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Entropychaser
@entropychaser
dr talisman | secret samwer & l catterton partner | sherman act violator | bunga bunga connoisseur | retired shape rotator | probably rotating mids
welcome to the layer cake son
Joined February 2013
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By all means build online. But please for the love of Christ, do something interesting with your new hard earned gains.
Write and produce a short film, buy a 35mm camera and randomly head out to Asia, pick up an old Land Rover and bum around some African countries whilst working out how you can give back.
It will do more for your mind, creativity and ambition than sitting in the Royal Palm in Dubai with your personalised Rimowa looking at your tacky ceramic Rolex.
Not to mention the stories that will inspire your kids in years to come.
You get just one shot at this, why not be unique?
@SebREvans I may start writing more of these on a free Substack. (Too much slop, bating and frauds on Twitter). Will chew the fat on it over the new year.
Entropychaser Hindenburg research: AllPlants - a British failure.
Episode 1: Fraud, failure and falafels.
Welcome to the first in a new series where we take down VC backed companies in the UK and broader EU markets. Buckle up fuckleheads as we go full Hindenburg and gun down D-Grade startups which are paraded around London’s social scene like they’re Lazarus reemerging on the fourth day. I’ve been collecting data, insights and insider intel on these companies since 2017. I have decent exposure to this scene, IM as well as the PE world. Why is this important? Because these posts should be able to articulate customer acquisition, valuations and exit multiples in one post. I am not some rancid piss-stained Guardian journalist living in a flat share brownnosing the ‘next generation’ of British talent. This aims to be a brutal reflection on what the startup scene is really like with a side order of numbers. Ready? Good, let’s begin.
Company name: https://t.co/n5CKXzjnT5 - have a look and familiarise yourself prior to reading the below.
Inception: 2016
Revenue: £18MM
Raised: £55MM
Dilution: Huge, two founders probably own a little over 10% each. ESOP pool = tiny thanks to endless dilution. Limited options for exercising stock grants.
Business model: Retail and DTC, allegedly strong emphasis on subscription.
T.Exit multiple: Whether the founding team realise it or not, this company will probably sell for 4.5x EBITDA (but the company has never made a profit) or 1.5x revenue. Overall I find both scenarios highly unlikely. PE at this level is far too smart to fall for this and strategic’s will wait until the company implodes. Their best case would have been to prove they can handle retail distribution and then sell for an outsized multiple to a strategic - the Diageo playbook, a golden one if executed well. If.
Concerns: AllPlants has not been cashflow positive or profitable, endless financing rounds have diluted everyone to kingdom come. They were losing £1.5MM a month and over £10MM a year. Holy fuck that’s bad. E.C reporting guesses their customer base churns 30% YOY minimum. Little to no room for expansion revenue and no new products in the pipeline. Retention is a bitch as you’re fighting in a highly competitive market with well funded players. Retail is really tough. Plus their ads are dreadful. I can’t even explain how bad. No idea who their ICP is or how to write decent copy. I’d argue the whole model is flawed from the get go, but hey what do I know.
Pre money valuation: £54MM (2021 PRE - not even post).
Secondary share valuations: £5MM-10MM (Note, the secondary market is pricing them at upto a 90% reduction in value). I believe this to be an accurate assessment.
Company aims: As of late 2023, grow to £70MM and be profitable by 2026. Otherwise ladies and gentlemen, known as a fucking pipe dream. At that level they should be doing call it £14MM EBITDA and get acquired for roughly £150MM. I see this as highly unlikely. That’s £26MM in growth per year for the next two years. (£52MM expansion net net). They would have to double every year to hit their 26 targets. Not even SaaS VC firms like Craft are aiming for this internally. And that’s la crème de la crème in SaaS investing who are shooting for 70%-80% YOY growth. Good luck achieving 200% YOY growth in retail. I’m not going to comment further on the absurdity of this.
E.C. recommendation: Dump any equity you may own, avoid and run. If you’re in LMM PE or a distressed shop, I’d say buy this company for parts, but even then I don’t think they anything unique about them other than brand equity. This is probably worth <£1MM and can written off against tax.
E.C. Summary: This is what happens when arrogant hubris driven founders have access to endless amounts of cash from young VCs who can’t spell the term “liquidity event”. Instead of posting on here and LinkedIn, VC’s should log go off and learn the different between IRR vs. DVPI/TVI. Howard Marks’ papers are an exceptional place to start. I’d argue all VC’s should go work in PE first. L Catterton would be my preferred choice for educating these weapons grade morons who claim to understand consumer/retail/DTC.
