One of the first things Crowdmix
CEO Ian Roberts did when his music startup moved into its fancy new London office was to block off the playground slide that came down through a hole from the floor above.
The office slide was a relic of the previous tenant, a fast-growing tech startup called Mind Candy, which created the hit children’s PC game “Moshi Monsters.” Mind Candy failed to sustain its growth as children moved to mobile devices, the company laid off staff, and its CEO stepped down.
A few years ago, office slides were trendy among well-funded tech startups after Google built one in 2008. But they quickly became a cliche about bubble-thinking in the tech sector: vanity office toys for adults at billion-dollar tech companies with skewed management priorities.
So when Crowdmix — whose management also dreamed of billion-dollar “unicorn” valuation status — moved into the old Mind Candy office in August 2015, the slide stood like a symbol of failure. Or a warning.
So Roberts had the slide blocked up, and the company eventually paid to have it removed entirely.
Now, less than a year after moving in, Crowdmix is in an even worse situation than Mind Candy. It blew through £14 million (about $20 million) in investor funding without ever properly launching. It only managed to ship an invite-only version of its hybrid social network and music streaming app, before costs spiralled out of control. Roberts, the founding CEO, was forced out, and the company collapsed into bankruptcy administration on July 11.
The crash of Crowdmix comes at a terrible time for the British technology scene. The EU referendum has damaged investor confidence in the country. The future legal status of UK tech companies and their European employees in relation to the rest of the EU is uncertain. And the high-profile demise of financial technology startup Powa, once valued at $2.7 billion (£2 billion), didn’t help either. Startups need to prove that they have a genuine chance of growing and becoming attractive businesses — and the collapse of Crowdmix just makes London look bad. That could hurt other tech companies.
“That’s where the problems started”
Crowdmix was cofounded in 2013 by CEO Ian Roberts and Gareth Ingham. They started the business in a typical London tech location: The downstairs café at the Google Campus coworking hub.
Roberts is a middle-aged executive who was new to the world of technology startups. Tall, bald, and bearded, he often pauses to deliberate when asked a question about his business or its strategy.
Roberts previously ran a company that sold Wi-Fi access to stadiums for performances. “I was looking at ways of selling more ‘big canopy’ Wi-Fi [i.e. internet access for large event spaces] and I had a friend whose business we acquired called Music Technology Limited,” he said. Music Technology worked with digital download companies, and Roberts realised he could use that technology to create real-time, localised charts of popular music. He envisioned the audience at a concert or festival using the app to create lists of what other fans were listening to.
“A mix of the crowd,” he called it.
The staff at Music Technology suggested that Roberts meet with Gareth Ingham, a marketing executive who worked with DJs and musicians. He was an early employee of music social network dontstayin.com, and had gone on to set up marketing agency Musically Digital. Ingham claims to have run some of the first brand campaigns on Facebook.
Ingham was a very different personality to his CEO. He often wore casual clothes to the office, usually including his trademark snapback hats. He was enthusiastic and excitable, keen to talk at length about what the future held for his startup.
The pair realised that they had a shared vision for a new business, so they started Crowdmix. It let users join “crowds,” where they can talk about music and see which tracks are becoming popular. The plan was also to let users listen to music directly using embedded music players in the app. Users could share tracks, comment, and then see charts change to reflect their listening patterns.
The first version of Crowdmix was simple: It produced local fan charts, and that was it. “Very lightweight,” says one person who was involved with the company during its early days. But Roberts and Ingham had a far grander vision of their company. They wanted it to be the destination for fans of all the world’s biggest musicians to come and talk about the music they love.
Crowdmix started becoming a social network and streaming site, instead of just a chart app. “That’s where the problems started,” says an early employee. Roberts decided early on that Crowdmix should build a product for 15 million users, not just a few thousand. That could save time in the future, but it meant that “even the smallest change was a huge amount of work.”
It became clear to staff that Crowdmix had an ambitious plan, and it needed more money and more staff to succeed.
Crowdmix’s main investor was the billionaire property tycoon Nick Candy
Crowdmix’s main investor, according to documents filed at Companies House, is billionaire Nick Candy. He is one-half of the Candy brothers, a well-known pair of property investors who live between London, Beverley Hills, and Monaco.
