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Topless dancers, champagne, and David Bowie: Inside the crash of London's $2.7 billion unicorn Powa

Topless dancers, champagne, and David Bowie: Inside the crash of London's $2.7 billion unicorn Powa
  • Powa Technologies collapsed in February after blowing through more than $200 million of investor money.
  • Insiders claim its flagship product was a "basket case" and company was plagued with management dysfunction.
  • Former staff recall wild Christmas parties with bottomless champagne and topless dancers.
  • Deal that valued Powa at $2.7 billion was a "dud" according to insiders.
  • CEO surrounded himself with "yes men" and allegedly wouldn't listen to criticism.
  • Rumours that CEO could have saved the company if he'd stepped aside, but refused.

Powa Graphic wide

Business Insider/Powa

Powa CEO and founder Dan Wagner, right, and the PowaTag product.

It was rare to see Dan Wagner on the 34th floor.

The CEO and architect of Powa Technologies usually stayed above, on the 35th floor of Heron Tower in London, where the company's salespeople and executives sat. But here he was, making an unusual visit to the engineering and product guys on the floor below.

And he was clearly angry.

Upstairs, Wagner had been trying to give prospective clients a demonstration of the company's newest and most exciting product - PowaTag.

The app stored people's credit card details and let them quickly buy products with a few clicks on their smartphone by scanning QR codes, ads, audiowaves, and iBeacons. Wagner had raised $76 million on the back of the product and said the app would help turn Powa into "the greatest technology company of all time."

Except right now, during this demo in early 2014, it wasn't working.

"Dan Wagner comes down to level 34, which was rare, bellowing and F-ing and blinding at people," a former employee who witnessed the incident told Business Insider. Wagner believed the company's firewall was preventing the PowaTag demo from working, our source said. "Bearing in mind what PowaTag does, it holds your credit card details in a database, his solution - and he screamed this across the office - was to 'Take the fucking firewall down right now'."

If the firewall went down, all the world's hackers could have cherry-picked customer details from Powa's servers.

"We didn't have many consumers, but you don't take down the firewall on something that's holding credit cards," says the former employee who witnessed the confrontation.

Wagner ordered Lyderic Landry, then Head of Systems at Powa, to shut off the firewall. He refused. Later that day he left the company.

Two other former Powa engineers independently raised the incident during conversations with Business Insider in the weeks following Powa's collapse into administration in February of this year. All believed Landry was fired for refusing to do what he was told.

Landry did not reply to an email and a message from BI on LinkedIn asking for comment on the event, but his LinkedIn profile confirms he left Powa in April 2014.

Dan Wagner did not respond to an email or call asking for his side of the story on this confrontation. Approached at an event in London this week, Wagner told BI: "I'm not going to give you any comment," when asked about Landry.

'One of those things that is completely random'

The collapse of Powa Technologies into bankruptcy administration in February is by far the most high-profile failure of a UK tech company in the last decade and has sent shockwaves around the industry.

Many in the tech industry now fear Powa has dented the UK's image as an emerging tech hub, making it harder for future startups to raise cash.

Dan Wagner_Timeline

Business Insider

Deloitte's report into the company's collapse, released last week, shows Powa raised just over $200 million in debt and equity in less than three years. At one point Powa claimed to be worth $2.7 billion and Prime Minister David Cameron even said he was "delighted" that Powa was contributing to the UK's economic recovery. 

But Powa managed to blow through all its funding at an alarming rate with little to show for it. At the start of February - the month it went under - Powa had just $250,000 in the bank and debts of $16.4 million.

Investigations by administrators show Powa's UK business was spending around £2 million a year on rent and £25 million a year on staff. At its peak, revenues were just £4.8 million.

BI's own investigations suggest money was also spent on lavish Christmas parties at Mayfair venues, with topless dancers and free champagne at one party.

In the weeks since Powa collapsed, Business Insider has spoken to over a dozen former Powa employees, as well as leading industry figures, to try and figure out how exactly a company could go so spectacularly wrong.

The Powa staff we spoke to ranged from engineers to sales and from the most junior level to senior executives. Their tenures range from 2010 right up to its collapse in 2016. All spoke on the condition of anonymity, fearing the scandal may taint their careers.

Collectively, the former employees and executives we spoke to paint a picture of a business plagued by management dysfunction and with no coherent strategy other than to try and sell or float the business in an IPO.

They attest to a technology company that was run by salesmen rather than engineers, with the product suffering as a result. All agree the company revolved around founder and CEO Dan Wagner, who drove it forward. And almost all find fault with Wagner, the greatest salesman of them all.

Dan Wagner   CEO Powa Technologies   (2)

Powa Technologies

Powa CEO and founder Dan Wagner.

"'Presentation is 9/10ths of a sale', that used to be Dan's line," says a former Powa employee who worked closely with Wagner in its early years. Eventually, the disparity between Powa's presentation and reality became too great for the company to bear.

BI has repeatedly tried to get Wagner's side of the story, given that many of the sources we spoke to left on bad terms with him and the company. But Wagner has ignored BI's calls and emails requesting comment over a number of weeks. Approached at an event in London this week, Wagner refused to comment on any specific points put to him BI and refused to cooperate with this piece.

Powa's main investor Wellington Management declined to speak to BI for this story.

Although Wagner did not agree to talk, it is likely that he would dispute much of the criticism of both the business and his management style.

In his only interview on Powa since the company's collapse, Wagner told the BBC he was "bemused" by Powa's collapse. He said: "It's the business equivalent of walking across the street and being hit by a car. It's one of those things that 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 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."

Many of the former staff we spoke to disagree.

A 'born salesman' stages an IPO in a Donald Duck waistcoat

Dan Wagner's businesses have a habit of running into each other and Powa was no different. The company began life as Venda Small Business Solutions in 2010, a division of Wagner's e-commerce website building business Venda.

