Dan Wagner and the fall of ‘unicorn’ startup Powa Technologies

The technology entrepreneur Dan Wagner, once one of the highest profile entrepreneurs of the dotcom era, appeared on television on Monday discussing the future of the high street and why it is struggling to survive.

Speaking on Sky News, he said: “There needs to be more of an engagement to drive people out of their homes and into those stores, and make that more compelling.”

What Wagner did not mention was the recent demise of his own retail-linked venture, a business that he had hoped would encourage this “engagement”, but instead collapsed into administration in February, having burned through £147m since 2013.

It was only three years ago that the company, Powa Technologies, was praised by David Cameron and hailed as a British “unicorn” – the term for a technology company yet to join the stock market that is judged to be worth more than $1bn (£700m). There are only a handful of British unicorns, including businesses such as flight comparison website Skyscanner, money transfer service TransferWise and music discovery app Shazam, but every startup wants to be one and every investor wants to find one.

However, Powa’s collapse shows how quickly a unicorn can go from valuable to valueless if it trips up on the way to the promised land.

Dan Wagner told Sky News that the high street needs to ‘engage’ people in order to survive. Photograph: Graham Turner for the Guardian

Founded by the flamboyant Wagner in 2007, Powa was developing a product called PowaTag, which would allow consumers to scan an item or advert with their smartphone and see details or buy the product immediately. It was billed as the Shazam of shopping; Powa also built retail websites and made tills and card-reading technology.

Wagner said in 2014 that Powa was worth $2.7bn and the company claimed that 1,200 businesses had signed up for PowaTag, although it was later reported that many of these were non-binding letters of intent.

But it all came crashing down two months ago after US-based investment group Wellington Management, which had put up £137m in loans and equity starting in 2013, and was Powa’s biggest investor, called in £42m of loans that had been due to be repaid in December.

Wagner, whose previous best-known business Dialog lost 95% of its value during the dotcom boom and bust, told BBC Radio 4’s In Business on Sunday that Powa’s fall into administration came as a complete shock.

“They [Wellington] didn’t tell us or the board. Just one day the administrators turned up,” he said.

“It’s the business equivalent of walking across the street and being hit by a car. It is one of those things which sometimes happens which is completely random. It doesn’t necessarily reflect on what we were building, it doesn’t necessarily reflect on the capability or the experience or the management capacity to deliver value. It doesn’t necessarily reflect whether or not the valuation was right or wrong. Certainly in this case, I can tell you it was just one of those extraordinary things that should never have happened.”

However, a report from administrators Deloitte into the collapse paints a picture of a business running out of control.

According to the report, Powa, which had not filed accounts since 2013, had £277,000 in cash in the bank when it went into administration; the report shows that money had been pouring out of the business at the same time as it was struggling to build revenues.

Powa made a loss of £16.6m in 2013 on revenues of just £667,000. The next year, it lost £38.5m on revenues of just over £1m and in 2015, it lost £31.8m on revenues of £4.8m. Most of the revenues came from its point of sale and web businesses, rather than the much-touted PowaTag.

Staff costs amounted to £6.8m in 2013, then £25m the following year and £24.8m in 2015. Some of that went to contractors, but last year about £15m was shared between 168 Powa employees – an average of nearly £90,000 a head.

Timeline of Powa’s demise. Photograph: Deloitte

It was extravagant in other ways. The company was based in the top two floors of Heron Tower, the tallest skyscraper in the City of London, but such a prestigious setting – and an unlikely one for a startup – came at a cost of nearly £6m over three years, according to Deloitte.

It also had offices in Hong Kong, Australia and Europe, and employed 300 people worldwide in an ambitious attempt to expand across the globe. Indeed, Powa had been pinning its hopes on a major deal in China, a joint venture for PowaTag hailed by Wagner as having limitless potential, which would generate £3.5bn over three years.

But this potential was never realised. Deloitte said: “PowaTag required modification for the Chinese market and significant work was undertaken to try to meet the delivery date in January 2016, which never happened.”

The company is now facing claims from 110 former staff related to unpaid wages of £150,000, and claims from trade creditors worth nearly £15m, but the Deloitte report indicates that they are unlikely to see any of the money.

Wellington, however, has received some of its investment back. The PowaTag business and technology has been sold at a notional cost of £42m to a new company jointly owned by Wellington and Ben White, who joined Powa as a director in January to raise funds for the business.

And Wagner himself has taken part in the administrator’s fire sale. He paid £1,155 for “certain items of boardroom equipment and furniture” from Powa. Perhaps he is getting ready for his next venture.

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