Receiver says CricHQ will keep running; confident of sale; 5 reasons it went bust
NZ Cricket was wondering earlier today if it would have to go back to pen and paper for scoring games following CricHQ's receivership yesterday.
Receiver Neale Jackson, of Korda Mentha, tells NBR the answer is no.
CricHQ’s cloud-based scoring and team management software is still up and running, he says.
NBR spoke to Mr Jackson from CricHQ’s office in Wellington, where he has set up shop while he sorts through its files.
The receiver says he’s confident the business can be sold, based on interest expressed so far.
Asked about job losses, he said a restructure was under way. The business has 22 staff in Wellington, plus more in offices in India and South Africa. Enough staff will be kept on to keep the CricHQ platform running, he says.
CricHQ was in the early stages of monetising its service, which was offered free to most users.
Mr Jackson would not comment on how much CricHQ owed but one unpaid contractor – who did not want to be named – said the situation was complicated by a high-interest convertible loan from Singapore’s Tembusu.
The first receiver’s report is due on December 24.
Beyond debtors, those with the biggest stakes in a possible sale are the three owners of Moneybaker Holdings, which held a 42% stake in CricHQ: chief executive and CricHQ founder Simon Baker and former Black Cap captains Stephen Fleming and Brendon McCullum.
In a statement, CricHQ chairman Kevin Roberts said, “I have been involved with CricHQ for only 10 months and have been disappointed that we were unable to successfully monetise our much used and respected platform. The constantly evolving sports media and data marketplace has made it difficult to convert serious interest into investment.”
Five reasons CricHQ failed
1. A scattergun approach to capital raising
CricHQ, which has raised $20 million since it was founded in 2009 (albeit some of it with strings attached; keep reading), was in the process of trying to raise $10 million when it went into receivership.
The raise had been dragging for more than a year. In September last year, then CricHQ chairman Mike Loftus sent an email to NBR publisher Todd Scott and NBR contributor Michael Coote, asking them to participate in the raise.
Neither Mr Scott nor Mr Coote knew Mr Loftus, nor had any association with CricHQ or any of its investors. It seems likely they were among many recipients in a cold call campaign (or at least, cold email campaign).Many of the customer and financial targets in the investor presentation attached to the email seemed fanciful, including its claim of 2.5 billion cricket followers worldwide (a sum greater than the population of all the major cricket playing countries combined, let alone their cricket fans). The whole escapade seemed disorganised and unsophisticated at best, and desperate at worst.
Mr Loftus first tried to stop NBR publishing an article based on the investor presentation he emailed to Mr Scott and Mr Coote but, when an article was published anyway, he then sent another round of emails to potential investors trumpeting it as “positive unsolicited media coverage.”
2. A big 2015 raise but with strings attached
In fact, NBR’s article wasn’t completely positive by any stretch.
It noted that in June 2015, CricHQ landed $US10 million through a capital raise led by Singapore-based Tembusu Partners — albeit via convertible notes with a 12% interest rate for the first two years, and some of the money tied up in milestones that have yet to be met. For example, $US1 million will be released when CricHQ England's national governing board is a fully paying customer, another $US1 million when it signs Australia.
3. Failure to crack the UK and Australian markets
While CricHQ had a lot of success selling its product to cricket boards around the world, it never managed to crack the key, lucrative UK and Australian markets.
As well as lost opportunity and revenue, that meant it had failed to meet the milestones required by Tembusu to access the full $US10 million.
4. Kevin Roberts no longer in first XI form
Toward the end of last year, Kevin Roberts signed on as CricHQ chairman.
But the legendary ad man was perhaps no longer at the height of his powers, having recently taken an early retirement from Saatchi & Saatchi following a sexism scandal.
5. A sport for love, not money
After NBR’s article on CricHQ’s investor presentation was published, Peter Macauley, a director of Melbourne-based Interact Sport, got in touch to say, “You are right to be skeptical. Our company operates in the same market – supplying digital solutions to sport, and have done so since 2001. I give CricHQ credit for their passion and for having a “crack” in this market but the commercials just don’t stack up.
“We manage some five million participants across cricket and other sports and are one of the bigger providers in the space. I can tell you from 15 years of experience that it’s a difficult market to operate in. In fact, there was a New Zealand company that tried to do a similar thing to CricHQ several years ago (RealSports International) and went under after a couple of years. Larger organisations will bury you in product customisation requests – grassroots sport is complicated – while smaller ones will want it for free and then require constant support as they are managed by an ever-changing roster of volunteers.
“You have to keep costs very low as the SaaS [software as a service] revenue you get is limited to the minimal budgets that sports organisations have. Getting a subscription revenue stream from players and parents is tricky and unproven, and this is what CricHQ has based its projections on. If it’s proven, then the national sports bodies will take that revenue for themselves, because ultimately they control the platforms as they control their affiliates. They can mandate which platform the sport uses and can even decide to build their own as one sport did here in Australia.
“People work in this industry because they are passionate about sport, not to make huge sums of money – there is no pot of gold in this market”
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