Born in Middlesex in 1963, Wagner left school at 16 to work as a salesman in a hi-fi shop before ending up at an advertising agency. He secured the job by "sending a giant advert for himself, wrapped in brown paper, in a taxi to ad agency WCRS," according to the Telegraph. "Thirsty for new talent?" it asked." 

Wagner left the agency in 1984, aged 21, to start MAID, an early online information business. The business launched at the Waldorf Hotel in Covent Garden in 1985, one of the earliest signs of Wagner's flamboyant style.

MAID enjoyed success. The business listed on the London Stock Exchange in 1994 and Wagner became well-known as one of the youngest CEOs of a public company. In 1997, he addressed the prestigious Institute of Directors conference and was named Ernst & Young's entrepreneur of the year in 1998.

But Wagner, a lifelong Arsenal fan who settled on a slicked back hairstyle in the 1980s that has not been changed since, was also a controversial figure from the start. Prior to the float of MAID, he turned up at a media photo call in a Donald Duck waistcoat, an incident that some thought prompted MAID's stockbrokers to write down the price of MAID's shares in the IPO from 150p to 110p.

A 1997 profile of him in the Independent said Wagner was "known for his exuberance - some might say arrogance" and was "criticised for years in the financial community for his flamboyant ways."

Keith Woolcock, a technology analyst at Merrill Lynch in London at the time, told the Independent: "People view him as a marketing guy, a motor mouth … He's a born salesman. His way is to hype his company and talk it up."

The fortunes of Dialog, as MAID became in the late 1990s, turned sour towards the end of the decade. Wagner presided over a 95% crash in the company's stock price, leading the Financial Times to dub the company "Dial-a-dog". It was sold to Thomson Reuters in 2000 for $275 million, plus a $25 million investment in Wagner's new venture capital vehicle Bright Station. The Telegraph dubbed him "the posterboy for the dot com disaster."

A phoenix from the ashes of

Venda was Wagner's chance to bounce back. The company was created from the ashes of, a fashion business that was one of the dotcom bubble's most infamous failures. Wagner's Brightstation bought the technology underpinning it for £250,000 - a bargain price. Venda built online shops for retailers and in fact built part of the website of Wagner's beloved Arsenal.

Wagner ran Venda throughout the 2000s relatively successfully, continually teasing the press with the prospect of floating the business. He also dabbled in side businesses involving fashion blogging and search engine tech.

But, as the decade drew to a close, he hit upon a bigger idea - what he called 'm-commerce'. Seeing the rise of smartphones, Wagner reasoned that there must be a way to harness these devices to get people spending.

"He felt that there was some way to use mobile to buy anything, that was where he wanted to get to I think," says Ed Lea, the founder of mobile payment app Paddle. Lea met with Wagner in 2012 to discuss Powa acquiring Paddle, which stored people's card details and then let them buy things with a few clicks by scanning QR codes.

Wagner wanted Paddle to form the code base for PowaTag - his visionary product that would let people buy things by scanning, well, anything.

"After meeting with him and discussing things with him I just felt I didn't really want to do a deal with him," says Lea. "I just felt something wasn't quite right. He was describing his visions of everything that I felt were unrealistic. The valuation he was putting on his business and my business didn't make any sense."

Lea adds: "He didn't really understand, I think, what he wanted to do. It didn't feel like he had any sense of product or tech even, he just wanted to be selling things. I think he had aspirations that he didn't understand technically, I don't think."

Wagner told the Telegraph in 2012: "I am a businessman, in that I wear a suit and tie, but actually I see myself as an artist. I think outside the box. I don't follow trends. I follow instincts." The paper drew a comparison to the Office's David Brent in the same article.

'Enabling the mobile device in that way is the future'

Undeterred, Wagner set about building his "m-commerce" vision at Powa, as Venda Small Business Solutions was now known. Wagner conceived three separate Powa products:

  • PowaWeb, an online shop building outfit that grew out of Venda.
  • PowaTag, which let consumers buy anything anywhere. It stored people's card details and addresses, then allowed them to buy goods in a few clicks by scanning QR codes, audiowaves, TV adverts, even pictures of the products.
  • PowaPOS, known as mPowa in the early days, which was two products pitched at retailers. One, the PowaPOS terminal, was a "next generation" till that had the functionality of an iPad and linked with PowaTag. The other was mPowa, a dongle that plugged into a smartphone to allow it to accept cards a little like Square's early products.

PowaTag was Wagner's pride and joy, a product that as recently as this week he continues to push, telling the audience at the EntrepreneurCountry Forum event in London: "Watch this space, because that concept of enabling the mobile device in that way is the future in my opinion. You'll see PowaTag-esque solutions in the market, maybe from me, we'll see."

'The Blackwater of the high seas'

Wagner built a prototype of PowaTag and mPowa by licensing technology from other companies and bolting it all together. At the same time in 2012 he set up a new umbrella company to raise money and assembled a team of key lieutenants who would help him build the business, many of whom Dan had known for years.

Core among them was Ant Sharp, a school friend of Wagner's, who came in as deputy chairman. In the early days, he was in and out, according to a former early employee.

Around this time, Sharp was also trying to set up a private navy -a maritime security venture called "Typhon" - that would protect ships from pirates. Wired called the venture "the Blackwater of the high seas,", referencing the US private security company that worked extensively in Iraq.

Typhon's vessels would escort shipping containers on their journeys and watch for Somali pirates. Sharp, then 50, told Wired in 2013 that the ships would carry "small arms, long-range rifles and non-lethal baton rounds" or rubber bullets. It's unclear what became of Typhon.

ant sharp and dan wagner

Business Insider

Ant Sharp, left, with Dan Wagner.