The Candy brothers own a vast property empire valued at around £9 billion. The luxury developments they own include One Hyde Park and NoHo Square. They have also been criticised for their tax arrangements. Nick’s brother Christian Candy once said, “I don’t pay tax. I am a tax exile” during a game of Monopoly with a reporter for The Financial Times.
A document filed with Companies House shows that Nick Candy’s company Candy Ventures SARL loaned Crowdmix £6.5 million in August 2015. Another document from June 10 shows a second loan of £1.45 million.
Candy was more than just an investor in Crowdmix. Sources inside the company say he regularly appeared in the office, gave motivational speeches to staff, and let Crowdmix use his offices for meetings. He also brought in his own employees to assist the social network as it prepared to launch.
One employee who had knowledge of the company’s early days said Candy pushed for more equity in Crowdmix than was offered, but Roberts held firm. Roberts was “great at managing investors” as the company scaled, one former employee says.
Candy wasn’t the only investor, though. The company claimed to have raised £14 million in funding in 2015 and said it was looking to raise a similar amount in 2016 as well. The company never revealed its other investors, only suggesting that a collection of high net worth individuals had invested.
People with knowledge of Crowdmix’s business plan said that Roberts had grand claims for Crowdmix’s potential. Multiple former employees claim that Crowdmix calculated its total potential userbase by adding together the social media followings of artists who had vague agreements to use the app, and then taking a percentage of that figure. Employees joked that Crowdmix’s total addressable market was larger than the population of the planet.
Crowdmix pushed employees to secure letters of intent that could be used to show commitment by musicians to use the platform. Those agreements meant that the company’s internal forecast saw it growing at a faster rate than both Facebook or Twitter did in their early days. One former employee says that Roberts even predicted a $1 billion (£755 million) valuation for Crowdmix and millions of users after just one year — although with only a few thousand users and no revenue that valuation was a mere pipe dream.
As Roberts’ vision grew, so did the staff he hired to build it. Crowdmix quickly outgrew its first office in Google Campus, and eventually rented space at the Old Truman Brewery, also in east London. They were tasked with creating Roberts’ ever-growing list of demands for features and functions inside the app.
The cofounders couldn’t agree on a vision for Crowdmix, so developers kept adding extra features. As each new feature went into development it pulled resources from the previous project. Crowdmix was meant to have an integration with YouTube that would let people watch music videos in the app, for example, but that was never added. Many developers focused on load testing and big data, which meant that important parts of the product elsewhere were underdeveloped. It was “difficult to do any work other than firefighting,” says one source.
Crowdmix was meant to carry advertising at its launch, but that never happened either. Instead the CEO preferred custom-branded campaigns that would see brands interacting with fans inside the app, but they never came to fruition. That meant Crowdmix never had any revenue during its lifetime.
It was around this time that Crowdmix began to hire more and more staff. Specialist big data employees and business relations staff were brought in, often with high salaries. Its headcount increased to over 100 people, and it even reached over 160 staff members at the start of this year. That’s a vast figure for a pre-launch, pre-revenue startup. However, one former employee says that the large number of staff was needed to work with record labels for permissions, and build the business. If Crowdmix was going to make money then it needed to secure API agreements with other technology companies, a lengthy and laborious process.
The company decided to move to the lower floor of Mind Candy’s office on Bonhill Street, almost directly opposite Google Campus, where the business started.
Meanwhile, it carried on hiring.
Crowdmix’s most high-profile hire was Rob Wells. He joined the company from Universal Music Group. He ran the record label’s digital operations, and it was a major coup for Crowdmix to hire such a well-known name in the music industry. Other high-profile hires included music industry veteran Dick Wingate, best-known for his time working for Columbia, Epic, and PolyGram record labels. Video technology company MirriAd’s COO Ted Mico also agreed to join Crowdmix as CMO.
The company now had a contingent of US employees, and it regularly paid to fly staff members between London and Los Angeles. One former employee says Crowdmix even paid for junior employees to travel on planes between offices in order to attend internal meetings.
Parties in Amsterdam and Austin for an app that didn’t exist
But it wasn’t just employees and offices that Crowdmix was spending money on. It sponsored a party in Amsterdam in October 2015 that featured dance acts Faithless, Eats Everything, Patrick Topping and Eton Messy, as well as grime artists Giggs, Ghetts and Bonkaz.
