March 2018 Crowdfund Frequently Asked Questions

This document aims to cover all current questions about the process and plans. If you don’t find an answer you need, please contact us at crowdfund@stemandglory.uk

INVESTING and FINANCES

Question: What is the founders plan for long term?
Answer: In short, the founders plan is to accumulate value on the Stem + Glory brand as fast as possible, and exit in 5 years starting the conversations at 3 years. The founders want to set up something amazing and then hand it over to someone who can make it huge.

Question: What kind of investment is this - why would I invest and when can I expect a return on my investment?
Answer: It’s important to understand that this is a long term investment. Returns will be received once we make an 'exit' in the future. Different types of exits include a trade sale, IPO or share buyback. Our plans are to exit at 5 years with a target of 10 restaurants, with the intention to build it up to a level at 3 years when we can start to have those conversations.

Question: How will the shares be formalised?
Answer: We are aiming to overfund and are aiming to reach 600k. If this is the case we will release more than 15% of the value of the business. We may fund beyond £600k releasing further equity. Crowdcube represents you in a nominee structure, which means they are responsible for your data and issuing the paperwork and you own the shares and future benefits. You can also be part of future raises for Stem and Glory.

Question: Does crowdcube cost?
Answer: No, not for you as the investor.

Question: What happens if Crowdcube disappear?
Answer: Crowdcube Capital Ltd is authorised and regulated by the Financial Conduct Authority (No. 650205). As such, investors are treated as customers of Crowdcube Capital and therefore have the potential to be compensated out of the Financial Services Compensation Scheme established and operated by the Financial Conduct Authority, in the event that Crowdcube Capital should fail in the conduct of its FCA regulated activities. However, investors will not be able to claim under the Financial Services Compensation Scheme merely because a Crowdcube Capital investee company fails. Details of the Financial Services Compensation Scheme may be found at www.fscs.org.uk.

Question: In a future round does the value of my investment get diluted?
Answer: A typical scenario, and one we want to make happen, is to grow the value of the company as quickly as possible so any future raise will include your shares at a higher value - a smaller slice of a bigger cake. This time we will give away 15 - 20% - with a smaller percentages in future.

Question: Do the government enterprise investment schemes apply?
Answer: Yes - the Enterprise Investment Scheme (EIS) is a UK government schemes designed to help smaller higher-risk trading companies raise finance, by offering a range of tax relief to investors who purchase new shares in those companies. Our application has received advance assurance from HMRC, so yes, this tax relief will be available to qualifying investors. For investors who are part of the raise, 30% tax relief will apply. Importantly, there are no capital gains for all investments made now on a future sale. Losses are also mitigated against future tax.

Question: SEIS sounds complicated - what do I need to do?
Answer: Crowdcube will send you forms and you need to complete them to make sure you are covered/eligible and can claim the tax relief later.

Question: Looking at the Exec Summary, it states pre-money valuation as £1.98m. From our calculation where you state 15% equity to shareholders, this does not equate to £350,000. It is actually £297,000 making a difference of £53,000. Could you explain this difference or are we missing something?
Answer: The share issue is done after the raise. So £1.984m + £350,000= £2,334,000 , £350,000 is 15% of that total.

Question: There is mention of an exit strategy, could we have more details on this please?
Answer: Typically a business like this would have an exit strategy at 5+ years. That’s not to say it isn’t possible earlier. the growth model we have is to grow to 10 locations by 5 years, then either rapidly scale up (possible shareholder buy out) or exit.

Question: If a bulk of shareholders want to cash in their share after say 3-5 years, where would this money come from and how would it affect existing shareholders?
Answer: Shareholders do not typically have an option to cash in their shares other than in a buy out or exit situation as outlined above. Unless if course you yourself find a buyer. A raise like this is what they call ‘patient capital’. In other words you need to be in it for the longer game, in the hope of increasing the value of the shares substantially over time. What Crowdcube advise is that you only invest money that you won’t need for a few years, and of course with any investment there is a risk.