In later years, Sharp became closely involved in Powa and took the role of "Dan's enforcer", according to several former employees. If Wagner was the party leader, conceiving the vision, Sharp was the chief whip, corralling employees and even going so far as to check sales employees' call logs to make sure they were working hard enough, according to a former employee. Sharp could not be reached for comment.

John Wagner, Dan's father, also took up a non-executive directorship at Powa in 2011. A former BMW dealer, Wagner Senior had served as MAID's US President and chairman of Venda.

Based in Thailand, John Wagner eventually presided over Powa's Asian operations but would occasionally visit the UK and US offices to help train sales people, according to former employees. Dan Wagner credits his father, a former car salesman, will helping him learn the ropes of business by rewarding him with 10p for quickly naming the brands of commercials on television as a child, according to The Independent.

John Wagner did not respond to a LinkedIn message asking for comment.

From car wash to accountant

The oddest figure in the office in those early years was Henry Agoh - the accountant.

"The guy used to wash Dan Wagner's car and Dan said, what do you want to do with your life? He said, well I'd like to be an accountant," remembers a former Powa product manager. "Dan Wagner funded him to take his exams and then employed him to manage his financial affairs."

The guy used to wash Dan Wagner's car and Dan said, what do you want to do with your life? He said, well I'd like to be an accountant

Agoh did not respond to an emailed request for comment from BI so we have been unable to verify this story with him. But several former employees recounted this incredible tale to BI independently, saying Wagner and Agoh worked closely.

One developer says Henry's "origin story" was regularly recounted by CTO David Ingram as an example of Wagner's kind spirit. It seems commonly known in the office.

It's not clear exactly what role Agoh had at the company, but one source tells us that he definitely handled Powa's accounts for a period in some capacity.

Unlike Wagner's other close confidantes, Agoh does not show up as a director of Powa Technologies at any point. However, the company's share register show Agoh owns just over 15,000 shares Powa - 0.000186% of the company.

'It always looked odd to me'

With prototypes built, Wagner set about raising money. But this proved a difficult task, even for a master salesman like Wagner.

Venture capitalists, traditional bankrollers of technology startups, were lukewarm on Wagner's vision. Most didn't think e-commerce was moving the way he thought it was.

A partner at a leading European VC fund, who did not want to be named, told BI: "It always looked odd to me - it's a rehash of Venda, which was a 1999 not-great ecommerce platform, and made some ambitious statements about using beacons and sounds. It was hard for me to believe the story."

A former employee who worked closely with Wagner during this period told BI: "Dan went to quite extraordinary lengths to raise funding." Wagner wined and dined "people close to the Rausings", the heirs of the Tetra Pak billions. Investors in fast food chain Leon passed, according to the source. Greek money was on the table at one point.

A 'very weird' $76 million investment

Eventually, however, Wagner did secure investment - and a lot of it. In August 2013 Powa secured a $76 million "Series A" round, which Wagner hailed as the biggest early-stage investment in European technology, ever.

He told the Telegraph at the time: "Even in Silicon Valley, only about three companies every five years receive this kind of growth capital. Facebook raised only $500,000 in its [first funding round]."

The cash came from Wellington Management, a Boston-based investment manager. Wellington manages over $900 billion globally but typically invests in stocks and bonds. The European VC partner says it was "very weird to see a Boston-based public equities manager like Wellington come into this. It feels like they got sold the big picture."

What observers couldn't see from the outside though was that the money Wellington had put in came with hefty strings attached - Powa was committed to paying the investment manager a 5% annual cumulative dividend, accounts show. £11 million of the funding round was also long-term debt, which would have likely needed servicing with interest payments.

mPowa, the company's smartphone card reader, enjoyed some early success during this period. In late 2012 and early 2013 Powa signed "multi-million pound" deals with South African bank FNB, Portugal Telecom, and, according to former employees, Japan's Aon. Under the white label deals, Powa would make branded versions of its card reader for each customer, which they could then sell on.

'It was a basket case of a product'

But Powa was already suffering from serious problems with its technology. Despite managing to raise tens of millions off the back of PowaPOS and PowaTag, both were still only at the prototype stages. The products were far from ready to roll-out, and development was almost constantly in turmoil.

"It was a basket case of a product, it was just consistently missing deadlines," says a former senior engineer of PowaPOS. "But it wasn't just development, the entire project was just really poorly run. Sales teams were just too eager to say yes to clients without realising development was a finite capacity. That was a problem throughout the company."

Sales teams were just too eager to say yes to clients without realising development was a finite capacity. That was a problem throughout the company.

A salesman who worked at the company for two years pointed the finger at management when this was put to him. He says management were constantly obsessed with pushing the next big thing rather than delivering what had been promised. As a result, clients or prospective clients were constantly disappointed.

Aon - the big reinsurer - in particular was angry about delays to delivery on the mPowa deal. Several staff recall executives and engineers making trips to Japan to reassure the client that progress was being made.

Another engineering team leader who worked on the mPowa project remembers: "I've been in software for about 10 years now so I know when stuff's going well and stuff's going badly. This definitely wasn't going well at all."

'Smoke and mirrors'

PowaTag was similarly troubled. When you ask former staff who worked on the project about it, a phrase that comes up repeatedly is "smoke and mirrors" (which is also one of the most commonly used phrases in Glassdoor reviews of the company.)

Says a senior engineer: "It was hosted on someone's box at home, it had to be restarted every day."



A mockup of PowaTag in action.

Powa's solution was to throw money at the problem. The company went on a hiring spree, growing headcount from 74 at the end of 2013 to over 430 employees by the end of 2014, according to accounts filed with Companies House.

Despite the huge swell in headcount, problems persisted. An engineering team leader told BI: "There were occasions where we would have project managers bombarding individuals with numerous different deadlines. People had no idea as to when things were expected to be delivered."

