What the hell happened at Vulpine?

The adjective "vulpine" means “relating to a fox or foxes” and is therefore, perhaps unfairly, associated with the supposed fox-like traits of being crafty and cunning. Foxes get an unfair press, so how about Vulpine the cycle clothing company? Until it announced its collapse to 588 “crowd” shareholders at the start of May, Vulpine’s press profile was, to say the least, stellar. Vulpine founder Nick Hussey was fêted as a visionary, an entrepreneur who asked for crowdfunded investment of £500,000 and raised twice as much. He was invited by the BBC to drape his cycling togs over the desk of a business programme, and he was plugged by cycle magazines.

BikeBiz, too, was guilty of not paying close enough attention to the company’s publicly available financials – we now know they stank. And they were whiffy even when Hussey recently went back to Crowdcube in order to raise a further £750,000. 

The company that Hussey valued at £6.5m now has stock worth – perhaps – £250,000; stock that will likely end up being sold at deep discounts, harming other cycle apparel players. Robert Young of accountancy firm RSM told BikeBiz earlier today:

“It remains uncertain whether anyone will buy the business as a whole but, for this, time is of the essence.”

For sale, said Young, is Vulpine’s IP, its websites, the brand, stock and “physical assets”. These assets, said Young, accounted for a “relatively small amount.” Where has the cash gone? How did Vulpine raise so much money but rack up so many losses?

Let’s go back to basics. Who is Nick Hussey? The 43-year old was a schoolboy time-trial champion in his native Nottinghamshire, and studied sports science at Liverpool’s John Moores University in the mid 1990s. Ten years later he moved into film production and, for five years, worked as an executive producer for a number of small-scale film companies.

Hussey incorporated Vulpine in 2010; the company started to trade in 2012. In the same year Hussey told a blogger: “I used to be an exec producer with film. I basically found directors, matched them with people who wanted to use them, and looked after them. So I guess my marketing background was self-taught or invented.” 

He added: “marketing is just completely f*cked up, it’s all about lies … you’re trying to pull the wool over people’s eyes, to create a veneer of untruth.”

One more time – Founder & MD, Nick live this morning on BBC News, flaunting our new Spring/Summer range. #BBCBizLive
Here’s a clip: pic.twitter.com/11qtSKdiJ5

— Vulpine Bike Apparel (@vulpinecc) February 28, 2017

“If you have a great product (which I hope I have), then you should be telling people the truth,” he told cyclelove.cc. “So, that’s what I’ve done with Vulpine.”

“A lot of people said to me, when I started this, if you knew how stressful it is to start up a clothing company, specifically a clothing company, you wouldn’t do it.”

He added: “There’s two things that made me not stop. First of all, I’m very pig headed. If someone tells me not to do something, it’ll probably make me want to do it more. And that’s an essential thing for an entrepreneur, because pretty much everyone tells you you can’t do it. So you’ve got to ignore a certain amount of advice.”

But you can’t ignore creditors – Hussey needed money.

“I spent nine months creating the company … and then very quickly [realised] that I [needed] investment. Because, to buy the clothing, to a high quality, you have to go to high quality factories, which aren’t even going to look at you unless you’re putting thousands of garments their way. So I immediately realised I was going to need a lot of money to do that. So, I had to learn about getting investment, which most people only know about from watching Dragon’s Den. It’s kind of a cartoon version of what happens. People are much nicer in real life. Some of the nicest people I’ve ever met are investors, weirdly.”

Two angel investors who were originally impressed enough by Hussey to give him early seed funding were Philip Jenks, a founder of the publisher Harriman House, and Simon Hulme, a start-up specialist. They joined Vulpine’s board, hoping to rein in Hussey’s infectious enthusiasm and, slowly, build a profitable business, initially with the original consumer-direct model but also in a move to wholesale which meant buying in more stock.

Both Jenks and Hulme are cyclists, but both are hard-headed businessmen and, in 2015, they resigned from the board, citing time pressures. They had been unable to convince Hussey to order more astutely so he didn’t have to dump clothing at deep discounts on “membership” clothing discount websites and at special Vulpine clearance sales. Hussey also spent big on expensive marketing campaigns, and brought in a new management team. As a marketing promotion the company bought “his and hers” custom bicycles for Hussey and his wife as a “Vulpine is five” birthday present to “Mrs and Mrs Vulpine”. The directors were paid £95,969 in the year to date, month ending March 2017. There are currently nine people on the payroll, including Hussey who, according to Companies House was the sole director in 2017.

