How bad management decision pushed Crowdyvest into financial crisis

Digital investment platform, Crowdyvest, is currently in financial distress that has seen it unable to refund money invested by Nigerians into the tech startup’s investment opportunities, plus interest.

The Lagos-based investment startup offers returns on investment through savings and yields, with an assurance that the investment opportunities are “well-vetted”, but with its current financial crisis, it doesn’t seem so.

While the amount trapped in Crowdyvest has not been made public, Ripples Nigeria gathered that the platform recorded $30.6 million investment in its projects, but has paid $25.3 million to investors, a statement on its website reads.

In a letter to Nigerians and other individuals who invested in Crowdyvest offerings, the firm said it encountered significant business challenges in November 2021, making it impossible to pay investors.

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“That ultimately led to our inability to pay requesting members on demand. These challenges are a direct result of delayed payments from our impact partners with whom we have had several transactions in the past.” Crowdyvest told investors in the letter.

Crowdyvest wrong management decision and Farmcrowdy debt burden

The company was depending on equity investors [financial backers] to pay individuals that invested in their savings or yields investment opportunities – wrong move.

Crowdyvest ability to fund its ROI offerings was dependent on its ability to onboard equity investors, but the company failed in achieving both.

The management was stuck in this position following its exit from its parent company, EMFATO Group, and had also done a debt acquisition of sister-company, Farmcrowdy – filing up financial burden on a three-year-old startup.

It, however, admitted that the decision was ill-advised and shouldn’t have gone through that route, which now has Nigerians, who invested in their ROI offerings, worried.

“In March 2021, Crowdyvest fully exited EMFATO Group through a debt acquisition agreement where it acquired Farmcrowdy’s debt at the time.

“In retrospect, the choice of the debt acquisition model was ill-advised as our projections to onboard equity investors and long-term financing did not yield anticipated results.” Crowdyvest said.

It added that, “A combination of the acquired Farmcrowdy debt and the ongoing defaults by our impact partners has now led to the inability to pay all monies plus interests that should accrue on the monies received via the platform.”

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