As numbers swelled, so did complexity. Says the engineer: "One of the things at Powa is people's titles are changing all the time. Dan used to hire a lot of people who he'd worked with many, many years ago. That style of management may have worked in the '90s but it doesn't work now."

A product manager at Powa told BI: "There were differing management structures going on. It was fairly obvious to me in hindsight that you had Wellington bringing in people to make it work professionally and you had Dan Wagner and his management team trying to work their way. The two just didn't work together."

An entire department fired on New Year's Eve - some by voicemail

Eventually, problems got so bad at the PowaPOS division - the point of sale and mobile card reader products - that Powa took the nuclear option.

Almost the entire PowaPOS team, many of whom were working over the festive period to try and make progress on their flagging product, were made redundant on New Year's Eve 2013. For those not in the office, the exit was even more humiliating.

The product manager says: "It came out that not everyone worked New Year's Eve and they actually hadn't bothered to ring people back who hadn't picked up and had just left voicemails." This was just months after Powa's huge fundraise.

London on New Years Eve


PowaPOS staff were let go on New Year's Eve 2013.

The team was eventually replaced by Smart Business Solutions, a company in Atlanta that made point-of-sale payment products that Powa acquired in March 2014.

Engineers and product staff already felt overworked and underappreciated but the New Year's Eve firings cemented the feeling.

A former senior engineer says: "The company was hugely imbalanced towards sales. All the other teams were second class citizens. They had one of those sodding cow bells that they'd ring when they made a sale." (Other staff says the sales bell was only in the company's early years.)

Another developer says of his co-workers: "They were treated like a commodity."

Turnover of development staff became a huge issue as management repeatedly fired tech staff, blaming them for project delays, and the demoralised remaining employees chose to leave voluntarily. This created yet more delays and added to costs as Powa looked to hire vacant slots.

To lessen the problem, Powa began offering more share options to staff in a bid to get them to stay and to get them invested in achieving Wagner's vision.

That was a struggle. A former product manager who left after less than a year in 2014 says: "I came to the realisation that it was not going to end well so I should get the hell out because the share options were not going to be worth anything. I came to the conclusion that it was better to be unemployed than to be there."

This was in mid-2014, almost 18 months before the company went under.

'It's insane. All these people were on the payroll.'

Despite the turmoil behind the scenes, Powa quickly acquired the trappings of success after the $76 million came in.

An employee who worked closely with Wagner in the early years says: "The worst thing you could give someone like Dan is money because he didn't know how to spend it."

Wagner, who did well for himself in his earlier ventures, is a fan of ostentatious displays of success. His 5ft 11 frame is never not coated in sharply pressed suits and ties. His Bentley was infamous in the office. He often parked in disabled spots with little regard for fines, according to former staff, something former temporary CFO Steven Prowse claims "says it all" about Wagner. "It has a sticker [for handicapped parking] but it's for one of his parents who live in the Far East," Prowse has said.

Level 35 terrace Heron Tower


The view from the terrace on the 35 floor of the Heron Tower, where Powa's executive and sales team sat.

With $76 million in the bank, the company moved from its cramped Percy Street offices to two floors in the Heron Tower, a skyscraper in central London that Deloitte's insolvency report reveals cost the company around £2 million a year.

Heron Tower, now known as Salesforce Tower after another resident, afforded executives on the 35th floor incredible views of the London skyline from the balconies. The building is also home to high-end restaurants Sushisamba and Duck & Waffle.

Satellite offices sprung up around the world, including a New York outpost at One Bryant Park, a $1 billion development that's also home to Bank of America.

A former US executive told BI: "They would spend money on stupid things. They had patio furniture in their Heron Tower office that cost £25,000. Stupid shit like that."

Despite little revenue flowing through the business Powa acquired offices in Italy, Spain, France, Hong Kong, Mexico, Taiwan, Shanghai, and Thailand.

Powa group


Powa's complex group structure, according to Deloitte's insolvency report.

A former developer who joined before the investment remembers: "You'd go to the Christmas party and be talking to someone who's vice president of PowaTag in Spain or Greece or whatever. All these people with these titles. It's insane. All these people were on the payroll." That payroll reached a staggering £24.8 million by 2015, according to Deloitte's insolvency report.

'The Christmas parties were partly legendary, partly disgusting'

The Christmas parties themselves were also an excuse to spend money. A former product manager says: "The Christmas parties were partly legendary, partly disgusting."

Powa's first Christmas do was held at the Ritz, according to an early employee, the world famous Mayfair hotel where rooms cost upwards of £500 a night.

The 2013 party was held at the Heron Tower office shortly before Powa moved in. The product manager recalls "a table with women who didn't work at the company and were very skimpily dressed. They were very attractive. You can draw your own conclusions." The mysterious women were confirmed by several other employees.

A Veuve Clicquot display at the cocktail reception hosted by Saks Fifth Avenue And Off The Field Players' Wives Association on January 30, 2014 in New York City. (Photo by )

Jemal Countess/Getty Images for Saks Fifth Avenue

Powa employees recall free champagne poured all night at Christmas parties.

"They had the most expensive champagne I've ever had in my life - Veuve Clicquot," remembers the product manager. "There was no expense spared. Dan Wagner was there, it was going to be 'spend as much as possible.'" Veuve Clicquot champagne sells for around £30 a bottle.

2014 saw Powa rent out the One Mayfair venue for its Christmas Party, a large event space in the exclusive London area that describes its interiors as "opulent grandeur" and boasts on its website that it has "consistently attracted luxury brands." One Mayfair confirmed to BI that it costs £12,000 to hire the whole venue out, with catering and entertainment paid on top of that.

The entertainment Powa got in was memorable. BI has seen a video that a source tells us shows topless dancers in paddling pools pouring liquid over themselves at the Christmas party. Several other sources confirmed the topless dancers, who apparently performed with neon paint.