Question: How did you arrive at your valuation?
Answer: EBITDA at year 3 x 9 (restaurant valuations tend to be 8-10 times EBITDA) discounted 20% per year for first 3 years gives a current valuation of 2m. We then also looked at a valuation based on a 2 x multiple of year one turnover giving a valuation of 2.2m. After consultation and to give our early adopters the best deal possible we settled on a valuation just below 2m giving 15% in exchange for £350,000.

Question: Is the 15% equity share that's available in Stem and Glory (all the locations), not just the upcoming London branch?
Answer: The 15% is for a share in the entire business - all three locations, future locations and other revenue streams down the line

Question: How will you fund the new restaurants that you plan to open each year, as shown in the financial summary? Will these be crowdfunded as well, and if so do you expect to make additional equity available?
Answer: The financial summary assumes locations will be self funded at first. It is possible that we crowdfund, but this would be at a point where the business is worth alot more.

Question: How do you envision we see a return on any investment, for example, through dividends paid to shareholders, the shares increasing in value as the business expands?
Answer: We would advise investing in this project for the end game - an increased share value in say 5 years. If we self finance the first few locations, then it is better financial sense to reinvest all surplus in the business rather than pay shareholders. We may of course see dividends before 5 years, but we advise against making this your primary investment aim. The most likely scenarios are 1. at the point of considerable scaling up with larger investors on board, there is some kind of ‘buy out’ of existing shareholders or 2. we exit all or part of the business via acquisition. There may be other scenarios.

Question: Is there a minimum or maximum investment?
Answer: £10 is the minimum and there’s no maximum. That said, more than 600 people have registered interest in pledging £100- £50k each. Ideally we will keep the circle small and protect our own loyal crowd, focussing on the smaller investors and not need to go to other funding sources.

Question: What happens if you don’t reach the £350k target?
Answer: We will need to find another way to raise the finance, as the plans are so well progressed we will definitely go ahead, but would really rather do it this way if at all possible.

Question: When do I need to invest?
Answer: We are excited and delighted to announce that all being well we will be launching our Crowdfund in PRIVATE mode this Friday, 16th March, at 12.00! If you have pre-registered you will get exclusive link to our pitch on Crowdcube platform for three days to make your pledge before the campaign goes public on Monday 19th at 10.00.

So that you can be ready on Friday, we recommend that you register NOW on the Crowdcube website as there are a few questions to answer. It's also a great idea to make a small pledge on another pitch so you fully understand the process. Pledges are accepted on a ‘first comes first served’  basis, with the best tax relief opportunities available to the early investors. There will be maximum of 30 days before funds are taken from your account.

BUSINESS BACKGROUND and PLANS

Question: What gives you confidence that you will be able to do the same in London that you have done in Cambridge?
Answer: Director Jim Masters was one of the original directors of Ministry of Sound and is extremely well connected with the London hospitality scene. He also hosted nightclubs across the capital for over 20 years. Calling upon old and new contacts for both personnel and PR we have a sound base for our marketing and recruitment strategy. The plant-based market is very under-represented in London and the is huge demand, especially for a high quality offering such as ours.

Question: What are your projected trading figures based on?
Answer: Projected figures are based on our first year trading figures of locations 1 and 2 scaled to the number of covers in our new sites and the high footfall location.

Question: Does the business have any debt?
Answer: The business does not currently carry any debt

Question: How healthy is the balance sheet now?
Answer: In the 1st year turnover was £300k, with a profit of £30K. In the first quarter of out 2nd year, Q1 year on year growth was 84% at the Mitcham’s Corner restaurant alone.

Question: Are you planning further funding rounds?
Answer: We may consider further funding rounds at a point of rapidly scaling up for wider penetration of the restaurant market.

Question: Do you have an exit strategy?
Answer: Yes at 3-5 years. In order to expand to become a global brand we would either need to float the company or raise significant funds by way of a buy-out. We would also consider exit via acquisition. Similar business ‘Plant Organic’  with 7 London outlets is currently exploring a sale at 50m sale.

Question: Where will the next location be based?
Answer: We are currently looking at a site in London City, Old St area.

