas, and few are much more than ideas.

If I was allowed ignore valuations, I'd have bought XRO early, and I'd buy more today. I'd buy DMP. I'm buy more of everything in my portfolio. If I could ignore valuations, I wouldn't have posted this thread! Life would be great.

Being allowed to ignore valuations, there'd be a million things I'd buy before this crowdfunding stuff. Look at the alcohol ones for example. I currently hold AVG which is far from perfect, but not overvalued and bought at what I hope is near a cyclical low in the wine industry. If you put AVG against Yeastie Boys, Invivo, Rennaissance etc, to me, it is a no brainer.

I'm giving serious thought to trying to get one away as a joke and see if anyone notices.

[Stranger_Danger]

Follow up question, how do you compare them to SNK, MOA, WDL, Sealegs, Rakon, Martin Jetpack, etc

I put them in the same category as not really being "investments". The only exceptions on that list would be Rakon(real business, but a bad one) and Sealegs (interesting, haven't quite nailed it, should it even be listed?, could it maybe become something?).

The others are Joke, Joke, Absurd Joke (seriously WDT? people still send you money?? but it's been 20 years?), Joke, in that order.

[kizame]

The only offer that interested me was the company building the drones,but didn't invest of course.
But that was well taken up.

[Harvey Specter]

So if Invivo lists with a PE of 9 and div yeild of 5 like AVG, you'd be interested?

So crowdfunding isn't the only place to find joke investments then?

[Harvey Specter]

The only offer that interested me was the company building the drones,but didn't invest of course.
But that was well taken up.i think I read someone put in $500k!

[Stranger_Danger]

So if Invivo lists with a PE of 9 and div yeild of 5 like AVG, you'd be interested?

So crowdfunding isn't the only place to find joke investments then?

Yep, I'd definitely be having a good look.

Oh hell no, the reason I'm interested in crowdfunding is because of the "bigger picture" worries I have.

Talking to people, especially younger people, if they have any memory of the GFC at all, the lasting memory is it was the thing that happened just before lower interest rates. Most don't even go back that far and recognise that we HAVE "lower interest rates". What we have currently is the "new normal" and we should be angry that our rates are still higher than other countries. Money at 1% for everyone, forever!

Saw an article today about coastal property hitting new highs. That stuff was unsaleable during the GFC and I personally know of a couple people who went broke due to an overexposure. Anyone remember or care? - Nope.

I'm not picking on crowdfunding per se. I just see it as a symptom of a far bigger problem.

Even the bearish people seem to be bullish! They all seem convinced that that the conditions I'm starting to see will take us straight to hell, but they all predict it is a year or two away!

Hmmmm. I sense a year off coming on.

[Stranger_Danger]

Harvey,

Here is the problem I have with crowdfunding specifically.

You mention Punakaiki. The sole issue I'd have is I believe it is probably the wrong time to give someone money to invest in the tech sector. That aside, Lance would be a good person to give it to.

Now look at the investments made by Punakaiki. I don't know the valuations he was able to invest at, but several of them are the sort of businesses, run by the sort of people, that are always worthy of serious consideration.

Punakaiki now has a holding in these companies, who now have access to the not worthless experience and knowledge and networks of the Punakaiki team. All good.

Now look at the crowdfunding mob. By virtue of using the platform, they probably haven't been able to raise money from high net worth individuals, VC's etc.

The "return" they offer the uninitiated is free wine, cheap this, discount that etc. They get given some money. They acquire no knowledge to tap into, no networks, no experience. In fact, there is probably a negative value on the experience, knowledge and networks, as the funders won't have realistic expectations, could waste the time of management with stupid questions and will all scream "Won't the Government DO SOMETHING!" when they realise they're losing money, which might be the exact moment they're about to make money, if they'd just shut up. It isn't a distraction I'd want to deal with as a CEO.

What Punakaiki does is high risk, but I'd view it as done by grown ups, for grown ups. Their company selection suggests some knowledge and there is definitely some experience.

The crowdfunding? I honestly struggle to see it as anything other than fleecing the rubes. I may be a cynic. It's been suggested before.

