- The struggling startup spent over £1 million ($1.32 million) on its office per year.
- Staff stopped working after Crowdmix ran out of money to pay them.
- The company owed money to an artisanal wine company and the National Basketball Players Association of America.
A leaked document shows that Crowdmix, the London-based music startup that collapsed into administration in June, was spending £2 million ($2.65 million) per month before it even launched or had any revenue.
The company was trying to build a social app that would let people listen to music with friends and fellow music fans, and then compile charts of the most popular songs. But it grew to 160 employees and a monthly burn rate of £2 million per month without even launching the app to the public or generating any revenue.
Business Insider has obtained a copy of the full administrator’s report into the demise of Crowdmix. The document details the company’s financial state, confirming the rumoured £2 million monthly cost of running the company that was first reported by Business Insider in June.
Crowdmix’s London office was leased from Mind Candy, the British gaming company behind the hit game “Moshi Monsters.” The leaked document shows that Crowdmix paid £243,109 rent per quarter, as well as a quarterly service charge of £40,224. That comes to a staggering £1,133,332 per year, a giant sum for a pre-launch, pre-revenue startup. The report claims that Crowdmix still owes Mind Candy money, but the gaming company declined to comment.
Staff weren’t paid — so they stopped working
Crowdmix grew to 160 employees at its peak, with a maximum monthly wage bill of £1.1 million. That isn’t unusual for a company that size, but Crowdmix hadn’t properly launched its app, and it had no plans to monetise yet. Specialist big data employees and business relations staff were brought in, former employees say, often with high salaries.
The last time Crowdmix was able to pay its staff was on May 30. After that, many employees left the company or began to work from home. Administrators say that “development/marketing of the product had effectively ceased” at this point.
The administrator’s report shows that Crowdmix owed former employees £1.39 million in unpaid wages, but staff say they still haven’t received the money. It also owes £266,000 in arrears of pay and holiday pay.
Here’s a selection of unpaid debts from the administrator’s report:
- Artisanal wine seller Grape Juice Wines was owed £1,078.
- Crowdmix owes taxi company Addison Lee over £8,400.
- The US National Basketball Player Association was owed £38,500.
- The trendy Shoreditch coffee supplier Ozone Coffee Roasters was owed £1,067.
- Youth media network SBTV Global was owed £6,420.
Patsy Palmer and an investment fund in the Cayman Islands tried to save the company
It became clear that Crowdmix urgently needed to bring in outside investment if it could continue trading. The leaked report says that a high net worth individual was going to invest £800,000, but eventually decided not to. An investment fund based in the Cayman Islands also considered putting a “significant sum” into the business but that deal fell through as well.
The Evening Standard reports that former “EastEnders” actress Patsy Palmer even tried to save Crowdmix by attempting to convince her celebrity friends to invest in the company, although that attempt failed as well.
Bankers such as Anthony Gutman from Goldman Sachs, Andy Brough from Schroders, and Nigel Ridge from Blackrock had all invested their money into Crowdmix. The Evening Standard reports that over 100 people from the finance world had invested in the company, but it still needed more money.
Crowdmix was forced to go into administration
The report details how Crowdmix failed to raise the £4-5 million it needed to pay off debts and continue trading. Eventually, administrators were called in. The company had shrunk from 160 employees to 57 paid staff members and 35 contractors. The invite-only version of its app had brought in 2,000 users, but Crowdmix had run out of money to keep it going.
The decision was made to sell Crowdmix at auction. Details of the sale were sent to 3,385 recipients, the report says. Around 15 companies expressed interest in buying Crowdmix, including “high profile names in the industry.”
The ideal scenario for Crowdmix was selling the company before the auction deadline so that the remaining staff members could move over with the sale and continue working. But the deadline came and went, and no credible bids had come in. Crowdmix was forced to lay off staff members, and eventually only three bids came in for the company.
Billionaire property tycoon Nick Candy beat the competition to buy Crowdmix
The administrator’s report details the bids received for Crowdmix after it ran out of money and went up for auction. It confirms that it was eventually purchased by 52 Grosvenor Street Limited, a company controlled by Crowdmix’s lead investor, billionaire property developer Nick Candy.
Candy agreed to pay £6.75 million for the company. However, the report shows that Candy was owed £7,794,600 by Crowdmix in return for investments he made in the company. The final purchase amount was actually just £675,000 after Candy forgave his own debts. Representatives for Candy and Candy, a firm owned by Nick Candy and his brother Christian, did not respond to a request for comment.
The deal to sell Crowdmix gives Candy control over the company’s name, database, and its office furniture. He’s no longer just an investor in the company: He owns it. The deal proposal published by 52 Grosvenor Street Limited also indicates that he wishes to re-employ some staff who lost their jobs when the company went into administration.
There were two other bids for Crowdmix that were eventually rejected. One bid came from Darden Enterprises Inc which was interested in the app itself. Crowdmix’s senior management apparently supported this offer in a letter. Darden Enterprises could not be reached for comment.
Another bid came from Compere Capital Limited. The administrator’s report says it was only interested in Buddy Bounce, a social network that Crowdmix had acquired. Compere Capital offered to pay £745,000 for Buddy Bounce, but declined to purchase the rest of the business. That offer was supported by Buddy Bounce management, but it was rejected in favour of Candy’s offer. Compere Capital declined to comment.
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