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EIS Crowd 23 January 2019

  • BY: Andrew Hore |
  • POSTED: 28/01/2019 |

Significant growth in start-up revenues anticipated
More than 50% of growth companies are expecting to increase their revenues by more than 50% this year according to the EY Fast Growth Tracker 2018 report. This will require investment and two-thirds of the firms believe they will need to raise money in the next 12 months.
Most of the companies seeking additional finance are expecting to raise less than £5m. Three-quarters of firms are considering venture capital investors with 20% considering crowdfunding.
There were 380 replies to the survey and 35% of these were technology companies. Business and professional services accounted for 30% of firms. Three-quarters of technology firms expect to raise cash in the next 12 months. Only 3% believe that valuations are worsening, with 76% expecting valuations to improve.
London dominated the survey geographically with one-third of respondents, with Scotland the next highest area with 16% of the companies. The most optimistic entrepreneurs were in London and the South East. In the North East only 17% expected to grow revenues by more than 50%.
Of the start-ups surveyed, 59% were less than five years old, while 21% were more than ten years old. A small number of the companies had revenues of more than £50m in the previous year, but 56% had revenues of less than £1m.
Brexit is the biggest concern for one-quarter of the companies, although 58% say it is a concern but there are bigger worries for their businesses.
Crowdcube competition
Crowdcube has launched a competition that offers a share in a £500,000 investment fund, plus back office support with accountancy and legal requirements, to three fintech businesses that are raising money via the crowdfunding platform. The focus of the judging for the Thrive for Fintech award will be financial inclusion for the two million adults that do not have a bank account and other people that find it difficult to access financial services. 
Crowdcube told the Daily Telegraph that pledged investments in the fourth quarter of 2018 were nearly double the same period last year at £84.6m. Firms using Crowdcube to raise cash include fintech firm Monzo. This success is continuing into this year.
Small Robot Company raised £12m from 1,213 investors via Crowdcube. Small Robot Company develops robots and uses artificial intelligence to plant, feed and weed crops and thereby improve crop yields and reduce the use of chemicals. The first robot is being trialled at 20 UK farms.
A group of hospitality industry veterans have already raised more than the £400,000 they were seeking via Crowdcube to develop the Three Joes sourdough pizza chain. So far, £421,000 has been raised from 253 investors. There are already sites open in Fareham and Winchester in Hampshire. The Winchester site is generating a contribution to the funding of the capital investment in it. The focus is sites in market towns or shopping centres outside of London. The founders were involved in building up other restaurant chains, including Pod and Byron.
Lingoo, which connects people who want to learn a language with hosts and teachers in the specific country, is trying to raise £200,000 to expand into other countries and languages – currently English, French, German, Spanish, Portuguese and Italian are available. Longer-term, Lingoo wants to expand into Asian markets.
AxiaFunder is a UK-based crowdfunding platform that enables investors to finance litigation funding claims. It can take 12-24 months for a case to complete and there is no guarantee that it will be successful. If it is a success, then returns can be high. AxiaFunder has raised £12,750 from 13 investors to finance the trustees of a pension scheme in a claim of professional negligence against a firm of solicitors that was advising them.
Bond power
Orbital Marine Power (Orkney) has raised £7m from a 30 month, 12% debenture issue through Abundance Investment. The cash will finance the first Orbital O2 2MW tidal turbine, which floats and can be installed using small boats. There has been 16 years of research and development going into the turbine technology and a recent version has been operated for a year at the European Marine Energy Centre in Orkney.
Abundance currently has a 10% debenture on offer for CoGen, which is an advanced waste gasification facilities developer. So far, £2.13m of the £7m asked for has been raised, which covers 71% of the minimum threshold. The bond matures in four years and six months. CoGen has already developed four facilities and another site was developed and sold to Aviva. The cash will be used to develop more sites. The most recent facility uses Japanese technology to gasify general waste to produce heat and power and recycle metals.
Verolution wanted to raise £400,000 via Seedrs to finance additional stores in the electric and urban cycling chain. The offer has already raised £511,000, which is equivalent to 8.3% of the company, which previously raised cash via crowdfunding in 2016 and has three stores. There are two Verolution Electric stores, which are a smaller size, planned for this year. The company is valued at nearly £6.2m.
Primary Ascent
Gas producer Ascent Resources has raised £349,000 at 0.3p a share, which was a 20% discount to the market price, via A further 4.7 million shares were issued to pay suppliers for services. The broker handling the deal is Stanford Capital Partners.
Ascent has successfully raised cash via the platform in the past. Most recently in October 2017, when it raised £1.5m at 1.66p a share and in February of the same year when it raised £3m at 1.85p a share. The first fund raising via was in May 2015, when £550,000 was raised at 0.2p a share and in 2016 £500,000 was raised at 0.6p a share
Ascent, which had €400,000 in the bank plus a deposit for a bank guarantee of €200,000, is refocusing its expansion outside of Slovenia because of regulatory hold ups in the development of its gas project in that country. Revenues from the export of gas from Slovenia totalled €2.1m in 2018 but gaining permission to process the gas and sell it to the national grid has proved difficult.

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