[Harvey Specter]

I agree with your concerns. I see the campaigns falling into 3 categories

High valuation - the likes of Invivo and the two breweries are doing ok and probably have an ok business model but the valuations were high for where they are at.
Crap idea - these are the ones that couldn't get serious investors to consider them. This is most of the pldegeme campaigns. I do wonder how Sellshed got funded, and Chariot isn't much better.
To early - some are just too early. I like the idea of school interviews but the founders lack a bit of maturity. It could do well but needs an experienced investor to hold their hand. Others like Be intent are doing a friends and family round which should really have been completed first so they could get more traction before they crowdfunded.

Its the lack of a strong lead investor that concerns me. I note in the UK, some of the campaigns are being coinvested with VC's and I think Snowballs current one is raising on the same terms as a recent IceAngels round.

[Stranger_Danger]

I agree with your concerns. I see the campaigns falling into 3 categories

High valuation - the likes of Invivo and the two breweries are doing ok and probably have an ok business model but the valuations were high for where they are at.
Crap idea - these are the ones that couldn't get serious investors to consider them. This is most of the pldegeme campaigns. I do wonder how Sellshed got funded, and Chariot isn't much better.
To early - some are just too early. I like the idea of school interviews but the founders lack a bit of maturity. It could do well but needs an experienced investor to hold their hand. Others like Be intent are doing a friends and family round which should really have been completed first so they could get more traction before they crowdfunded.

Its the lack of a strong lead investor that concerns me. I note in the UK, some of the campaigns are being coinvested with VC's and I think Snowballs current one is raising on the same terms as a recent IceAngels round.

In a lot of ways, the school interviews one was the idea and the founder I liked the best. But the thing I didn't get is, he is, what, 20? Has the technical skills. Why not just live in mum's garage for a year or so? I've never had more fun than running a business that way, no money, no other people to report to or suck up to and no real penalty for mucking it up, other than wasting your time, which at that age, you'd have wasted anyway.

It just isn't the sort of business that should need a lot of money, and the last thing you'd want to give a young nerd is a whole lot of other peoples money.

Hell, girls might start to go for him! Between the money and the girls he'd think he had it made, and rather than an inferiority complex and no decent alternatives creating the motivation and time to code for 100 hours a week, well, where would we be then?

[Harvey Specter]

In a lot of ways, the school interviews one was the idea and the founder I liked the best. He does have a good advisor in Trask (founder and CEO of mindscape) and I note Rowsell (founder and CEO of Vend) invested (though obviously a small amount that doesn't signal anything other than moral support).

He could bootstrap it, but I agree he needs to market quickly. He has a strong competitor in NZ so he needs to capitalise quickly on his better product (if you believe the hype) before it is copied. A shame he didn't have enough friends and family to fund this step.

[bmrm]

I've tried to keep an open mind, but things that would make no sense at a fraction of the valuation are being swamped with more money than they ask for, instantly.

This isn't totally accurate, I'm heartened to see that the 'wisdom' of crowds is stopping the total dogs (see Pledgeme's past unfunded offers) get funded, though I was floored that Sellshed got over the line.


I saw the Pledgeme CEO speak recently, and her core argument was that their policy was not to cherry-pick their offers. This could be a valid philosophy (though one then questions what the point of having licenses is), but I got the impression it’s more a matter of them taking what they can get after VC gets the really good deals and Snowball takes (as Harvey has said) the serious companies whose values are a bit high. Given the choice, I can’t imagine anyone opting for Pledgeme over Snowball.


Snowball at least seems to have a few more investor/VC credentials on staff, and they seem to so far have been competent weeding out anything totally beyond the pale. Pledgme’s not so much democratising finance as re-learning the lessons of the South Sea bubble.

I don’t mean to beat up on either platform though, as I don’t think I see it as quite as big a problem as you. It’s not just ‘GFC all over again’ in that at-least people are now raising capital for risky ventures with the express proviso that there is risk, vs 2008 where they were raising capital for risky ventures implying it was all good.


To take the secular stagnation view, tons of savings vying for limited investment opportunities is going to generate some pretty eye-watering valuations. A lot of people probably see taking a punt on a moonshot preferable to what their bank account (or the thin div-paying pickings) will give them, atleast at the ‘play-money’ margins.


Glad to see a conversation on this topic finally getting going!

