Investors who backed Scottish start-up Flavourly, a luxury food and craft beer subscription club, have been left out of pocket after it was sold in a cut-price deal.
The Edinburgh-based company told shareholders who invested more than £600,000 in the business they would have to accept the discounted offer and sell their holdings.
Founded by Ryan O’Rorke (pictured) in 2012, the company has been offloaded to Drinkshare Holdings for £118,000. At the time of the fund-raising Flavourly was being touted as having a value of £1.2m.
O’Rorke, who went through the Entrepreneurial Spark programme, is one of the directors of Drinkshare along with Flavourly CEO Assean Sheikh who helped the company grow to a team of 10, increased year on year monthly sales by over 300% and raised the investment via CrowdCube. Sheikh joined Flavourly in 2014 after completing the Saltire Fellowship.
Flavourly raised an initial £116,000 in less than 24 hours on Angels Den and a further £515,000 on CrowdCube after exceeding its original target of £300,000. Interest from 339 investors saw the company achieve 65% over its initial target in return for equity.Crowdcube claimed Flavourly to be the first Scottish company to raise over £500,000 in crowdfunding.
Key shareholders Andrew Veitch, O’Rorke and Kevin Dorren triggered a clause which states that all shareholders must sell their shares if the majority holding agreed to a sale.
A statement from the company to the shareholders said: “We, Andrew Robert Veitch, Ryan O’Rorke and Kevin Matthew Dorren (the “Selling Shareholders”), together holding a majority percentage of the A Ordinary Shares of the Company, have agreed to transfer all of our interest in our shares in the Company (the “Sellers’ Shares”) to the Proposed Buyer (the “Sale”).
“We, therefore, constitute the Selling Shareholders for the purposes of article 10 (“Article 10”) of the articles of association of the Company (the “Articles”). Pursuant to Article 10, we, the Selling Shareholders hereby give you, the remaining shareholders of the Company (the “Called Shareholders”), notice that you are required to transfer all of your shares held in the Company (the “Called Shares”) to the Proposed Buyer.
“This notice, therefore, constitutes a “Drag Along Notice” (as such term is defined in Article 10) and is given pursuant to and in accordance with Article 10 (the “Drag Along Notice”).”
Appearing on the BBC’s Dragons’ Den in February 2015 O’Rorke was offered backing by all five investors and accepted a joint bid from Piers Linney and Peter Jones for £75,000 in return for a 20% stake. Kelly Hoppen even offered him a job. After the show aired O’Rorke rejected the offer.
At the time, Flavourly was forecasting a tenfold increase in sale. Over the previous two years, it generated £600,000 in revenues, and shipped more than 500,000 products to its 10,000 subscribers.
Responding to news of the sale, Mr Dorren said: “I was only a shareholder in the company. I provided some early funding and advice but haven’t been on the board or actively involved.”
By 3pm on Tuesday Mr O’Rorke had not responded to an email sent last night or a phone call sent earlier today requesting comment.
It is understood a high profile Scottish entrepreneur is also involved in the new company but also did not respond to an email sent earlier today.