The company justified the financial outlay as needed to grow Crowdmix’s presence in the dance music community. This was months before the app had even launched. Sources inside the company say that over 20 staff members attended the party and had their expenses paid for the trip, and the total cost to Crowdmix was between £100,000 and £200,000.
Other events that Crowdmix spent money on include a box at the Brit Awards in London and a box in Wembley Stadium. It also paid for staff to attend events like the Cannes Lions festival, even when wages were late, and when the app itself wasn’t available to the wider public. Twleve staff members were paid to travel to the South by Southwest festival in Texas to film a documentary about grime music.
Privately, employees questioned these parties. Why stage public events for an app that didn’t exist yet?
“I find it morally wrong to be so lax with the spending on interior decorations and events when the company is not making any money,” a former Crowdmix employee said. “You are basically spending product development funds on chandeliers.” (The Venice Beach office literally had a chandelier in it.)
Crowdmix also hired a creative agency that cost around £60,000 per month, as well as paying £1,000 per month on consultants “who weren’t doing anything,” a former senior employee says.
There were also well-known figures brought into the business to help raise its profile. Perhaps the most bizarre example of this was former “Eastenders” actress Patsy Palmer, who regularly promoted Crowdmix on social media. She listed “special projects” as her role at the company on LinkedIn.
Some executives took it upon themselves to try to reduce the amount of money Crowdmix spent on consultants. But first they had to actually figure out who the consultants were. Eventually they obtained a list of names from the human resources department. When they tried to end relationships with some consultants, though, they discovered that they were “protected.” A former employee says this was because of relationships with people higher up in the company.
Roberts disputes this account, though. He says it sounds like a “red herring.” Instead, “I think all people with responsibility want to maintain relationships where they add value whether they are via consultancy or employment agreements,” he told Business Insider.
The company also spent money on plush offices in London and Los Angeles. The London office included thousands of pounds worth of custom graffiti, one source said, and a custom reception desk in the shape of a ghetto blaster.
The Los Angeles office appears to have been luxurious too. It was situated in Venice Beach, an expensive place to rent office space, just a 10-minute walk from the Venice Beach boardwalk, and on the same street as Snapchat.
The interior of Crowdmix’s US office was created by interior design firm Molori, which also designs luxury homes and private jets.
One source with knowledge of Crowdmix’s spending claims that the business was spending around £2 million a month. Another says the burn rate was likely closer to £1 million. Either way, Crowdmix was spending vast amounts of money for a pre-revenue, pre-launch tech startup.
Senior employees say they raised the burn-rate with CEO Ian Roberts, as well as other senior executives, but that didn’t appear to have stopped them. The company’s board should have realised that Crowdmix was spending too much money, but it didn’t step in to control it. That may be because Crowdmix’s investors weren’t experienced technology VCs.
When asked about the high spending at Crowdmix, Roberts defended his decisions, saying “I executed a unanimously agreed board plan (inc strategic investor representation) and always operated within plan.”
Crowdmix’s other founder, Ingham, does shoulder some of the blame, though. “As a co-founder, a director and a senior leader in the business, ultimately I accept my share of the responsibility for all expenditure,” he said in a statement to Business Insider. “Crowdmix was striving to be a global business. With support from our major investors, we hired a world class team, built a great product, put on events to raise our profile and built a business that acted in line with the ambitions we had.”
The first public sign of trouble inside Crowdmix came when the company laid off around 8% of its staff in April as it cut back its marketing team. Around 12 people were let go as part of what the company called a “reorganisation” at the time. It also cut ties with a Los Angeles-based marketing agency that it had been using.
At that time, Crowdmix hadn’t even launched a product.
“I came here to put lipstick on a pig. I’m starting to realise that there is no pig.”
The company quickly moved on from the layoffs and launched an invite-only version of its app in May. The functionality was all there: Users could sign up and join “crowds” where they could talk with friends and view charts of their music.
Business Insider asked Roberts why it had taken the company so long to launch its app. “It’s quite a big product,” he said. “It’s not just a frontend app, there’s a lot of backend capability that’s been built. There’s a lot of integrations with big tech partners that do not exist on apps.”
Crowdmix still wasn’t ready to go fully public yet, though. The app remained in beta, and invite codes were handed out to musicians, DJs, and influencers. It wanted to test the product ahead of an official rollout to come later in 2016.