The founders have spend nearly eight years of their lives on a company that will probably get aquihired (after yet further dilution) and probably sell for £20MM. This really is a best case scenario.
They’ll walk with call it £2MM, which becomes £1.5MM best case thanks to capital gains. Presuming an exit in 2026, that’s £150k a year pro-rata. I’m going to leave that there without judgement.
VC’s don’t care about losses as they can simply tax loss harvest and frankly good for them. The few decent senior VCs left in London (50yrs old +) know how to play this game and thank God they still exist.
My guess is AllPlants will continue crowdsourcing from pensioners who are so retarded as to never realise that this company is, was and always will be D.O.A. Hence why companies who crowdfund raise £5MM on a £50MM pre money. There’s literally no way economically for investors to make a penny. It’s rigged against them from the get go. VC’s will continue to pump cash in because deployment of funds boosts IRR allowing to them to raise more. The incentives for all parties are misaligned. This is always a red flag. Everybody should have the same outcome in mind.
Even if the market potential was there (hint, I really don’t think it is) they would still need a sterling team capable of understanding DR marketing/first order profitability, LTV/CAC and PE exit opps. The holy trinity. Oxbridge retards are simply bred to exit the womb and then fail spectacularity. This current crop seem to go around playing 2-7 offsuits whilst acting like they’re holding a Royal Flush.
Even with their current post money valuation hovering around the £70MM mark on private mkt investor’s balance sheets, (inside intel tells me it hasn’t been marked down), they would have to sell for that - at the bare minimum just to get any form of ROI for the founders and employees thanks to the liquidation preferences. Meaning their revenue would still have to almost 4x in two years. None of this takes into consideration the VC’s portfolio maturity window, which is another issue altogether. Good luck trying to sell the equity at the end of the maturity cycle to another fund.
I’d go as far as to argue that this was never a venture backerble business. They raised too much too early without true PMF. Went around pumping the valuation with endless fundraising rounds (what could possibly go wrong?) and moonlighting as a ‘DTC darling’ within London’s startup community in an attempt to impress precisely the wrong people. All whilst customers churned from a shitty product with dogshite unit economics and no true moat.
This post makes me both sad and angry. Sad because I hate seeing companies fail and this one has been destined for failure since 2019. Angry because there are so many talented founders and teams who can’t raise funds by dint of coming from precisely the wrong backgrounds or having a ‘funny’ accent. Note, I do not fall into either camp. This is not some vicious journalistic attack based on my own inherent biases. The numbers exist to demonstrate the absurdity of the whole picture.
As my aforementioned posts detail, the startup scene in London is one of fraud, moronic founders, no PMF or understanding of exit opps. I would bet you dollars to donuts that these founders still think that they can sell for a SaaS multiple, rather than valuing themselves according to their market’s multiples or better still, a full blown DCF. Oh but don’t DCFs require some form of growth and bottom line assumptions?
But there you have it folks, an honest assessment of one of the hundreds of companies that raise money in London every year. I’m sure the FT won’t publish this (despite me emailing them) as a guest publication because it calls out the cold hard facts. Something Brits seem to be allergic to.
Always remember that denial is not just a river in Egypt.
[End of broadcast]
![entropychaser's tweet photo. Entropychaser Hindenburg research: AllPlants - a British failure.
Episode 1: Fraud, failure and falafels.
Welcome to the first in a new series where we take down VC backed companies in the UK and broader EU markets. Buckle up fuckleheads as we go full Hindenburg and gun down D-Grade startups which are paraded around London’s social scene like they’re Lazarus reemerging on the fourth day. I’ve been collecting data, insights and insider intel on these companies since 2017. I have decent exposure to this scene, IM as well as the PE world. Why is this important? Because these posts should be able to articulate customer acquisition, valuations and exit multiples in one post. I am not some rancid piss-stained Guardian journalist living in a flat share brownnosing the ‘next generation’ of British talent. This aims to be a brutal reflection on what the startup scene is really like with a side order of numbers. Ready? Good, let’s begin.
Company name: https://t.co/n5CKXzjnT5 - have a look and familiarise yourself prior to reading the below.
Inception: 2016
Revenue: £18MM
Raised: £55MM
Dilution: Huge, two founders probably own a little over 10% each. ESOP pool = tiny thanks to endless dilution. Limited options for exercising stock grants.
Business model: Retail and DTC, allegedly strong emphasis on subscription.
