A cautionary tale – crowd-funding and tech startups.
Failed PurpleBricks competitor Emoov raised $2.6 million from 1,064 investors at a valuation of over $132 million via Crowdcube, a crowdfunding platform. A mere four months later, the online real estate agency went into administration to help repay its debts.
What happened next: The failed startup was subsequently bought by Mashroom for a mere $396,000, according to PropertyWeek. Investors were duped and misled about the company’s finances.
Cautionary tale: Many crowdfunding sites do not require startups to offer a transparent view of their balance sheets. The truth is that even sophisticated VC’s don’t perform significant due diligence as tech investments are inherently risky and speculative.