POWA’s demise

Powa Technologies, the London technology company once valued at £1.8 billion ($2.7 billion), has collapsed into administration, putting over 311 jobs at risk.

Deloitte confirmed over the weekend that it has been appointed to take over the business, which has run out of cash and can’t pay its debts.

The company has raised $175 million (£122 million) to date, but had only $250,000 (£175,200) in the bank at the start of February and debts of $16.4 million (£11.5 million). That’s despite $50 million of investment in 2015 and a loan from its biggest investor, Boston-based Wellington Management, as recently as November.

Despite the huge sums invested in Powa, which has partnered with the likes of Adidas and L’Oreal, CEO and founder Dan Wagner told staff in a video that the company was “basically pre-revenue,” according to a video seen by the Financial Times.

Since this ‘Unicorns’ horn and wings have fallen off everyone is running for the hills making the technology the excuse for the demise. This is simply ludicrous! People have jumped on the bandwagon slating QRCode technology without a thought of what actually happened at the company.

I’ve personally been in mobile and cross border payments for the last 5 years and know some of the guys very well over at Powa and trust me it’s not the tech.

QRCodes aren’t the problem, if it was Starbucks, Zapper, YoYo, Levelup or AliPay wouldn’t be as successful as they are. In Q3 2015 Starbucks did more than 9m mobile only transactions. LevelUp has more than 14,000 merchants using on a daily basis. AliPay is the biggest and fastest growing part of Alibaba and it’s only QR based.

Rather than blaming the technology or adoption how about people focus on the management and the investors. I set up my first business at 17 selling advertising space in 2001 and grew this business rapidly employing people all over the UK, so know how to grow a business. There’s lots of people in the payment’s space who have had success in the 90’s and since then have struggled with the rate in which technology is moving. They all claim to be the fathers of the internet and all claim everyone is dying to work with them and yet they’re all complete failures! The real question is Dan Wagner joining that heap? The more popular mobile payments got the more con-men turned up to take advantage and ran companies in to the ground with promises they couldn’t keep.

Website Glassdoor lets current and former employees leave anonymous reviews of companies. Being anonymous it’s hard to sift out the people with an axe to grind or from someone giving genuine feedback. But, taken in aggregate, they give interesting insight. Business Insider reviewed the 133 public reviews of Powa on Glassdoor. The most common rating of the company is just 1 star, with 50 reviewers giving this rating.

Staff consistently complained of the following:

Uncontrolled spending
“Company spends outrageous amounts of money on travel and parties for potential customers and vendors, yet leaving hundreds of unpaid bills and invoices stack up leaving people to scramble just to keep the lights on and not get evicted.”

“That a start-up with no revenue needs offices in the most expensive buildings in each city is one example of poor management at this company.”
(N.B – It’s estimated Salesforce Tower (Heron Tower) cost £2m p/a in rent alone)

“This company spends money like the world is coming to an end.”

High turnover of staff
“Most people get fired (more than 60%).”

“REDUNDANCIES!!! This is kinda a company tradition. Just to warn you, it happens every quarter of the year.”

“Senior leadership instability (supervisor changed 5 times in 10 months).”

“People that have done an outstanding job have been basically fired. I have no idea why this keeps happening but it does.”

Bad management
“Management with no vision, lack of competence.”

“They do not appreciate your work, management use different excuses to destroy your years of work, re-design and ask you to rebuild it so that they can take over the control.”

“We all sit back and watch rolling our eyes as senior management changes direction.”

“Complete new management is needed. As long as they are there, nothing will go forward.”

High employee turnover, high spending, and poor management go some way to explaining the current turmoil at Powa, valued at $2.7 billion (£1.8 billion). We also need to look at the fact that the management team at Powa paid $75m in an all share buyout of MPayMe Ltd the creators of Znap, which had $120 in sales. Where did the insane price tag come from? I understand technology has a value, but $75m?

We also need to look at its biggest investor, Boston-based Wellington Management. What have these guys been doing whilst Powa has let it’s money go to it’s head. In November 2015 they were aware of Powa running out of money and gave them a loan of more than $16m, surely at this point it was time to come in and take control, consolidate, close offices, and get back to it’s roots and take one market at a time. Why did they not interview every employee to find the route of the issue or simply just read Glassdoor. No…. they just gave more money and buried their heads even further in to the sand.

With all this in mind and you still want to blame the technology? I think not.

