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EIS Crowd 26 February 2021

  • BY: Andrew Hore |
  • POSTED: 28/02/2021 |

Chapel Down sells Curious Drinks

Brewer Curious Drinks, which raised £1.74m via a crowdfunding with Seedrs in 2015, is being placed into administration and the business will be acquired by Risk Capital Partners, which was founded by Luke Johnson. The new owner does have expertise in the hospitality sector and the timing of the deal could be excellent for the buyer given the investment in the brewery. Curious Drinks will not be the only brewer with financial concerns.
There are 90% of sales to the on-trade and Covid-19 has closed most of these outlets for much of the past year. This background put the business into difficulties soon after getting the new Ashford brewery up and running in September 2019. This deal will have to be agreed by the HMRC and the secured creditor HSBC. There should be no redundancies if the deal goes ahead.
Majority owner Chapel Down Group decided it was better off concentrating on its wines business. Aquis Stock Exchange-quoted Chapel Down is offering small shareholders in Curious Drinks a share swap. There will be 1.57 Chapel Down shares issued for each Curious Drinks share.
In 2015, the crowdfunding placed a value of £17.7m on Curious Drinks. The funding was equivalent to 9.79% of Curious Drinks and there were 886 shareholders. The share swap should provide an investment valued at around 50% of the initial investment.
In 2019, Curious Drinks generated sales of £4.7m and it won brewery of the year. There was a total loan from Chapel Down of £7.77m at the end of 2019.

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There were a record number of fundraisings during 2020, helped by the Future Fund. Beauhurst says that there were 2,928 deals last year, while fintech, digital security and blockchain businesses raised record amounts of cash.
The Future Fund has announced 114 investments and, although it closed at the end of January, there are still more to be announced.
Total money raised increased from £11.7bn to £11.8bn, but without the Future Fund the figure was £9.8bn. In 2020, there was less cash put into companies making their first fundraising. 
Up rounds still accounted for more than 50% additional financing rounds, but the proportion of down rounds increased slightly and was approaching one-fifth of the total. 
Crowdcube was involved in 2013 deals raising £126m and Seedrs in 179 deals raising £104m. The merger between the two platforms is still being assessed by the competition authorities. There were a total of 424 crowdfunding deals, down from 435 in 2019.
Crowdcube was the top investor in seed-stage companies in 2020 with 117 seed investments. The Business Growth Fund was the top investor in established companies with 11 deals. Scottish Enterprise invested in 91 venture stage companies, making it the most prolific investor in that segment of the market.

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Research from Beauhurst shows that changes to the capital gains tax regime could hamper the growth of UK businesses. Investors would be less likely to put money into growing companies and founders would consider starting their businesses in other countries. That could lead to jobs being lost to the UK.
Beauhurst admits that some tax breaks are abused but it believes that there should be a carve-out for entrepreneurs, so that they retain the current benefits. It believes that this could be done by setting size limits. An authorisation scheme by the HMRC, similar to what it does with EIS approval, is suggested so that share sales are deemed to be eligible for carve-out tax relief. Given the number of small companies in the country this could require additional resources for the HMRC and it would not simplify the taxation, which is what the government has been seeking to do.

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