A former executive who attended the party says many people were offended by the "utterly distasteful and sexist" entertainment. Wagner sent an email to the company shortly after the party apologising. "He said he had nothing to do with it and it was someone else's fault it had happened," the executive says.

The product manager says: "I mean he [Dan Wagner] was living the 1980s all over again."

Wagner declined to comment on the Christmas parties when asked about them at a London event this week.

'When I saw that valuation I thought, this is crazy!'

By mid-2014, Powa got the ultimate mark of success for a private tech business at that time - a $1 billion "unicorn" valuation.

Venture capital money was flowing free and easy and companies like Uber and Airbnb were hitting the headlines with huge valuations in excess of $1 billion - the so-called unicorn status.

Powa didn't look like much of a unicorn at this time. PowaPOS clients were grumbling, uptake of PowaTag was limited, and its web shop business was unremarkable.

Tony Craddock, head of the UK's Emerging Payments Association, a trade group, told BI: "They kept themselves to themselves, they didn't really engage with the rest of the payments industry. I never saw them at any networking events or dinners, nobody ever introduced me to them.

"But we saw the publicity and heard the stories. It wasn't obvious what the business model was."

Sebastian Klarna


Klarna CEO Sebastian Siemiatkowski.

Powa's value at this time was likely around £243 million, according to a lawsuit brought by the founders of Smart Business Solutions and reported by the Financial Times.

But an opportunity to reach unicorn status came along in the form of MPayMe, a company out in Hong Kong that had built a similar product to PowaTag known as Znap.

In June 2014, Powa acquired MPayMe in an all-shares deal that, according to Powa, valued it at $2.7 billion. It came as a huge surprise to most in the industry.

"When I saw that valuation I thought, this is crazy!" Sebastian Siemiatkowski, CEO of Klarna, told BI. Klarna is a Swedish payments company valued at $2.25 billion that has also attracted investment from Wellington, Powa's main backer.

Siemiatkowski continues: "I'm obviously doing something wrong if this company that has barely started could get this valuation while Klarna is at a similar levels. Anytime I've been talking to investors it's always been what's your P&L [profit and loss], the classical way to value a company."

Klarna processed $9 billion worth of transactions in 2014 and 30% of all online sales in Sweden. That same year, when Powa's valuation apparently overtook Klarna's, Powa had revenue of just £1 million. While profitable on a gross basis, Powa lost £38.5 million that year.

A lawsuit behind the deal

Crucially, MPayMe was behind the $2.7 billion valuation of Powa, not a venture capital investor, which is usually the case when private valuations are reported in the press. As it was an all-shares deal, it was up to the Hong Kong company to decide on a fair price.

Still, why would MPayMe accept such a high valuation if it was so wide of the mark? It looks like the company may have needed a lifeline from Powa.

A lawsuit brought by MPayMe's former US CEO Greg Gresh over his dismissal and stock rights suggests problems at the company shortly before its acquisition. 

Like PowaTag, MPayMe's product was a consumer-facing shopping app using QR code scanning. But to make it work, the company needed to strike deals with retailers so that its technology would appear in various shops.

Towards the end of 2013, according to the suit, Gresh wrote down MPayMe's US 2014 revenue forecasts from $7.8 million to just $530,000, after realising merchants didn't want to adopt the company's product.

Shortly after writing down revenues, Gresh "became increasingly concerned about [CEO Alessandro] Gadotti's financial representation to investors," according to the suit. Gadotti was the group CEO of the company, and Gresh's boss.

Gadotti forecast revenue of $34.8 million by the end of the first quarter of 2015 and Gresh "challenged the integrity of the global revenue forecast," his suit claims. Gresh alleges that after this, Gadotti began planning to push him out.

Reached via LinkedIn, Gresh told BI that the suit was settled last year and he could not comment on it.

Reached over the phone in Hong Kong, Gadotti told BI: "The suit has been settled and most of the allegations were just to be stronger in the negotiation of the settlement."

'They bought a bit of a dud vehicle'

Wagner said at the time of the MPayMe deal that the "integration of Znap technology [MPayMe's main product] with PowaTag will bring a phenomenal new scope to our provision."

But a former Powa account manager remembers: "A lot of the code bases they weren't able to use, it was just putting new UI interfaces on the front end. They bought a bit of a dud vehicle."

Today, Wagner admits that MPayMe added little tech-wise. He told the audience at the EntrepreneurCountry Forum event in London this week: "In the case of MPayMe and Powa, we bought a whole team of people in Asia Pacific. What we got from that was not necessarily great technology, because what they were doing was sort of similar to what we had.

It was another company that had been struggling to do the same thing. They'd built a product, had tried to go to market and weren't getting traction - Ed Lea, Paddle

"But what they had was established relationships and developing relationships with partners in Asia. They had two big partners that they were working on: ChinaUnion Pay and Line across South East Asia. Both relationships take a long time."

An MPayMe employee who stayed through the takeover says: "Powa made a Frankenstein out of the technology. There was the technology there but Powa wanted to merge it in a very different way and do very different things and keep adding things."

"It's like if you buy a car and then say, no, no, this car has to be a pick-up, so you start cutting it up. It doesn't work."

Between 2013, when MPayMe was acquired, and 2014 the company's UK revenue fell from £29,779 to just £120. The former MPayMe employee says there operations essentially just stopped.

"I saw the acquisition of MPayMe or Znap," says Paddle's Lea. "That didn't make much sense. It was another company that had been struggling to do the same thing. They'd built a product, had tried to go to market and weren't getting traction."

Still, Powa was a unicorn now.

'Why are we not doing what PowaTag is doing?'

MPayMe was struggling to gain traction with merchants, and so was PowaTag - but you wouldn't have known from the outside.

When it launched in March 2014, PowaTag claimed to have signed up 240 retailers, including Adidas, Reebok, Universal Music, and Carrefour. By January of this year, that number had risen to 1,200.