The company had hired an army of developers, both contracted workers and salaried employees, to build its app. They started to post damning reviews of Crowdmix on company rating service Glassdoor. “A joke business,” one review read. “They seem to have no clue,” said another software engineer. Another former employee slammed Crowdmix for “huge unnecessary headcount.”
It’s not too unusual for a startup to undergo layoffs as it grows, nor is it unusual for negative reviews to appear on Glassdoor. But they were signs that some people inside the business were unhappy. One executive who had been hired into Crowdmix told a colleague “I came here to put lipstick on a pig. I’m starting to realise that there is no pig.” Senior employees became worried that the company had no clear direction.
All London-based Crowdmix employees assembled in the office in May for an all-hands meeting. Roberts told staff that the business was fine, but said “weird times are ahead. I apologise if I seem strange.” That in itself was a rather strange thing to say, and staff couldn’t understand what he meant.
Several former employees point to a “chaotic” company culture with no clear communication from executives, and a high staff turnover. Employees who worked on the marketing team only found out that CMO Ted Mico had left in late May after someone mentioned it during a cigarette break outside the office.
The situation wasn’t helped when, in May, wages weren’t paid out on time. Crowdmix assured employees that everything was fine, and that the wages were about to arrive. But it took 10 days for the money to finally come through.
CEO Ian Roberts “vanished”
At the same time that the May wages were late, CEO Ian Roberts abruptly left the company he started back in 2014.
Roberts never said goodbye to staff. He simply “vanished,” according to one employee. Cofounder Gareth Ingham immediately took control of the business. He told employees in a Monday meeting that Roberts had left.
One person who attended the meeting in which staff were told that Roberts had left said that Ingham was joined by several employees of Nick Candy, the first time they had attended a Monday meeting.
Crowdmix says that Roberts chose to leave, but multiple people close to the company say that he was forced out. Roberts declined to comment on the reason for his departure due to “legal reasons.”
One former employee accuses Nick Candy of forcing Roberts out so that he could have more control of the company. Another former employee who was familiar with Crowdmix’s investors says “the first thing I thought of when I learned Ian had left was that Nick Candy had gotten his way.”
A representative for Nick Candy told Business Insider that claims Roberts was forced out of Crowdmix are “factually incorrect” and threatened us with legal action for publishing them.
The departure of Roberts was a blow to Crowdmix, but some people inside the company were relieved when he left. They saw Roberts as a major reason why the costs had spiralled out of control, and blamed him for the high turnover of employees and Crowdmix’s “revolving door” employment policy.
Ingham told Business Insider that “Crowdmix made decisions that may be open to challenge with hindsight.
We have recently made some executive changes that we believe give us the team to take the business forward and execute on the product to achieve the vision we set out on.”
Crowdmix’s other cofounder, Gareth Ingham, was immediately named CEO. Staff looked to the positives: DJs and musicians had been enthusiastic about the invite-only version of the app, and the company at least had a working app. Aside from the late May payments and the departure of Ingham, one source said that the end of May was “really positive” and the “best month” inside the company. The invite-only version of the app had brought in around 2,000 users, and it seemed possible that Crowdmix could pull through.
June wages never arrived
But Crowdmix employees were told at the end of June that their wages would be late again. May salaries had been sent out 10 days late, but this time staff were more worried. The wages never came. This was the second month running that staff hadn’t been paid on time.
Staff stopped going into the office, and the floor on Bonhill Street sat empty throughout June. Employees heard nothing from Crowdmix, and they wondered whether they still had jobs. Crowdmix workers were becoming concerned that the wages would ever arrive. Employees scrambled to make rent and mortgage payments. They stopped believing their management when it said that wages were on the way. Instead, they started looking for new jobs.
Meanwhile, Crowdmix executives embarked on a last-ditch attempt to save the business. Nick Candy wouldn’t invest any more money, so the only remaining hope for the company was a foreign investor who could afford to put millions into the business. Their investment could have given the company up to a year’s extra runway. The weekend of July 9 and 10 was crucial, but the deal fell through.
Crowdmix had now run out of money for good. It couldn’t raise any more interim funding, and debts to suppliers were starting to stack up. Employees found themselves locked out of the company Salesforce account, and one vendor gave the company a 4 p.m. deadline on July 11 to pay or face a “winding up” petition — a legal action that would force the company into bankruptcy.
