Powa Technologies

What did it do?

Powa Technologies was a London-based company that built mobile commerce, e-commerce and in-store payment solutions. Its flagship PowaTag app used QR codes, audio recognition and beacon technology to promise that users could scan an advert or product and buy it within seconds. The company also offered smartphone-based point-of-sale devices and online shop services.

Why did it shut down?

Powa announced that hundreds, and later 1,200, businesses had signed up to PowaTag; after the collapse it emerged that most of these deals were non-binding letters of intent. The China UnionPay alliance announced in December 2015 was met with a letter from China UnionPay's lawyers stating that there was no business relationship with the company. In early 2016 the company began missing payments to staff and suppliers. On 19 February 2016 the investor Wellington Management appointed Deloitte as administrator, and the business units were sold off separately. A Financial Times analysis concluded that, against the company's claimed valuation of $2.6 billion, $106 million was a more realistic figure.

The story

For a while Powa was the darling of the British tech scene. It had won praise from prime minister David Cameron and was counted among the rare British unicorns valued at more than $1 billion. In February 2016, however, it was placed into administration, and it soon emerged that much of the story had existed only on paper.

Founded in 2007 by the entrepreneur Dan Wagner, Powa landed the biggest tech Series A of its time in August 2013: $76 million. According to the Telegraph, the company planned to use the money to create 250 jobs in the UK. Unveiled in New York in March 2014, PowaTag promised that users could scan an advert, a poster or an inaudible audio signal on the radio with their phone and buy within seconds. At launch the company said more than 240 retailers had joined. In June 2014 it bought MPayMe of Hong Kong for $75 million in shares, and Wagner claimed the company was worth $2.6 billion. A planned listing on the London Stock Exchange was postponed in 2015.

In December 2015 Powa announced an alliance with China UnionPay that it said had limitless potential. As the BBC later reported, China UnionPay's lawyers sent a letter stating that no business relationship had yet been established with the company. By then the more than $200 million put in by investors, led by Wellington Management, had largely been spent; the Hong Kong office began paying salaries late.

On 19 February 2016 Wellington Management appointed Deloitte as administrator; within days 74 employees in London were laid off. PowaTag and PowaWeb were sold in separate deals. Business Insider reported that most of the 1,200 PowaTag deals the company had announced were non-binding letters of intent. The Financial Times examined the claimed $2.6 billion valuation and concluded that $106 million was more realistic. Former employees interviewed by the BBC spoke of a management team without a clear strategy and of heavy spending, such as a two-floor office in Heron Tower.

Powa is a textbook case showing that bold announcements and letters of intent are no substitute for real customers.

Lessons for founders

• A letter of intent is not a customer; report only signed, revenue-generating contracts to investors and the press.
• Reward your sales team for transaction volume delivered, not for the number of documents signed.
• Lavish offices and spending ahead of revenue can take a company all the way into administration at the first funding delay.

Sources

1. Powa Technologies (Wikipedia)
2. Powa: The start-up that fell to earth (BBC News, 2016-03-21)
3. Powa Technologies Picks Up A $76M Series A Investment To Take Its Mobile Payment And E-Commerce Platform Large (TechCrunch, 2013-08-20)

This section is compiled from public sources (Wikidata, news archives and company announcements). Figures are given as they appear in those sources; unknown fields are left blank. If you spot a mistake in an entry, you can send us a correction.

Is something in this entry wrong? Request a correction → Method