Question: What other towns are you planning? And what market research do you do to verify demand?
Answer: We have been gathering a lot of interest from people in towns up and down the country. Having a groundswell of support in a town will propel us towards a particular location. Towns with a similar demographic to Cambridge will most likely be our first port of call, but down the line anywhere is possible.

Question: Will you be franchising?
Answer: We have no plans to franchise due to quality control issues, but we may consider down the line for very select individuals or possibly the international market

Question: Is Camyoga a separate company?
Answer: Yes

ABOUT STEM + GLORY

Question: Restaurant chains are struggling in the current climate with some high-profile failures. What makes Stem + Glory different?
Answer: We have actually seen the reverse of this trend and believe the rise of independents, just like us, is a factor in the demise of the more sterile formulaic chains who are the ones struggling/closing. Although we want to grow fast we will keep our focus on quality, keep very involved in how the brand evolves and take advantage of more prominent outlets as they come free. This is absolutely not a venture capital backed chain.

Question: Why London? Will you add more outlets in Cambridge?
Answer: The London market is very under-served at the moment, plus London gives us the perfect launch platform in a more prominent location to take the business to the next level. We don’t have plans for Cambridge yet but are gathering data from our pre-registrations about where might be next.

Question: Veganism is in the news now - will it grow?
Answer: It’s our view that the vegan trend is not even getting started! That said, we don’t focus on vegans, it’s really about making the experience of delicious plant-based food more widely accessible. Also, our typical client is not vegan - and in fact we are using the term plant-based more often now. Our typical table of four is one vegan plus friends and family, looking for healthier, compassionate lifestyle options in their dining. The environmental messages are strong too.

Question: What's the ratio of new and returning customers?
Answer: We have a very high client retention who we service with offers and special events to keep things exciting. And they are a huge source of new customers too in bringing their friends. Our Tripadvisor reviews bring a constant stream of new visitors, and our marketing brings new local customers.

Question: Will you offer Shareholder discounts?
Answer: We are looking at rewards schemes and aim to limit them to a small manageable number.

Question: Is Stem + Glory a restaurant or a cafe?
Answer: We piloted both a restaurant and a cafe in Cambridge. The London site will be a combination of the two with table service dining and a fast lunch/cafe/takeaway option. Down the line we have the cafe/takeaway option for high footfall areas such as train stations or motorway services.

Question: Will you be open all day?
Answer: We plan to open from breakfast to dinner with local variations

Question: How ethical is your supply chain and how do you verify it?
Answer: We are working closely with our suppliers now on delving deeper into our supply chain. We work with few suppliers in order to firmly establish the supply chain and we make this a priority.

Question: Do you pay minimum wage?
Answer: Yes we pay all staff higher than minimum wage

Question: Is the founder Vegan?
Answer: Yes founder Louise is Vegan. She gave up eating meat 35 years ago.

Question: What exactly do vegans eat?
Answer: Basically vegan food is 100% from plants. We do not use eggs, milk products, or honey as they all come from animals

Question: Do you wear leather?
Answer: No Stem + Glory founder does not buy or wear any leather

Question: Are your staff allowed to wear leather?
Answer: Staff are requested not to wear leather whilst on shift.

Question: Will you ever serve lab grown meat?
Answer: We believe lab grown meat does play a part in the future of the planet, but we will most likely not be serving it as we focus on naturally healthy plant based ingredients

Question: Who is creating the food?
Answer: Menus are created by the head chef in consultation with the directors and the rest of the team. Menus have been evolving since we opened

Question: Future plans. What is the pipeline?
Answer: We plan to have 10 locations within 5 years from now

Question: Where will you find staff?
Answer: We will recruit locally with existing core team members on the ground in the early stages of each location

Question: How will you train the chefs?
Answer: We provide inhouse training, plus send the chefs on regular training days.

Investing involves risk and should be done only as part of a diversified portfolio. Investing equity in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution. Crowdcube is targeted exclusively at investors who are sufficiently sophisticated to understand these risks and make their own investment decisions. Crowdcube Capital Ltd is authorised and regulated by the Financial Conduct Authority (No. 650205).

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