Powa: Is Dan Wagner’s latest unicorn hobbled?

His e-commerce software company, Powa, which he claimed would be one of the biggest of all time, is said to be struggling to pay staff, some of whom have been locked out of its European offices. Jamie Nimmo investigates

Dan Wagner is best-known for being the founder and former chief executive of Dialog (originally known as MAID), whose shares lost 95 per cent in value duing the dotcom crash (Getty Images)

The stylish offices of Heron Tower, the tallest skyscraper in London’s Square Mile, are tailor-made for City firms.

Ideally situated in the centre of the capital’s financial district, they offer the chance to show off to clients, with impressive views over the City of London and the opportunity to wine and dine them at one of the two restaurants at the top of the building, known officially as Salesforce Tower.

So it would seem an unlikely home for Powa Technologies, an eight-year-old start-up, which occupies the top two floors, 35 levels up, overlooking the famous Gherkin, and which would probably be more suited to trendy Shoreditch just down the road, which is a renowned start-up hub.

But Powa is no ordinary start-up. The man behind the company is Dan Wagner, the technology entrepreneur and one of the most recognisable faces of the dotcom boom-and-bust of the early 2000s.

Mr Wagner is best-known for being the founder and former chief executive of Dialog, which was dubbed “dial-a-dog” by City wags after its share price crashed 95 per cent on Nasdaq, New York’s technology-heavy market.

Not deterred by past failures, Mr Wagner turned his attention in 2007 to establishing the e-commerce software firm Powa, which he claimed would be one of the biggest tech businesses of all time.

People scramble around just to keep the lights on and not get evicted. It’s a nightmare

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The company’s PowaTag image recognition technology allows shoppers to take a photograph using their smartphone of an item or advert, and buy it with just a few taps. Retailers such as Argos and Laura Ashley have signed up to the service.

But it has emerged that the firm is struggling to pay staff on time, while payments to suppliers have also been held back, sparking concern over its future. Staff were also locked out of its European offices when it failed to pay serviced office provider Regus.

One disgruntled employee on jobs review site Glassdoor, who claimed to have worked at Powa full-time for more than a year, complained: “The company spends outrageous amounts of money on travel and parties for potential customers and vendors, yet leaves hundreds of unpaid bills and invoices to stack up. Other people scramble around just to keep the lights on and not get evicted. It’s a nightmare.”

Worse still, the company’s accounts for 2014 are four and a half months overdue. Failing to file triggers an automatic fine, and directors are liable for prosecution under UK law.

The last cash injection came in November 2014, which is a problem as Powa does not charge retailers or consumer brands to use its software.

Most app developers are rarely profitable in the early days, choosing to prioritise user growth over profit growth and rely on private funding, but Powa has yet to generate revenues, let alone turn a profit.

Revelations of funding issues are unlikely to come as a surprise to cynics sceptical about the valuations of loss-making start-ups and especially unicorns – those worth more than $1bn – which have become hot property over the last year or so.

Powa was valued at £1.6bn after its 2014 takeover of Hong Kong rival MPayMe, making it one of the most highly-valued unicorns in Europe. The $75m (£52m) fee for MPayMe was covered with just 3 per cent of Powa stock, putting an eye-watering valuation on the company. A year earlier, a funding round valued Powa at less than a fifth of its latest price tag.

Mr Wagner owns the majority of the company, with Wellington Management also holding a stake after the Boston-based investor ploughed $175m into the company in two rounds, the last being in 2014. The US asset management firm’s first backing in 2013 was considered a ringing endorsement of Powa’s technology – which at the time was more focused on mobile payments – so much so that even David Cameron jumped on the bandwagon, hailing the creation of 250 jobs in the UK.

Mr Wagner has made no bones about his plans to float the company on the stock market and has strongly hinted that it would shun London in favour of a listing in New York, criticising the UK for its lack of tech expertise.

“The UK market isn’t ready for a big tech flotation which is on the cutting-edge of technology. When you’re talking about guys such as Uber, the UK is not the natural place to think about,” said Mr Wagner, referring to the ride-sharing firm, the world’s largest unicorn with a staggering valuation of more than $60bn – more than the stock market values of car-making giants Ford, General Motors and Honda.

Almost two years on from Powa’s last financing, the cash appears to have dried up, which raises the question of how it will survive without revenues or another cash injection.

The company declined to comment on the payment issues and its late accounts, but confirmed it was in the middle of another private funding round.

That will be closely scrutinised, not least to see whether it can retain the same lofty price tag investors have put on its head in previous rounds.

It’s almost certain now that Mr Wagner will postpone his dream of a Powa float for another year, amid turmoil on the stock market and a lack of appetite for pre-profit and pre-revenue companies.

Either way, it looks as though Powa will be able to enjoy the high life in Heron Tower for a while longer at least.