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Ve Interactive, a “unicorn” no longer

Summary:
Predicting the future is never easy. Soothsayers have a mixed record and bankers apparently do even worse. In December, GP Bullhound, a boutique tech investment bank, predicted 2017 would be the year two European startups reached a bn valuation. Among their companies to watch was Britain’s Ve Interactive, a tech company specialising in e-commerce solutions.Three months on and the advertising technology startup’s valuation has been slashed from £1.5bn to just £300m, according to anonymous sources cited by The Sunday Telegraph. A spokesperson for Ve declined to comment on the figure.The steep dive came with an emergency £3m funding round earlier this month that rescued the company from the brink of disaster. As we revealed two weeks ago, Ve Interactive has struggled to pay its employees

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Predicting the future is never easy. Soothsayers have a mixed record and bankers apparently do even worse. In December, GP Bullhound, a boutique tech investment bank, predicted 2017 would be the year two European startups reached a $10bn valuation. Among their companies to watch was Britain’s Ve Interactive, a tech company specialising in e-commerce solutions.

Three months on and the advertising technology startup’s valuation has been slashed from £1.5bn to just £300m, according to anonymous sources cited by The Sunday Telegraph. A spokesperson for Ve declined to comment on the figure.

The steep dive came with an emergency £3m funding round earlier this month that rescued the company from the brink of disaster. As we revealed two weeks ago, Ve Interactive has struggled to pay its employees on time each month since December and its founder and chief executive David Brown has left the company, though he remains an “adviser”. It now has a new boss and a new board who are working to raise new funding and get the company back on track — with almost 1,000 staff and 36 offices, job losses would seem likely.

None of this will come as a surprise to Alphaville readers. Since September, we have detailed the questionable information Ve used to raise money from wealthy individuals, the great gulf between its valuation and its peers’, and its repeated failure to hit the lofty targets it set for itself.

The interesting thing here is not the troubles of a young technology business, it’s the amount of funding and praise it got from people who should have known better.

This is a business given over £50m by investors who make their living handling other people’s money for the most part. They include a co-treasurer of the Conservative Party, a managing director at Nomura and a host of traders.

Tech City, meanwhile, tipped the business as one of the UK’s most promising startups just a week before it missed February payroll for some of its staff.

Even Stuart Chambers, a man with years of public company experience who headed the board of Arm Holdings, was minded to take the position of chairman as recently as November, though something seems to have changed his mind and he veered into an “adviser” role before finally quitting more recently.

So what’s going on? We would suggest there are three overlapping forces at work.

The first is a little glib: people lose their minds when they hear the word “tech”. It introduces a virus into their brains that prevents them from thinking critically or doing due diligence on a company. The tech sector is complicated and confusing, so investors hear vaguely familiar words like “platform” (or “blockchain”) and get their wallets out without properly understanding the product or the competition.

The second is simply that there is a lot of dumb money out there. We live in a world where capital is cheap and abundant and investors have moved into new and unfamiliar territories in the search for returns. Inevitably there are people who have no idea about technology investing in technology, which is particularly brave given that most venture capitalists – the supposed pros – don’t do a great job of making money on their investments.

And the third is that there is a bias against “talking down” technology companies, especially homegrown ones, even when it’s apparent they are grossly overvalued. This is on top of the more general bias against criticism that arises from the ever growing public relations business. The technology sector is optimistic by nature and uses the language of progress to defend its practices and valuations. Critics are therefore resisting “innovation” and clueless about the “opportunity” that lies just one more profitless year in the future.

And connecting all three of these forces is the idea of the “unicorn”, the billion dollar startup. An entrepreneur no longer has to build a profitable or sustainable company, they merely have to build a “unicorn” to be seen as a success. It has become an achievement in its own right, no matter how flimsy its basis, no matter how contrived the valuation.

Eventually, of course, reality catches up. It did for Dan Wagner’s Powa Technologies. It did for David Brown’s Ve Interactive. And it will for other overhyped tech startups.

Related links:
Ve Interactive, the unicorn that hates venture capital — FT Alphaville
Ve Interactive: Part Two — FT Alphaville
Is Ve Interactive really a unicorn? — FT Alphaville
Pearls of wisdom from the boss of tech unicorn Ve Interactive — FT Alphaville
Welcome to Ve Interactive, Stuart Chambers — FT Alphaville
British adtech unicorn Ve Interactive is in for a tough ride in 2017 — FT Alphaville
Former ARM chairman delays joining board of tech ‘unicorn’ Ve Interactive — FT Alphaville
Tech unicorn Ve Interactive struggles to pay salaries, but insists it’s raising fresh cash– FT Alphaville
Boss of troubled tech unicorn Ve Interactive steps aside — FT Alphaville

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Kadhim Shubber
Kadhim Shubber is a freelance journalist who first bought bitcoins so that he could buy a beer at The Pembury Tavern, Hackney’s bitcoin pub. He has reported for Slate, Wired, The Daily Telegraph, The Sunday Times and Ampp3d. He is currently studying for a Masters in Journalism at City University London.