For Wagner these "deals" could be shouted about in the press and taken to potential investors as signs of industry traction.

Dan Wagner told the Telegraph in 2014: "You don't win brands like Adidas when you're a startup business, before you've even launched a product, without having truly transformational technology." 

Dan Wagner Sky 2

Sky News/Business Insider

Wagner appeared frequently in the media while at Powa and recently returned to Sky News.

Klarna's Siemiatkowski says: "I came across them through the PR stuff. People started sending me emails saying, why are we not doing what PowaTag is doing?"

But the reality was that, in most cases, Powa had simply had early conversations or trials with these retailers. Business Insider first reported that of the 1,200 brands Powa claimed to work with, the majority had not signed formal contracts. Deloitte later confirmed this, saying only around 100 merchants signed "formal contracts."

When contacted by Business Insider, a spokesperson for Adidas told us Wagner's statement was "incorrect", saying: "While we were in touch with this company back in 2014 we ended up not working with them." 

Powa relied on what's known as "letters of intent." These are non-binding signals of interest that could be precursors to a deal but could just as easily come to nothing.

A former product manager says: "At one point it [the letter of intent] was an A5 piece of paper and what sales were doing was going in and saying if you just sign this official NDA so we can have an open conversation about it."

"People, usually not the right people, at the various prospective clients, would sign it. Dan Wagner would then use that to shout 'Oh we signed client X!' The client would then go 'err ....' but it's very difficult to say 'no you haven't.' You can't publicly say that."

A former US executive told BI: "I would get calls from people who would say, 'Hey, I read somewhere that we're doing business with you - could you walk us through what it is exactly that we're doing with you?' It would literally be that kind of thing."

'They were interested in building the perception that they had a business'

A former salesman told BI that in 2014 bonuses were paid to sales staff who produced signed letters of intent - a highly unusual practice. But the salesman says this bonus plan was changed to reward full contracts in 2015, and he insists that "we signed some good deals."

He points to a partnership with Vodafone but says management did not follow through. The emphasis was on selling, our sources say, with delivery of an actual product a distant second.

The US executive says: "They had no interest in building a business, they were interested in building the perception that they had a business."

To try and boost adoption among retailers, Wagner returned to his stalwart tactic - spending money.

Powa conducted a series of trials of the PowaTag app with big names like Tesco in the UK and Comptoir des Cotonniers in France. But, according to several former employees, these were paid for by Powa itself.

Powa would pay to integrate itself into the partner's till systems. This could easily cost Powa £200,000 a pop and usually resulted in little revenue. The trial in France generated only around 200 "Tags" according to former staff, most of them by Powa employees.

"They paid for all of the free lunches for the Tesco trial too, that was the only way they could get people to use that," says a senior engineer. "That was dead in the water."

'No one's able to make this work. There isn't a market.'

Merchant adoption was only one side of the coin. The real issue was that people just weren't using the PowaTag app to buy things.

PowaTag was conceived as a way to help retailers, not customers. Wagner noticed that the biggest drop-off point in online sales is towards the end of the checkout process - people just get bored filling in those online forms that ask for your address, email, card number, and on and on. Perhaps customer conversion rates could be improved by making buying on your phone as simple as a few clicks?

For consumers, PowaTag didn't offer much benefit. If anything, taking your phone out and scanning an advert in a magazine before proceeding to a purchase felt like even more effort.

iZettle CEO Jacob De Geer


iZettle CEO Jacob de Geer.

"I've been very skeptical to QR codes since the day they were presented to the market," Jacob de Geer, CEO and founder of iZettle, told BI. The Swedish startup makes card readers for mobile phones - a bit like a European version of Square.

He says: "We have a company pushing QR codes very heavily in Sweden and you've never seen pick-up from the consumer side. I feel it's the typical fintech product which is a solution looking for a problem to solve. I never really understood the rationale behind it."

Klarna's Siemiatkowski says: "When I was presented with the [PowaTag] product at one point in time, I didn't get it. It was so hard [to use]. Sign some deals with some big clients on the promise of joint advertising or whatever, that's not really hard. What's really hard is getting consumer pickup and getting people to change their behaviour."

Paddle's Lea says: "No one's able to make this work. It's not really anything. There isn't a market." Paddle, which held trials with Marks & Spencer similar to Powa's work with Tesco, ceased trading in January 2015 when Lea realised consumers were never going to use their phones to buy things by scanning codes.

A big drain on the company's cash

PowaTag wasn't the only division on trouble. Throughout 2014 and 2015 PowaPOS - the division making next generation retailer tills and mobile card readers - was hemorrhaging money, according to former staff.

Powa was developing its card-reading terminal with companies in China but this proved difficult. A senior engineer remembers: "There was always stuff going on with mPowa [as PowaPOS was known then] in China in Shenzhen. The company was always holding Powa to ransom."

When devices did arrive, they weren't up to scratch. A developer made redundant in February says: "We made a lot of basic errors. We sent out PowaPOS pin devices to customers but we didn't check battery charges, bank customers couldn't use them." One delivery had to be junked because it did not support chip and pin.

A former executive who spoke to BI estimates Powa spent as much as $60 million on development of the PowaPOS solutions. While the division was one of two bringing in revenue (PowaWeb was the other), costs were running well ahead of what Powa was bringing in.

'He basically hired a bunch of people that were yes men'

By late 2014, it was clear there were serious problems with the business. PowaPOS was sucking up cash. PowaTag was failing to gain traction. And PowaWeb, while it was functioning perfectly fine in the background, was never going to be a business that could support Powa's lofty valuation and funding to match. Worst of all, the company's cost base had run out of control, with the hundreds of staff around the world costing tens of millions a year.

Management stuck their heads in the sand, according to multiple former staff.

