Pronto, the food delivery service that raised £800,000 on Seedrs four months ago, has closed its doors. Founder James Poulter is quite candid with investors about the difficulties the business has experienced. Now that options have been exhausted, the company will wind down in a way that minimises investors' losses and enables them to gain EIS and SEIS reliefs.
Exactly a year ago. Pronto was flavour of the month with investors. Forbes reported that
Founder James Roy Poulter and the team at Pronto have created an on-demand food delivery service in London that is so quick they have had to reassure users ordering food can really be this simple.
Sounds great, doesn't it? The average customer ordered five times a month, and the company had no marketing spend. The company raised £1 million in funding - not from the crowd at that stage, but from London VCs including Playfair Capital. TechCrunch had a detailed appraisal of the company.
The Seedrs crowdfunding round in May 2016 gave the founders an extra £838,000 to build another two distribution centres and expand Pronto's customer base to all of central London. So, what happened after that?
CrowdfundInsider has published an extract from founder James Roy Poulter's letter to investors, and a long quote from Jeff Lynn, CEO of Seedrs.
“Pronto raised money on Seedrs earlier this year in a round led by prominent institutional investors Seedcamp and Playfair Capital. As planned, the Pronto team invested the funds into a hyper-growth strategy, but unfortunately despite their hard work they have had to make the difficult decision to cease trading. It is always unfortunate when a company fails, but failure is a common part of early-stage ventures due to their nature.”
It would appear that Pronto was relying on additional funding appearing by the start of September, but the funds did not materialise.
An important question for equity investors is'what do you intend to do with the money?' Founders know they have to have an answer for that. But three more detailed questions that need to follow that one are:
- 'how long will this round of money keep you going?'
- 'where do you expect the business to be after this money has been used?'
- 'will you have built some tangible assets?'
- 'awhat are the chances you are going to come backand ask for more money?'
It looks like the business had a strategy to 'get big or die trying' and it has died trying.
The most interesting thing we've read is from a commenter on the Fantasy Equity Crowdfunding blog.
I'm sorry but this is unforgivable! His exact words were 'we are trying to build 3 businesses in 1. A logistics, food and technology business'. First rule in start up is don't over scale too quickly! We see this far too many times and cutting your coat according to your size is key!
A good point. Pronto could be a useful case study for equity crowdfunding.
We'll let you know more news as we get it.