The ECF Scorecard – How does it work?

Equity crowdfunding investment opportunities can be evaluated on a qualitative basis and a quantitative basis.  Here at ECF Campaigns, we thought it would be most helpful to use both perspectives when reviewing investment opportunities, which is why we include the ECF Scorecard.

Qualitative analysis is typically presented using words and is often a narrative description of something.  In this case, the crowdfunding campaign would be subjectively reviewed and the findings would be presented in the form of a traditional text-based report, taking into consideration things like the caliber of the management team, the idea, the market and competitive environment, the barriers to entry, funds raised to date and the exit strategy.

Quantitative analysis typically deals with numbers and presents findings in a numerical style.  To complement our qualitative findings, we also appraise campaigns using a scorecard that enables us to give an actual numerical score for each of the important factors that should be taken into consideration when evaluating an investment opportunity.  This enables readers to instantly understand how highly we rate the investment opportunity and also compare campaigns with each other.  In time, we will introduce a League Table of live campaigns.

The ECF Scorecard rates equity crowdfunding campaigns on a scale of 1 to 100, based on the following criteria:

• Strength of the Management Team (Score out of 30):

• Size of the Opportunity (Score out of 25):

• Nature of Product/Technology (Score out of 15):

• Competitive Environment (Score out of 10):

• Marketing/Sales Channels/Partnerships (Score out of 10):

• Need for Additional Investment (Score out of 5):

• Other (Score out of 5).

This clearly demonstrates that the ECF Scorecard gives the highest weighting to Management Team as we believe this, more than anything else, will determine the success of the business or not.  Ideas are a ‘dime a dozen’ – it’s the ability of the Management to execute a strategy that can deliver value for shareholders that separates the winners from the losers.

The Size of the Opportunity relates to market size and will examine the Total Addressable Market (TAM), the Serviceable Available Market (SAM) and the Serviceable Obtainable Market (SOM).  TAM, or total available market, is the total market demand for a product or service, calculated in annual revenue or unit sales if 100% of available market is achieved.  SAM is the portion of TAM targeted and served by a company’s products or services.  SOM, or share of market, is the percentage of SAM which is realistically reached.

The Nature of the Product (or Technology) is essentially the merit of the idea and the likely appeal for the product in the market.

The Competitive Environment relates to the nature and strength of the competition for the firms product and also takes into account the barriers to entry for other competitors.  If a company has a high level of competition it would receive a score of 1 or 2 out of 10.

Marketing / Sales / Partnerships relates to the ease with which the company will be able to generate sales for its product and also considers if the firm has partnerships that could make this sales process easier.

Need for Additional Investment refers to whether or not the company will need to raise new funds in the future in order to execute its plan.  Fundraising is a time-consuming exercise for management and there is no guarantee of success.  Hence, a company which will need to raise new funds again will receive a lower score out of 5 than companies who will be able to fund growth organically.

Anything else that may not have been captured in these criteria for the ECF Scorecard is included in ‘Other’.

To conclude, each equity crowdfunding campaign is evaluated qualitatively and quantitatively, hopefully giving readers a holistic perspective on the investment opportunities on each of the UK equity crowdfunding platforms.  Click here to register for this site for free and access each of these campaign reports.