A senior US executive says: "What Dan did, he basically hired a bunch of people that were yes men. No one would challenge him. The idea was interesting but you know what? The idea did not evolve with the times. It was Dan's unwillingness to employ smart people around him and his inability to take feedback."

A project manager says: "There were a lot of 'yes' people who would try and spin things in such a way as to say 'No, no, no, it's not Dan's fault, it's our problem we've got to do something about it.' These people are also going to save face. Even when stuff is on fire downstairs, they'll say, 'No, no, no, everything's fine.'"

Another developer remembers: "It was very much kind of 'watch your back.' It was toe the party line. You couldn't really speak out against anything. Development wasn't driving development." The party line, he says, was "basically look this is a fantastic product and everyone wants to use it."

All the former staff BI spoke to say the goal in the company seemed to be to get it to IPO. The product manager says: "The whole thing was all about image. It was all about raising the maximum amount of money so that he could flog or float the business as soon as possible for the most amount of money."

In August 2013, when Powa had just closed its first round of investment, Wagner told the Telegraph: "In 12 to 18 months, we will either go public or take on a [second round of funding]." 

In November 2014, true to Wagner's forecast Powa raised a further $80 million from Wellington. Wagner told the Wall Street Journal: "It's a huge injection of capital and vote of confidence … If you get the engagement with the merchants, then consumers will follow. We're about selling, we're not about payments."

The project manager says: "Dan's a very good salesman. He's constantly pushing the idea that he's going to be the next Google. He's very good at saying, "We're valued at this." He's able to spin stuff. That's the reason why he's able to pull clients along like this. It's all smoke and mirrors."

An 'extraordinary' deal in China worth $5 billion

As 2015 rolled around, Wagner thought he had worked out a solution to Powa's problems: China.

PowaTag and PowaPOS were beset with issues and money was running out like sand in an hourglass. What's more, global tech giants like Apple, Samsung, and Google were wading into the payments space, launching their own payment products to rival PowaTag.

But if Powa could crack China - a market of over 1 billion people where smartphone adoption was high - that would put fresh wind in the sails. The MPayMe deal had opened the door to conversations there after all.

As early as April 2015 Powa was deep in discussion with potential partners in China, according to documents seen by Business Insider. But the deal took months to crack and Powa was only able to finally announce its entry into China in December 2015.

When it was finally announced, Powa told BI that it had signed a 10-year deal with China's state-owned payments company China UnionPay and Wagner told us: "It's a fantastic endorsement. It's an extraordinary move for a government-owned multi-trillion dollar company to outsource and rely upon a small British tech company to deliver this infrastructure for the whole of China. It's extraordinary."

In fact, according to Deloitte's administrator's report, the deal was nothing like that. Powa had created a joint venture with a small local operator - CN International Payment Services - that had been given permission by China UnionPay to operate in the country. China UnionPay sent Powa a cease-and-desist letter, according to the FT.

Wagner told BI that the deal would bring in $5 billion over two years, a wild-eyed forecast. In any case, it was already too late. Powa had raised a further $50 million in 2015 to keep the lights on but by December, the coffers were running dry.

The Christmas party cancelled, bonuses delayed, and Wagner as Bowie

In a video sent to staff in mid-December Wagner cancelled the Christmas party and delayed bonuses, promising them later in 2016 once the China deal was implemented.

At the end of the month, $60 million in loans from Wellington were due for repayment. Staff wages were missed. Powa tried to re-negotiate but failed. In January, payments to staff and contractors were again missed.

The company and management carried on as if everything was fine. A former developer let go in the February redundancies says: "During January we were working overtime because we were working to deliver this product for China UnionPay. We were asking people in London to come in early at 7 a.m. so they would overlap with developers working in Hong Kong. People were working weekends."

wagner bowie

Twitter/Steven Prowse

Dan Wagner dressed as David Bowie.

A company-wide email was sent at the end of January, days after David Bowie had died, featuring a photo of Wagner dressed as the pop star.  "Long live the legacy of David Bowie," the email said. "(....I don't do tributes in half measures!....)."

You would not think the business was on the verge of bankruptcy.

Wagner had been in this position before. Speaking to website Business Zone about how he set up MAID in the 1980s, he said: "I saw a lot of people and convinced them that they should help me create it, on the promise that they would get paid. I racked up £150,000 worth of bills, which I had no way of paying, but once I had built it, I was able to raise money."

This time, the bills were an order of magnitude bigger. And, with global stock markets taking a turn downward, raising money had become impossible for a business in Powa's shape.

The developer laid off in February remembers: "First thing we had was, OK you haven't been paid but it will come in, there are investors and they're doing due diligence. It will go in by the end of the month."

"My boss contacted me on the first week of February to say things hadn't happened. Once a week Dan Wagner would send out an email saying money would come through and promising bonuses for us when it did."

The bonuses never came. When missed payments were reported in the press in February, pressure began mounting on the company and, when it emerged that Powa had just $250,000 in the bank debts of $16.4 million, Wellington sent in Deloitte.

'If you couldn't get into your email, that's it, you'd been made redundant'

Even as administrators Deloitte moved in, Wagner told the FT that it was "business as usual." He then released a statement, not signed off by Deloitte, saying that Thompson Investments was stepping forward to buy the business

It wasn't the case. As soon as Deloitte arrived and saw the books, they began swinging the axe and dismantling the business.

The developer who was made redundant remembers: "At 5 o'clock on Monday people were asked to go to two rooms. They were either asked to go to a meeting on the 34th floor or the 35th floor. Depending on what meeting you were called to you were either OK or you were told you got made redundant."

"Bear in mind that the majority of people were working from home by this point, nobody bothered to email them. Later on that night there were some WhatsApp chats going around and we heard that this had happened. Then there was a rumour that if you couldn't get into your email, that's it, you'd been made redundant. I checked my email and I couldn't get in."

