WiNot over Capitalise too Early

With the recent negatives of VC funding rearing its head with the effects on Fire ID and Global Vision, I tracked down Bevan Ducasse from WiWallet, who has taken a slightly different approach to financing their mobile payments business. 

Ducasse joined forces in 2008 with a talented Techie doing his masters at Stellenbosch University, Basie Kok. They quickly built a rough prototype and within 2 months approached UCS, offering a major stake, for the funding, infrastructure support, and leverage provided by the established company. 

Some of the benefits of approaching a strategic partner as opposed to an Angel investor were that they had access to a lot of capital and supporting business infrastructure (legal and Accounts). With a strong interest in how the new acquisition could support the other companies in the group, UCS was very supportive in making sure the product was successful - for its uses and not just ROI. 

The biggest downside is that in exchange for the support and backing, a large equity share had to be given up compared to what an angel investor would have taken. Although there is little need for a later rounds of funding after getting the support of a larger company, giving up a larger equity stake early is the problem of handing over most of the risk when your company has such a low valuation. 

Ducasse realised a couple of key market features:

1)     They were not a consumer brand

2)     The market was not ready for their specific product yet

3)     It was easier to move to a B2B model rather than a B2C model where wiWallet would enable payment providers (including banks) to offer a suite of mobile payment services, rather than competing with these brands directly 

After turning down a potentially large cash injection from a VC, Ducasse says, “pumping money into a company and growing the team and expenses is pointless if you can’t also fast track the market adoption to match the growth.” The market was not ready for large scale adoption and the fact that WiWallet is still hanging in there is a testament to the value of keeping as small as necessary until the demand is there. It is a lot easier to grow with the market than trying to create its growth.

“You have to ask the Question: is your tech virtual and viral? If it’s hype, hype it. Mobile payments isn’t all hype and has a physical real world component. That is the restriction to rapid growth.” says Ducasse. WiWallet’s current offering is a backend solution which retailers can integrate to in order to enable any eWallet, mobile vouchers, mobile coupon and even mobile loyalty to transact in-store. WiWallet has also developed mobile payment applications which can be tailored and branded for client specific requirements. 

The recently signed deal with MXit is a testament to their technology and positioning as all payments on the MXit platform will now be done using their platform and will hopefully lead to a break in the market and large scale adoption. Ducasse and his team are also already waiting for the next market, with their platform ready to roll out on a NFC (Near Field Communication ) devices. 

With only one round or funding and equity split, Ducasse and Kok may have turned down massive growth and potentially a very high valuation early on, but it is their firm belief that the market traction is more valuable than a funding valuation, and in the long run the value of the business will follow based on real revenue