Frazer Fearnhead, a founder of The House Crowd property crowdfunding platform, has been sharply criticised in a ‘car crash’ moment on BBC Two’s Dragons Den programme.
Fearnhead told the Dragons he had been in serious financial trouble for four years when the downturn destroyed his £2m property investment business. He says he plummetted from having an Aston Martin to finding it difficult to pay utility bills.
The programme - which encourages entrepreneurs to pitch for investment from five celebrity business leaders - heard Fearnhead say he wanted a hefty £1m investment from one or more Dragons in return for just five per cent of equity in his latest business.
His figures valued his business at £20m.
He claimed the £1m investment would allow The House Crowd - which enables individuals to buy into projects which acquire, renovate and re-sell properties - to move from raising an estimated £40m over the next 12 months to raising £125m.
When asked by one of the Dragons, Peter Jones, how he could justify a valuation of £20m for his company today, Fearnhead explained: “If we use the analogy of a wave...a surfer on that wave...we’re starting off...it’s very very hard to get going so we’re paddling very slowly...as that wave gathers momentum...we’re gathering pace with it...we grew 149 per cent in our first year, 211 per cent in our second.”
He went on to say that venture capitalists had said they could not value his firm - which had “exceptional growth” - in a traditional way. But he went on to admit that total income to the company over the past 12 months was £375,000 and it had not made a profit.
Jones went on to ask whether Fearnhead had secured that valuation from people who may have been under five years of age. Jones said no one could value The House Crowd at £20m “unless they were completely stupid.”
After a robust exchange of views with most of the celebrity business experts, during which Fearnhead said he had “an option” to get investment from venture capitalists, he was then castigated by the final Dragon, Sarah Willingham.
She said that his proposition and approach was “the most disrespectful pitch from an individual...I never expected to hear and be offended in this way.” She went on to say it had been a complete waste of time.
All five Dragons were Out - and so, in terms of winning his £1m investment, was Fearnhead.
He created The House Crowd in December 2011 with Suhail Nawaz. It started trading in March 2012 and claims that by last month it had successfully funded over 140 projects.
Here is one of the more painful moments.