Functional chewing gum startup Blockhead has collapsed just weeks after attempting to raise £500k in a crowdfunding campaign.
The business (Blockhead HQ Ltd) appointed Quantuma Advisory as liquidator on 15 May 2024.
Details of the failure are unknown, with Quantuma declining a request for comment and The Grocer unable to get a response from the company.
Head of sales Craig Starling wrote in a LinkedIn post: “Despite huge growth in revenue, distribution and rate of sales, Blockhead is no more.”
Danny Lowe developed the brand in 2014 while studying sports science at university. Blockhead, which is understood to have employed about 11 staff, supplied a range of functional chewing gum with added vitamins and other active ingredients.
It raised millions of pounds across multiple investment rounds, including a series A raise in 2021 led by VC firm Btomorrow Ventures.
The business also launched a crowdfunding campaign on the Crowdcube platform at the end of March this year, but did not mention any financial difficulties in its pitch.
The pitch valued Blockhead at £4m and was 46% funded, with 124 crowd backers pledging money, but was pulled before it hit its target.
Pitch documents revealed the business generated cumulative revenues of £1.1m in 2020, 2021 and 2022, with combined losses of £3.1m, growing bigger each year.
It also had a £50k government-backed bounce-back loan owed to NatWest and convertible loan notes totalling £3.7m with a maturity date of December 2024. It was set to agree another £1.3m loan upon completion of the crowd round. The notes would have diluted shareholders’ stakes once converted to equity.
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A Crowdcube spokeswoman said the platform was “disappointed” Blockhead was not able to complete its raise.
She added the company went through the same due diligence process as all businesses aiming to raise crowd cash, which lasts about three to six months.
“Our due diligence charter clearly states we require a company to have six months’ cash at the point a campaign closes, based on the existing monthly burn rate, current cash position and investment funds to be received,” the spokeswoman told The Grocer.
“In the due diligence we conducted on Blockhead, we were initially satisfied that if the company was able to raise the funds to meet its minimum target, it would have sufficient cash.
“However, during the campaign, it became evident the company’s cash position would not be sufficient to meet the terms of our charter. Therefore, we did not allow the campaign to close, and no funds were captured from investors.”
She said documents available to prospective investors “clearly stated” the company was lossmaking.
“We are not in a position to disclose the nature or reason behind the company’s unexpected change in cash position.
“Lots of early-stage companies are in precarious cash positions, which is why they fundraise. Investing in start-ups and early-stage businesses involves risks, and it should be done only as part of a diversified portfolio. Crowdcube is targeted exclusively at investors who demonstrate that they understand these risks.”
