Powa Technologies, an e-commerce startup that was once valued at $2.7 billion, has entered bankruptcy after failing to win customers for its mobile payments products and never achieving profitability.
Most of Powa’s U.K. staff of 90 was laid off on Monday by Deloitte, which was appointed bankruptcy administrator last week. The company went into bankruptcy after Wellington Management, its lead investor, called in its loans.
According to the Financial Times, Powa had been struggling to pay staff and suppliers in recent months. It missed payroll in January and started February with $250,000 in the bank.
“There are a number of options available to us which are being explored,” CEO Dan Wagner said in an email to staff. “In particular I want to ensure you all get paid.”
Wagner once boasted that Powa would become “the biggest tech firm in living memory,” comparing himself to John Rockefeller. It was one of only two “unicorns” — the term for private companies valued at more than $1 billion — in the U.K., according to data from PrivCo.
As recently as December, a U.K. government-backed group named Powa as one of the country’s “highest potential digital businesses for rapid, global expansion.”
Founded in 2007, Powa initially focused on producing a mobile payments system similar to Square, featuring a dongle that turned mobile devices into payment card readers. It later switched to a “point and click” technology that would allow users to buy a product after scanning as special “PowaTag.”
Powa said it had more than 1,000 agreements with retailers and brands, including Adidas, L’Oréal, and Unilever, but the FT said those deals were “letters of intent” with companies that had agreed to work with Powa and rarely resulted in up front revenues. In a video message to staff late last year, Wagner described Powa as “basically pre-revenue.”
Boston-based Wellington, along with Germany’s Otto Group and other investors, contributed more than $200 million of equity and debt to the company.
It was much more than just lack of product adoption that bankrupt Powa. It was the blatant, egregious, shameless mismanagement of investor funds and unethical management practices across the board that was the main contributor. Everyone in the payments industry saw this coming a year or two ago. Had the investment company done the most basic due diligence, like say, read employee reviews on Glassdoor, they would have known immediately that their money would be at risk here. Great lesson to VC’s and institutional investors, do your homework, get insider opinions – not just the opinions of the few at the top seeking the investment.