T.Exit multiple: Whether the founding team realise it or not, this company will probably sell for 4.5x EBITDA (but the company has never made a profit) or 1.5x revenue. Overall I find both scenarios highly unlikely. PE at this level is far too smart to fall for this and strategic’s will wait until the company implodes. Their best case would have been to prove they can handle retail distribution and then sell for an outsized multiple to a strategic - the Diageo playbook, a golden one if executed well. If.
Concerns: AllPlants has not been cashflow positive or profitable, endless financing rounds have diluted everyone to kingdom come. They were losing £1.5MM a month and over £10MM a year. Holy fuck that’s bad. E.C reporting guesses their customer base churns 30% YOY minimum. Little to no room for expansion revenue and no new products in the pipeline. Retention is a bitch as you’re fighting in a highly competitive market with well funded players. Retail is really tough. Plus their ads are dreadful. I can’t even explain how bad. No idea who their ICP is or how to write decent copy. I’d argue the whole model is flawed from the get go, but hey what do I know.
Pre money valuation: £54MM (2021 PRE - not even post).
Secondary share valuations: £5MM-10MM (Note, the secondary market is pricing them at upto a 90% reduction in value). I believe this to be an accurate assessment.
Company aims: As of late 2023, grow to £70MM and be profitable by 2026. Otherwise ladies and gentlemen, known as a fucking pipe dream. At that level they should be doing call it £14MM EBITDA and get acquired for roughly £150MM. I see this as highly unlikely. That’s £26MM in growth per year for the next two years. (£52MM expansion net net). They would have to double every year to hit their 26 targets. Not even SaaS VC firms like Craft are aiming for this internally. And that’s la crème de la crème in SaaS investing who are shooting for 70%-80% YOY growth. Good luck achieving 200% YOY growth in retail. I’m not going to comment further on the absurdity of this.
E.C. recommendation: Dump any equity you may own, avoid and run. If you’re in LMM PE or a distressed shop, I’d say buy this company for parts, but even then I don’t think they anything unique about them other than brand equity. This is probably worth <£1MM and can written off against tax.
E.C. Summary: This is what happens when arrogant hubris driven founders have access to endless amounts of cash from young VCs who can’t spell the term “liquidity event”. Instead of posting on here and LinkedIn, VC’s should log go off and learn the different between IRR vs. DVPI/TVI. Howard Marks’ papers are an exceptional place to start. I’d argue all VC’s should go work in PE first. L Catterton would be my preferred choice for educating these weapons grade morons who claim to understand consumer/retail/DTC.
The founders have spend nearly eight years of their lives on a company that will probably get aquihired (after yet further dilution) and probably sell for £20MM. This really is a best case scenario.
They’ll walk with call it £2MM, which becomes £1.5MM best case thanks to capital gains. Presuming an exit in 2026, that’s £150k a year pro-rata. I’m going to leave that there without judgement.
VC’s don’t care about losses as they can simply tax loss harvest and frankly good for them. The few decent senior VCs left in London (50yrs old +) know how to play this game and thank God they still exist.
My guess is AllPlants will continue crowdsourcing from pensioners who are so retarded as to never realise that this company is, was and always will be D.O.A. Hence why companies who crowdfund raise £5MM on a £50MM pre money. There’s literally no way economically for investors to make a penny. It’s rigged against them from the get go. VC’s will continue to pump cash in because deployment of funds boosts IRR allowing to them to raise more. The incentives for all parties are misaligned. This is always a red flag. Everybody should have the same outcome in mind.
Even if the market potential was there (hint, I really don’t think it is) they would still need a sterling team capable of understanding DR marketing/first order profitability, LTV/CAC and PE exit opps. The holy trinity. Oxbridge retards are simply bred to exit the womb and then fail spectacularity. This current crop seem to go around playing 2-7 offsuits whilst acting like they’re holding a Royal Flush.
Even with their current post money valuation hovering around the £70MM mark on private mkt investor’s balance sheets, (inside intel tells me it hasn’t been marked down), they would have to sell for that - at the bare minimum just to get any form of ROI for the founders and employees thanks to the liquidation preferences. Meaning their revenue would still have to almost 4x in two years. None of this takes into consideration the VC’s portfolio maturity window, which is another issue altogether. Good luck trying to sell the equity at the end of the maturity cycle to another fund.
I’d go as far as to argue that this was never a venture backerble business. They raised too much too early without true PMF. Went around pumping the valuation with endless fundraising rounds (what could possibly go wrong?) and moonlighting as a ‘DTC darling’ within London’s startup community in an attempt to impress precisely the wrong people. All whilst customers churned from a shitty product with dogshite unit economics and no true moat.