Rumours Wagner 'could have saved all of us if he stepped down as CEO'

Wagner blames Wellington for sending the company under. He told the BBC: "I have to say that I'm as bemused as everybody else. The board did not want the business to go into administration, it was caused by the debt line. That's how they triggered the administration. But it doesn't make any sense, I don't think to them or to anyone else watching this, because it's just value destructive."

By the time Deloitte came in Powa was losing over £30 million a year on revenue of £4.8 million. But it's not unusual for startups to be loss making in their growth phase and the £4.8 million figure was up from £1 million the year before.

Still, staff and former executives are angry at Wagner. The developer made redundant in February says: "We heard rumours that Dan could have got money earlier but the people that wanted to invest in the company wanted him to stand down as CEO. I heard that a few times, that he could have saved the company, he could have saved all of us if he stepped down as CEO."

In the course of reporting this story BI heard this rumour from several former employees - Wellington would have kept the company going if Wagner had stepped aside. BI put this to Wagner over email but he has not responded. Wellington too did not respond for an emailed request for comment.

Whether or not it actually happened, what is true is that the story was widely circulated among staff who were let go and many of them believed it.

For his part, Wagner pleads ignorance. He told the BBC: "They [Wellington] didn't tell us or the board. It was a complete shock."

"I think the majority of my staff know that I was absolutely committed to making a success of my business and the circumstances surrounding its demise were very deeply disappointing to everybody. I would hope they would not blame me for what happened but some of them will undoubtedly feel that way."

'You don't serve champagne all night for a startup. You just don't.'

It's now two months since the collapse of Powa and the job of dismantling the company is complete - staff have been let go and the UK business has been broken up and sold.

But there's still the task of unpicking what exactly the impact of the business' collapse will be. A former executive of Powa in the US who declined to be named says: "There are victims here. Not only the investors here, but these poor employees. So many promises were made, none of them were kept."

"For many of them, it's probably their first jobs and was probably going to be a major inflection point in their careers. I felt really bad for those guys."

For Tony Craddock, director general of the Emerging Payments Association, the worry is that the collapse of Powa will damage the UK's ability to raise early-stage funding, particularly in fintech and "paytech", the area he specialises in.

In Craddock's conversations with investors and industry figures in the weeks since it went under several have bought up Powa, expressing fear about what it means for the industry.

Craddock says: "My worry is, when you've got people like the people investing in Powa, I don't believe they had a tight enough finger on the pulse. How could they have?"

"The Heron Tower is not a place to put an entrepreneurial venture, a startup. Especially one that's pre-revenue. You don't serve champagne all night for a startup. You just don't."

'You just need to get on with it, pick yourself up, have another go'

Wagner, who has refused to engage with BI since the company collapsed, appears undeterred by the whole thing.

On Wednesday, he spoke at the EntreprenerCountry Forum event in London's Mayfair, telling the assembled audience: "Entrepreneurial spirit and entrepreneurial endeavour and trying to create something is full of pitfalls. You just need to get on with it, pick yourself up, have another go, which is exactly what I'm going to do. And I will continue to do probably forever."

Wagner hinted at a new venture, Rezolve, which he suggested will be a competitor to PowaTag. Later, he said: "Anywhere where a business fails, where people lose their jobs, it's soul destroying. More so for me than anyone else, because I embodied that company, I lived it, it was my vision and for it to dissolve is crushing, totally crushing."

Dan Wagner at EntrepreneurCountry

Business Insider/Oscar Williams-Grut

Dan Wagner speaking at the EntrepreneurCountry Forum in London this week.

This was the first time I had seen Wagner in person since Powa went under. I first met him a few years ago while I was at the Evening Standard and he came into the office to give me a demo of PowaTag but since the company collapsed my calls and emails to him have gone unanswered.

His delivery at the Royal Institute was smooth and slick throughout - ever the salesman. His sharp suit and close-cropped hair were, as always, immaculate.

Approached by BI after his speech at the Royal Institute Wagner became flustered and refused to comment on any of the specific points in this piece that BI put to him.

Wagner said: "Such a load of rubbish, Oscar. It's all rubbish. I don't want to comment on anything. You're being fed a load of rubbish by a load of people who've got issues. You're not doing proper journalism."

I followed Wagner out of the Royal Institution auditorium. Outside in the foyer, he continued: "You should speak to some people with proper information on the business. You've spoken to people who've got a problem, who've got a chip on their shoulder."

Asked to give his side of the story, Wagner declined, telling me: "I don't believe you want to get my side of the story. You keep writing. I've got no interest in talking to you for any story. A journalist should take the view of doing a proper piece of research before committing some rubbish to paper. You continue to do it."

You're being fed a load of rubbish by a load of people who've got issues

Pressed specifically on the 1,200 letters of intent, which Wagner advertised in the press as customers, Wagner said: "I'm not going to get into a debate with you."

Wagner would say nothing more on the record but we spoke for at least 10 minutes on the stairs of the Royal Institute and on the street outside in the Spring sunshine. Suffice to say, Wagner strongly disputes the press's interpretation of Powa's collapse. He says he has been advised by his lawyers not to speak, but believes his side will be aired eventually - and will win out.

Deloitte is investigating the conduct of the company's directors as part of the normal course of an administration. It is not clear what the result of the probe will be.

At best, the collapse of Powa looks like a wildly overambitious attempt to force consumer behaviour to match the ideas of a self-styled visionary. At worst, Powa seems to be a case of willful ignorance and a failure to acknowledge serious shortcomings, at a cost of hundreds of millions of dollars to investors and hundreds of jobs for staff.

Paddle's Lea says: "I tried to do the same business in a very different way. I realised much quicker and after spending much less money that it's not a viable product or market. We were solving a problem that didn't exist. I got to that point spending £300,000, he [Wagner] got there spending $200 million."

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