Dan Wagner is finally ready to talk about Powa Technologies again.
Payments business Powa, founded and ran by Wagner, was once worth $2.7 billion and raised over $200 million in debt and equity. But it collapsed spectacularly in February after running out of money.
I reported extensively on the company’s collapse and what I heard from former employees were tales of extravagant spending, a cavalier attitude among management towards staff, and phantom deals that weren’t worth the paper they were written on. The administrator’s report backed up many of these findings.
Almost all of the sources I spoke to — over a dozen — singled out Wagner for criticism. Wagner, a serial technology entrepreneur, repeatedly refused to talk to journalists during the course of the story, citing legal advice.
But after going to ground for a few months, Wagner has recently resurfaced, setting up a blog and a Twitter account and pursuing a new venture called Rezolve, which looks remarkably similar to Powa’s flagship PowaTag product.
I contacted Wagner while reporting on his reemergence and, remarkably, he agreed to speak to me about Powa. Wagner wanted to put over his side of the story on many of the allegations and incidents that came to light during the reporting.
Here is Dan Wagner’s side of the Powa collapse story:
Parking in disabled spots
The allegation Wagner is most upset about is the claim he used to park his Bentley in disabled spots. Steven Prowse, who was acting CFO of Powa for three months in 2014, wrote in a blog post on LinkedIn shortly after the companies collapse that Wagner “parked his Bentley in the disabled spot. It has a sticker but it’s for one of his parents who live in the Far East. Says it all.” Other sources BI spoke to confirmed seeing Wagner park in a disable spot.
Wagner told BI that he may have occasionally parked in disabled spots but that his mother is disabled and lives in the UK, with only his father living in the Far East. It’s likely, he says, that he would have been giving his mother a lift somewhere when he used the disabled spots. He calls Prowse’s allegations “disgraceful.”
Prowse also said “management were the worst I’ve seen in over 30 years” but Wagner says Prowse is not a good witness, given he was only with Powa for three months.
Extravagant Christmas parties
When reporting on the collapse several staff noted that Powa’s Christmas parties were unusually extravagant for a startup that was “pre-revenue.” One remembered: “The Christmas parties were partly legendary, partly disgusting.” Another said: “They had the most expensive champagne I’ve ever had in my life — Veuve Clicquot. There was no expense spared. Dan Wagner was there, it was going to be ‘spend as much as possible.”
There were also topless dancers at one Christmas party at an exclusive venue in Mayfair, something which offended many people. Wagner was forced to apologise in an email sent to staff shortly after the party.
Wagner says now: “Christmas parties cost a tiny fraction of paying Christmas bonuses and I have always run my businesses with this mantra of building a good team will by having a great party where everyone lets their hair down and gets to know staff from other departments and sometimes other offices.
“Shot girls/dancers are often booked to get the party going. I understand that in 2014 they went a bit too far and I apologised to the staff the following day as soon as I heard.”
Expensive offices in the Heron Tower
Powa Technologies rented two floors in the Heron Tower, a gleaming sky scrapper in London near Royal Bank of Scotland’s London headquarters. This was seen by many commentators after its fall as a symbol of the arrogant excess of management.
Tony Craddock, director general of the Emerging Payments Association, told BI shortly after Powa went into administration: “The Heron Tower is not a place to put an entrepreneurial venture, a startup. Especially one that’s pre-revenue.”
But Wagner says: “There is a saying that ‘presentation is 9/10ths of sale’ and our offices were very impressive. Heron Tower was 60% empty and we cut a fantastic deal with two years rent free. In the end, we never paid any rent.”
In short, Wagner thought that to win big deals he had to convince clients Powa was the real deal and the best way to do that was to rent out swanky offices that would impress them.
Offices all around the world
To that end, Powa also had offices across the world, everywhere from Italy to Hong Kong. This struck a lot of UK staff as wasteful spending. The company’s payroll hit £2 million a month by 2015, according to administrator Deloitte’s report.
A former developer told BI: “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.”
Wagner says: “With a new proposition like PowaTag (and to a degree PowaPOS) we were ‘sifting’ the market for gold. This has always been my experience. When I started the first online platform in the world (MAID) in 1984, companies were not even using computers let alone connecting them to the internet so it took a year before I realised (more by accident) that I had to move to America if I wanted to get any customers. I left for New York in 1985 and didn’t come back until 1989.