This post makes me both sad and angry. Sad because I hate seeing companies fail and this one has been destined for failure since 2019. Angry because there are so many talented founders and teams who can’t raise funds by dint of coming from precisely the wrong backgrounds or having a ‘funny’ accent. Note, I do not fall into either camp. This is not some vicious journalistic attack based on my own inherent biases. The numbers exist to demonstrate the absurdity of the whole picture.
As my aforementioned posts detail, the startup scene in London is one of fraud, moronic founders, no PMF or understanding of exit opps. I would bet you dollars to donuts that these founders still think that they can sell for a SaaS multiple, rather than valuing themselves according to their market’s multiples or better still, a full blown DCF. Oh but don’t DCFs require some form of growth and bottom line assumptions?
But there you have it folks, an honest assessment of one of the hundreds of companies that raise money in London every year. I’m sure the FT won’t publish this (despite me emailing them) as a guest publication because it calls out the cold hard facts. Something Brits seem to be allergic to.
Always remember that denial is not just a river in Egypt.
[End of broadcast]](https://pbs.twimg.com/media/GGOzwdiXQAAnn1H.png)
@kangminlee Having a wife to beat
@zebulgar Immediate EU commission fine of $2BN. Do not pass go. Straight to The Hague.
More LinkedIn slop. Asymmetric home runs come from leaning into your demons. "Kill my demons and you'll kill my angels too" - Tennessee Williams. You need degeneracy to hit true escape velocity. Think of all the artists, creatives, actors, and great founders that had fucked personal lives and additions.
@RuizPropaganda Most of the killers I've met came from wealthy backgrounds. If you can motivate yourself from a position of privilege, then you have some serious leverage.
@harryjsisson Your phag ass is going to be deported to Guantanamo most expeditiously.
Donald Trump has been elected the 1st three term consecutive President! Here are three things we can learn about B2B SaaS 🧵
@DaveShapi More boring (& accurate) prediction would be that most things will remain the same. *hint. Because they always do. Innovation is overhyped.
@Pavel_Asparagus PG wrote that pacing around his Jacobean Manor House in Somerset. Says it all
Mkt consensus: Getting songs onto Spotify playlists is considered gospel. Spotify has higher quality/intent users w/higher LTV - which is how they justify smaller royalties relative to Apple, AMZN, Tidal etc.
Big labels have insiders to help place songs/artists in playlists. (Same as radio, cinema and other mediums). The aim being: Increase reach > find new true fans for retention > increase daily plays for enterprise value > find more playlists to build a flywheel effect.
Selected’s site has a portal where you can submit your music (as an artist) for them to review and potentially sign. No doubt an A&R play which they can lever as they’re vertically integrated by owning their distribution (their playlists). Same as AMZN having in house brands. They also have a list of artists they’ve signed, so I’m guessing this is their *real bread and butter.
If that is the case, then they’re incredibly sophisticated - as back catalogues will regularly change hands for +15x topline. (Shot Tower Capital produce annual market reports on this).
FWIW: Playlists are still curated by humans as they have die hard fans and streaming platforms naturally don’t won’t users to churn. Apple went as far as using a boutique agency in London to handle some of theirs. They take this playlists seriously and I doubt they’ll sell positions willy nilly to any new kid on the block.
@theallinpod I'd happily pay $1k a year for this, but without Jason. He's a weapon's grade retard.
@joerichlaw I said this would happen, (as an ex private school governor) yet everyone on this app flamed me. Dunning Kruger in full effect.
@Keir_Starmer Told you all 94 days ago about this. Move faster anon.
@Keir_Starmer My Labour Party insider has just confirmed CGT will rise to 40% in October. As has my private client lawyer. These will be retrospective taxes.
Posting this here so I can come back in a few months and say I told you so. The UK is about to get cooked.
True except for Balderton Cap. Also a case of fiduciary duties. If they IPO in LND, the comps will be lower than a US listing - so they run the risk of a lawsuit from investors for the delta. Sawan at Shell has said the same. There’s a left tail risk the FTSE becomes even more illiquid as companies delist post CGT being raised to 45%.
@chaseaustiinn Weird ass incel comment
@CardinalMason Jesus the cope here is unreal. You've clearly never met any real time entrepreneur or dealt with a proper family office or MM PE firm. Stick to Miami kid.
@_melinaed_ So you've read my memoir
Terrible debating skills. Reductio ad hominem should be avoided at all costs. Go to Oxbridge and learn how to debate properly. Top 10 skill in life, if you can learn.
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