Having seen its valuation slashed from £1.5bn to £300m and gone into administration, the adtech startup has now been sold for a fraction of its former value
There are no guarantees in the world of startups. No matter how promising a venture might seem, failing to adapt to shifting circumstances can see the value of any startup plummet. UK entrepreneurs were reminded of this fact on Thursday with the announcement that VE Interactive, the adtech startup and former unicorn, was sold for just £2m.
Specialising in nudging customers to complete online purchases, VE Interactive was once estimated to be valued at £1.5bn. As late as December 2016, the investment banking firm GP Bullhound predicted that the company could reach a valuation of £10bn in 2017. However, the last few turbulent months have proven that it’s difficult to predict anything when it comes to new businesses.
The first signs that something may have been amiss at VE Interactive came to light in early March when sources told the Telegraph that the company’s valuation had been slashed to £300m. The significant change in valuation came after a consortium led by Aston Ventures, a VC firm; early investor Mark Pearson and a group of significant shareholders gave VE Interactive a £3m emergency cash injection. At the same time, David J Brown, the company’s founder and CEO, was replaced by Morten Tonnesen who took over the role after having served as CEO of Aston Ventures. Having changed the leadership and deployed a life raft of sorts, the new boss and the consortium then attempted to raise £20m to save the company.
However, by April it was revealed that these efforts were for naught. After the new leadership failed to raise the money, the company went into administration and it was revealed that VE Interactive owed £1.3m to HM Revenue and Customs, which was largely made up of unpaid payroll taxes. The administrators also revealed that the company had £50m in debt that was mostly made up of corporate loans. Fortunately, the new management team staged a £2m buyout of VE Interactive, something they say may have saved 250 jobs.
But not everyone is happy with the deal. Concha, the tech and media investment firm that invested £4m in VE Interactive in March 2016 and, together with other investors, had put over £50m into the startup since 2009. Following the acquisition, Concha said that it and other shareholders were considering a challenge to the acquisition and that the board was “deeply disappointed by the recent events and circumstances of the last few months, particularly the actions of both the founder management team and their advisors.” It added that it would “continue to investigate the actions of those responsible for [VE Interactive’s] demise”.
VE Interactive’s fall from grace is the latest of a series of highly publicised startup implosions. In February 2016, Powa Technologies, the e-commerce company, went into administration, while later that summer the social-media app Fling closed shop after having been famously kicked out of Apple Store for being too similar to Chatroulette and then failed to raise capital to continue its operations. In November, Uber-challenger Karhoo bowed out of the ride-hailing game, claiming its financial situation was “getting pretty dire”.
These stories highlight just how uncertain the startup ecosystem is. On the other hand, there are plenty of second chances: Karhoo for instance has rejoined the startup race again after being purchased by Renault in January. Let’s hope that VE Interactive is able to stage a similar comeback.