I first dipped my tentative unpensioned toe in the murky shark-infested waters of crowdfunding a couple of years ago.
I wrote then that I was under no illusions about the inherent risks in this relatively new investment mechanism, technology enabling investors to support early-stage businesses and potentially earn greater returns than elsewhere, in the new low-interest and low-return environment.
I subsequently wrote about the need for the crowdfunding platforms to make sure sufficient due diligence was being undertaken on businesses and entrepreneurs, before being listed as investment opportunities. And how they should be more transparent about the performance of each business after the crowd had invested.
Rob Murray Brown posts far more incisively and frequently than I do about the failures of the crowdfunding platforms – particularly CrowdCube, one of the largest – on his hard-hitting blog The Truth About Equity Crowdfunding.
One of my own investments through CrowdCube two years ago was in a bond – so a debt instrument, rather than equity – to help finance the growth of Daisy Green cafes across London. For my support, I would receive 11% interest pa (paid twice a year), with a repayment date of 2019. Other benefits included free coffee for a while, and invitations to launch parties at new cafes.
In a surprise email last week, the founder said that the business had made such good progress that they had refinanced the bondholder debt with ‘a leading UK bank.‘ This significant new debt facility ‘will allow us to continue to expand Daisy Green throughout London.’
My latest interest payment and original bond investment are to be repaid in full immediately.
Rob Murray Brown takes a somewhat jaundiced view that bondholders should somehow feel disappointed:.
I don’t. I say hoorah for Daisy Green. I have received 11% on my money for 2 years. I’m going to get my investment back in full. I’ve enjoyed some outstanding coffee. I was a lender, and not an equity investor.
There were early repayment terms – without penalty – in the documentation. Perhaps they could have been more transparent, but I applaud Daisy Green for their progress and if they can refinance at less than 11%, and accelerate growth, they would be crazy not to.
The founder indicates that there may be the opportunity for bondholders to ‘get involved‘ in the next stage of Daisy Green’s story. We shall see what form that might take. But in the meantime, let’s celebrate this success for a hard-working entrepreneur and her team, and for crowdfunding.