A licensing tie-up with Sir Chris Hoy promised to catapult the company into the bigtime, and an exclusive deal was signed with Evans Cycles. Sales, however, were disappointing.

In happier days, Nick Hussey with Sir Chris Hoy

Described in a 2015 company press release as a “go faster entrepreneur” in charge of a brand that “continues to grow at an impressive rate” Hussey was, in fact, in charge of a company that had lost the confidence of its first angel investors and board members.

Hussey needed new money, and fast. In October 2015, he launched on the crowdfunding investment site Crowdcube hoping to raise £500,000. He told the “crowd” investors: “The reaction to our CrowdCube investment offer has been an amazing vote of confidence in what we are doing … Please do let you friends, family and colleagues know about this deal, so that together we can get fully funded super fast and get on with the business of making us even better!”

A week later the brand had raised over £1m. Yet still the losses racked up – £770,000 of losses.

Earlier in the year new hires managing director Jonathan Baker and financial director Irfan Harris left the company “by mutual consent”, and Hussey stripped out other costs too in the hope of keeping the business afloat.

“The poor results necessitate decisive action to realign our strategy, and structural changes to reduce our cost base,” said Hussey, aiming to return to the company’s roots as a nimble online-only player, without the worries of buying in stock to service the fickle retail market.

“We are structurally and strategically simpler, and thus more dynamic,” said Hussey months before the collapse into administration. “We will act more like the simple sales-driven startup that saw us grow so fast in the first three years … We’ve learnt hugely important but often painful lessons in what not to do, and fantastic insight into what really does work. Digital. Simple. Innovation. Brand. All founder driven.”

He added: “we are stronger and healthier now than ever before.”

In March Hussey told investors “our losses will improve by at least £200K” adding that “it is an exciting time, as we ramp up again with a clear strategy that is proved in the numbers.”

The numbers Hussey used are different to those said to have been uncovered by crowd-funding sceptic and investment blogger Rob Murray Brown, author of the Fantasy Equity Crowd Funding blog, and who had been warning about Vulpine’s losses for some time. 

Brown believes Vulpine should not have attempted to raise cash by crowdfunding, and that Crowdcube did not do enough due diligence on the company. What Vulpine did was “not illegal but it is certainly immoral,” claimed Brown.

Vulpine went back to Crowdcube earlier this year, hoping to raise £750,000. But investors were thinner on the ground for this second round, and the campaign was withdrawn. The writing was now on the wall – by 5th May Hussey had been forced to call in the administrators.

Explaining the collapse, Hussey told investors:

“We pulled out of the Crowdcube attempted raise and began contacting previously interested investors and potential buyers of Vulpine, plus a raft of new contacts. Whilst there was strong recognition of the brand, and initial verbal interest, none have produced offers or ongoing due diligence, and communication has stopped. It is highly possible that, having seen our precarious financial position and the complications of doing a fast enough deal, they are waiting to pick the business up in administration instead, if any deal is to be done.”

Fantasy Equity’s Brown remained unconvinced. He said “the director of Vulpine was helping himself to a salary of over £90k pa at the same time as running a start up business, using shareholders money, rapidly into the ground … In the last 4 months (Dec 16 to March 17) before [Hussey] pulled the plug … he paid himself £37k. This with the certain knowledge that the cash had run out … So in little more than 12 months, they have blown £1m and their business, apart.”

Brown said Vulpine “managed to deliver nothing with twice the money.”

Contacted for this story, Hussey said: “I’m unable to comment during the administration process.”

Earlier, to investors, Hussey had been more upbeat:

“Vulpine’s brand and business structure remains relatively undamaged at this point, and any acquisition via administration would see the highest potential value to all stakeholders if conducted as quickly as possible.”

Fans of Vulpine clothing have praised the brand on online forums, but others have been delaying purchases of other brands wondering when the £250,000 worth of existing Vulpine stock will flood the market.

The stock has yet to be bought, and nor has the business.

RSM’s Robert Young told BikeBiz:

“We really need offers by [close of business] tomorrow.”

What about investors? They can whistle, it’s highly unlikely they’ll get any of their money back.

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