[Harvey Specter]

I saw the Pledgeme CEO speak recently, and her core argument was that their policy was not to cherry-pick their offers. This could be a valid philosophy (though one then questions what the point of having licenses is), but I got the impression it’s more a matter of them taking what they can get after VC gets the really good deals and Snowball takes (as Harvey has said) the serious companies whose values are a bit high. Given the choice, I can’t imagine anyone opting for Pledgeme over Snowball.Lance asked for investor feedback on the proposed Punakaiki crowdfunding and the overwhelming feedback was Snowball over Pledgeme for this reason.

I note Snowball has gone through the Icehouse (and therefore partly owned by them) so I assume that has an influence on there approach and should provide good dealflow going forward (such as the current breatheasy campaign which is being syndicated through Snowball from the Ice Angels)

[iceman]

This may be of interest to some https://www.youtube.com/watch?feature=player_embedded&v=4xFdDinTGOU

[Stranger_Danger]

Anyone buy into Pineapple Heads?

*COUisthisallabaddreamGH*

[Harvey Specter]

Anyone buy into Pineapple Heads?

*COUisthisallabaddreamGH*no

If it's avaliable in both supermarkets, why were they expecting all growth to be online.

[bmrm]

no

If it's avaliable in both supermarkets, why were they expecting all growth to be online.

If Chariot gets over the line too, I am founding my own start-up. Not sure what it will be yet, but apparently that is unimportant anyway.

[Harvey Specter]

If Chariot gets over the line too, I am founding my own start-up. Not sure what it will be yet, but apparently that is unimportant anyway.
Only asking for $30k so friends and family could easily push it over. Just look at the investor names for Be Intent and how a few match with the founder (they were big investments too based on the jump in funds raised).

I do hope parent interviews makes it.

[bmrm]

Chariot got over the line on Pledgeme. Good luck to the new shareholders, but I'd be surprised if a product ever surfaces.

[Harvey Specter]

Chariot got over the line on Pledgeme. Good luck to the new shareholders, but I'd be surprised if a product ever surfaces.Will be interesting to follow up on. Same could be said for sellshed. I think most of the others will survive, its just whether the valuations were warranted.


If Chariot gets over the line too, I am founding my own start-up. Not sure what it will be yet, but apparently that is unimportant anyway.So whats it going to be. I'm thinking of starting a new messaging service, like twitter, but better.

[bmrm]

Will be interesting to follow up on. Same could be said for sellshed. I think most of the others will survive, its just whether the valuations were warranted.

So whats it going to be. I'm thinking of starting a new messaging service, like twitter, but better.

'Tinder- but for dogs.'

Starting with a 900k valuation, I anticipate Pledgeme to bust down my door any second, hungry for their 10%.

[Harvey Specter]

'Tinder- but for dogs.'

Starting with a 900k valuation, I anticipate Pledgeme to bust down my door any second, hungry for their 10%.I met a guy once who was doing a 'Facebook, but for dogs'. He entered one of those pitch offs - He didn't win.

[bmrm]

Lol.

Pledgeme have a new campaign launching soon: http://us10.campaign-archive1.com/?u=67174907154f54347a871200b&id=587d58b503
Because the failed wind-power companies already littering the NZX obviously aren't enough of a cautionary tale.

[Harvey Specter]

Lol.

Pledgeme have a new campaign launching soon: http://us10.campaign-archive1.com/?u=67174907154f54347a871200b&id=587d58b503
Because the failed wind-power companies already littering the NZX obviously aren't enough of a cautionary tale.I had a look. Could be good for those that want to be completely off grid and want a bit of diversification from solar (the PR on it makes it sound like a great product), but the price per kw appears to be 2x the price PV.

They are about 5 years into trialing/developing it and they still haven't got it price competitive. Will be interesting to read the IM and hope it disproves this.

[bmrm]

I had a look. Could be good for those that want to be completely off grid and want a bit of diversification from solar (the PR on it makes it sound like a great product), but the price per kw appears to be 2x the price PV.

They are about 5 years into trialing/developing it and they still haven't got it price competitive. Will be interesting to read the IM and hope it disproves this.

I don't want to prejudge, but I think the lesson of renewables over the past decade or so has been that its essentially a manufacturing issue, with scale being the main driver of reliability and efficiency (and from their cost-effectiveness). Improvements on generator efficiency are pretty marginal, and I can't believe some company out of Dunedin has pushed the curve out far enough to make up for their no-doubt fairly high cost-base.