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Google should buy Twitter

At present Jack Dorsey, new CEO of Twitter, is facing a real up hill struggle to get people to see things his way. He rejoined Twitter October 2015 as CEO and since then he’s been sacking people left, right and centre trying to reduce that 3,800 unnecessary headcount (Think the ego has gone to his head a bit with the long shot comparisons to him and Steve Jobs). He’s been culling hundreds (more than 700) of jobs to cut costs at the over inflated Stock Market listed company. At present Twitters stock is a in a dive (and so is Square, Dorsey’s other Stock Market listed start-up), so much so that he’s now gone from Billionaire status to just multi, multi milionaire decreasing from $2.2b to little more than $800m. Tough time for Dorsey (I think not ;-)).

In my opinion Dorsey doesn’t have a problem with product, even though at present they keep trying to change the layout and features, which recently caused the hashtag #RIPTwitter. His problem is the fact that Twitter has no real source of income. Even though the company has never made a profit, never showed any real return to shareholders it still managed to list for Billions, yes BILLIONS in valuation (more than $33b), with the preconceive notion that it will one day make billions from advertising like Facebook. The reality has been extremely different with still no profits and no real way to advertise.

Google on the other hand has now admitted what a pointless endeavour Google+ has been. Although they have 2.2b registrations, which they basically cheated to get if you had a googlemail email, only 9% post on a regular basis. That’s only 198m posting on a monthly basis, which sounds a lot, but when you compare that to Facebook, which generates 4.5b likes with 300m pictures added per day and Twitter generating more than 320m monthly users and more than 1b unique visits monthly to sites with embedded Tweets, the 198m doesn’t sound very much any more.

Google usual purchases are around the $1b mark. As of December 13, 2013, Twitter had “a market capitalization of $32.76 billion” so buying Twitter would be a little out of their comfort zone. If a deal were to happen, it would be the second-biggest ever acquisition in technology, well ahead of Facebook’s $19bn (£13bn) purchase of WhatsApp in 2013 and behind only the $106bn AOL-Time Warner merger of January 2000.

Google has around $60bn in the bank, though a lot of that is stashed overseas to avoid taxes on repatriation; a share- or debt-funded acquisition might be simpler. Eric Schmidt, Google’s chairman (and chief executive through its fast-growth years), told Bloomberg in December 2014 that “the biggest mistake that I made was not anticipating the rise of the social networking phenomenon”. He added: “It’s not a mistake we’re going to make again. In our defence, we were working on many other things, but we should have been in that area, and I take responsibility for that.”

Some think Google’s problem with “social” is that its data-driven culture tends to be blind to the tweaks that make people love social networks. As mobile use is now dominant, social networks offer the most valuable advertising space. In the fourth quarter, 69% of Facebook’s advertising revenue came from mobile ads, up from 53% a year before; and revenues were up 49%.

Google, by contrast, has seen its cost-per-click (what advertisers pay when someone clicks on an ad) decline by 30% over the past four years as mobile use has grown, limiting its potential for revenue growth. Google, of course, relies on advertising for 90% of its revenues, and perhaps more of its income.

With social dominance, social data and everything in our lives becoming social from taking a picture with instagram and sending money with my new start-up Cendit Google has to do something to make sure these social giants don’t chip away too much of its market share to the point where it becomes a scary future for Google. This is a protection exercise more than money generating. Below are 5 things I think each party brings to each other, which would enable them to match or even surpass Facebook.

What Google brings to Twitter:
1) huge number of advertisers already using Google AdWords and AdSense
2) global reach
3) potential inclusion by default in Android mobile software
4) integration with YouTube for short and long video
5) resilient systems

What Twitter brings to Google:
1) highly engaged social network
2) users’ instant “sentiment data”
3) different dimension to “search”
4) mobile-optimised platform for advertising
5) positive reputation on privacy

I believe Google has made three attempts, thus far, to buy Twitter so they obviously see something there for them. I personally am a huge fan of both Twitter and Google. I use Twitter more than Facebook and use Google search a lot more than Bing at present. Having been lucky enough to have been around both campuses and know/met various ‘high ups’ at the companies they have a lot in common with their cultures, unless Dorsey has set about changing that as well. I believe Google would be a wonderful fit for the unprofitable Twitter and think the shareholders should embrace the opportunity should it arise seriously. Otherwise the question is: Will Twitter be here in 5 years time????