“That’s how it is with business initiatives that don’t have a well-beaten path to follow. It’s a bit like drilling for oil, you end up with a lot of dry wells.”
Deal in China
Shortly before Powa collapsed, it signed a deal to roll-out its technology in China through a joint venture. Wagner described the deal at the time as “800lb gorilla”, saying the joint-venture could generate $5 billion in revenue in the next two years.
However, the Financial Times has cast doubt on the deal, suggesting it wasn’t as significant as it looked. Wagner insists that it was the real deal and would have transformed the company’s fortunes.
BI has seen a copy of the agreement between Powa and CN2Pay, Powa’s joint venture partner, that suggests the joint-venture was contracted to roll out Powa’s technology to 100,000 merchants by June 2016 in the Guangzhou region. Powa could even pull out of the deal if this commitment was not met.
However, even if the deal was real, it’s by no means certain that Powa would have been a success in China. Local operators Alipay and Tencent have a huge stranglehold on the market and Powa’s arrival would have coincided with Apple and Samsung’s payment products entering China.
Letters of intent
Perhaps the most serious allegation uncovered during the reporting was that the majority of Powa’s “clients” hadn’t actually signed contracts and had simply signed non-binding letters of intent expressing interest in the product.
Deloitte confirmed this in its administration report, saying only around 100 brands signed formal contracts out of the near 1,200 clients Powa claimed to have on board.
Wagner says: “Regarding the LOIs, they were contracts committing the merchants to use PowaTag for the charges specified on the rate card and adhering to the terms and conditions published on the Powa website.”
He insists that these were as good as real deals, pointing to people who sign up for Apple’s App Store by agreeing to the terms and conditions when they download the app. The 100 brands who signed formal contracts were simply cases where compliance or legal departments wanted more information, he says.
That ‘David Bowie’ picture
The most infamous image to come out of the Powa story was a picture of Dan Wagner wearing a gold suit dressed as David Bowie from his Aladdin Sane album.
The picture was emailed around to staff on January 12, 2 days after the death of David Bowie and around a month before Powa collapsed. The subject of the email, sent from Dan Wagner’s address, reads “Long live the legacy of David Bowie”, while the body reads: “(….I don’t do tributes in half measures!….).”
Many staff BI spoke to thought the email was insensitive given its timing and some even believed Wagner had hired out a professional studio to take the photo just for the email. Wagner says this is nonsense, insisting that the photo was taken almost a year earlier during a fancy dress party held for his daughter.
As for the timing, Wagner says: “I was in late stage negotiations with a large number of potential funders and didn’t believe we wouldn’t be able to close it given the rest of the business.”
Another charge I heard repeatedly when reporting was that Wagner was unwilling to listen to criticism and had surrounded himself with “yes” men.
A senior US executive told me: “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.”
Wagner calls this criticism “nonsense,” saying: “The reality is I’m a big character, I’m an exuberant character in the office and out of the office, and so a lot of people are a bit nervous about challenging me.
“But my inner circle — we met every week. We had an hour’s call or meeting about where things were and there was always healthy debate. There was also, of course, a very strong and healthy board. You can’t have a business where you don’t have some sort of challenge. I didn’t have ‘yes’ men, that was just nonsense.”
Finally, what about the product? Many people told me that Powa’s central issue was its flagship product, PowaTag. PowaTag was an app that let people buy products by scanning all manner of things — the soundwaves on an advert, a picture in a magazine. One insider described it to me as a “basket case” and many said it was beset by technical problems.
Wagner says: “The idea that we didn’t have a product is ridiculous. In January we signed a deal with Otto Group and announced it. In January we signed a deal with L’Oreal to go live on stoppable advertising on all their brands in America initially.
“No organisation signs those deals if it’s not there. You don’t have those engagements with large brands if it’s vapourware, it’s just not possible.”
So what went wrong?
Wagner seems to have an answer for everything. So why did Powa disappear in a puff of smoke if its deals were all legit, there was a mammoth contract in China, and the product was firing on all cylinders?
The simple answer is Powa ran out of money. Despite raising almost $200 million Deloitte’s administrator’s report shows it had just £755,000 ($1 million) in the bank by the end of 2015 and “was in essence ‘pre-revenue’.”
But Wagner says the story is more complicated than that. He says the business had momentum and there were other factors at play that led to Powa’s downfall. What they are he won’t say, citing legal advice. But he says they will come out eventually. Watch this space.