Staff returned to the office for one final meeting
On July 11, all staff members were asked to attend a meeting at 2.30 p.m. in the Crowdmix office. Around 80 staff members turned up. Standing by the expensive reception desk and the bespoke graffiti art was CEO Gareth Ingham and two men in suits.
Ingham sipped from a mug of tea and told his employees that Crowdmix had gone into administration. Staff were shocked and angry. The mood darkened when they were told that they wouldn’t receive their June wages, and only veteran employees would receive redundancy packages.
The men in suits were administrators from David Rubin and Partners, the company handling Crowdmix’s sale. One staff member secretly took a photograph of them, and then posted it in an internal “crowd” on Crowdmix.
Staff bombarded the men with questions, asking how much money Crowdmix owed to debtors, and when they might be paid. The administrators didn’t have any answers, and pointed out to staff that they had only been brought in that morning.
Ingham was asked about the frequent flights he took between London and Los Angeles. They accused him of only flying business class. Ingham insisted that flights only made up 0.5% of the company’s expenses, but didn’t deny that he took business-class flights.
Many of the employees who lost their jobs as part of Crowdmix going into administration are angry over the way its downfall was handled. They weren’t warned about financial issues until after wages were late, they say. And several employees have also raised questions over the payment of June wages.
A source with knowledge of Crowdmix’s finances says the company was millions in debt going into June. If that’s correct, then why were staff still told to come into work when there was little to no chance of them being paid?
Roberts denies that Crowdmix had no ability to pay its June wages. Instead, he says that a deal was close that would have let the company pay staff. “When I left I expected to be congratulating the business on a successful round closure in very short order, hence my upbeat message to the team when I left,” he said.
Ingham also insists that Crowdmix was unaware of the seriousness of its financial situation:
We paid May’s wages but regrettably we were late doing so due to a delay in closing of expected funding, something we never thought would happen until the last minute. June’s was the same. We had people in line to fund the business and fully expected to pay salaries. Unexpectedly, the funding only fell away and was not able to be closed at the last minute.
We are working with the administrator to try to find any available way to pay creditors, including June’s salaries. Since the announcement of the administration, we have had a great deal of in-bound interest in potential purchasers wanting to buy the Crowdmix business. We have an amazing team, with a great product and an excitement in the vision of where we want to take it.
We are working as always, with the administrator, to tell people about our product and the great things we are doing, and we hope to get the support we need to find a positive outcome for all in the time available.
Crowdmix is up for sale — but its future is uncertain
It’s not clear exactly what’s going to happen to Crowdmix. Its business and assets are currently up for auction, and are being sold by property auctioneers Lambert Smith Hampton. Bidders have until 5 p.m. on July 21 to submit their offers to acquire what’s left of Crowdmix.
The company is described by the auctioneers in a press release as a “pioneering UK social music startup.” It says that Crowdmix raised “around £19 million of funding in total, largely from angel investors and shareholder capital.” It also touts “an experienced management team,” including Rob Wells.
The company wants to sell itself as a going concern. After all, the app is basically finished. But one former employee says that it’s going to be difficult to make any money from the app because Crowdmix still hasn’t worked out royalties deals with music rightsholders. If it wants to stream music then it needs to get that sorted.
The US side of Crowdmix isn’t for sale, and administrators have been told that it will continue operating with the current board. That leaves things open for the business to continue operating in some form.
Sources say Nick Candy is still taking an interest in Crowdmix, and he may help the company to relaunch with a much-reduced headcount in order to resume work on the app. A plan has already been worked out to run the business with a smaller team, but it’s unclear which employees would stay.
CEO Gareth Ingham gave this statement when asked about the company’s future plans:
With the administrator, we are currently talking to and soliciting a range of enquirers and interests, from different parties to take the business forward. We are hopeful and excited we will be able to find the right partner to work with us to take the project forward. The exact shape of the business post-administration is no longer entirely in our hands but there are so many good people and such a great product and shared vision and I am confident that there is an exciting future for the Crowdmix team.
Until then, the Crowdmix office in London is dark, quiet and empty. There is no one working behind the ghetto-blaster reception desk. The middle of the office is dominated by wooden construction barriers. They are there to stop people from falling into the space where the slide used to be.