Watching Powa Technologies call in the administrators Deloitte last week was very sad but not necessarily that surprising to the market.

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In my opinion, even though its founder Dan Wagner had been claiming it was worth almost £2 billion a few months ago, his businesses suggest this was more about over-hyping than actual reality.

The reason for my lack of belief in the colourful narrative comes from a personal experience back in mid-2011 when Wagner’s former business Venda tried to sue me out of my house.

After publishing a story on this website about the problems of Venda and its high debt levels they took a hard-line approach typical of a bully who doesn’t like the truth. They instructed lawyers to give me a roughing-over for two weeks during which each evening I would receive increasingly threatening emails from a growing band of lawyers threatening to sue me for tens of millions of pounds.

Here’s the story that was originally published:

The Enda Venda?

With e-commerce platform provider Venda currently looking for a buyer or investor in its business it has been a tough time for mid-market suppliers with a clutch of similar providers selling up over recent years.

Despite the buoyancy in e-commerce the likes of Fresca, Pod1, Snow Valley, Drive Business and now Venda have hit some turbulence and either fallen into the hands of new parent companies or fallen completely off the rails.

Eric Abensur, CEO of Venda, told Retailinsider.com that Venda had “been the subject of a lot of interest from potential partners and we have appointed Arma Partners to assist us in evaluating the more serious offers”.

Despite the positive picture Abensur paints, it certainly seems that times remain tough for the providers of e-commerce platforms to smaller retailers – with sub-£10 million of revenues. This is no doubt why Venda has been working hard to switch its strategy to targeting larger retailers and brands.

Such a move must surely represent an opportunity for a player to come in and be the default e-commerce software provider of choice for small and mid-sized merchants.

So what’s the deal with Venda? Having been created out of the former software infrastructure of Boo.com (RIP) it built up an impressive roster of retail clients – including Republic, Monsoon Accessorize and Jimmy Choo – with many in the early days looking for an out-of-the-box solution to jump onto what was then a bandwagon just starting to roll.

Unfortunately its client list of 140 businesses seems to have come at some cost as it has built up a creditor base that is currently owed around £14 million and its last accounts at companies house (for the year to end-June 2010) show it made a loss before tax of £5.1 million on revenues of £10.5 million.

Balance sheets aside, times have arguably changed and one Venda customer suggests it could be suffering from failing to develop its product in-line with some of the best-in-class solutions currently available.

It is also likely to have hit a problem with some of its early customers outgrowing its services as they have sought to gain more control, and enjoy greater flexibility, over their e-commerce and multi-channel operations.

As Arma Partners seeks buyers/investors for the Venda business there is one big question mark. When you’ve got debt holders demanding some payback on their loans, who would be willing to pump money into these third-parties pockets when the business itself needs some meaty investment to get it firing on all cylinders again.

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After robustly defending my work for two weeks I was independently advised that I would have to make the decision to either engage a lawyer to defend myself further or pull the story from the site. Without having the financial muscle – or time to commit to the exercise – available to take the fight option, I reluctantly succumbed to the bully. And waited for another day to come.

What happened to Venda is that it ultimately made cumulative pre-tax losses of £53 million from revenues of £92 million. During which time it still managed to pay out £6 million in directors remuneration! (source: Duedil). As well as no doubt filling the coffers of various lawyers.

It was then bought by Netsuite who revealed that they paid just $50 million for the business and also made it clear that they had bought Venda for its capabilities and people – and no doubt its clients – but definitely not for the business [source: Barraclough & Co].

It was going nowhere. It was also clearly worth a lot less than the £170 million valuation the company had placed on itself around that time when management had been mulling over an IPO. Overhyping. Sound familiar?

While Venda limped along Wagner also set up Powa Technologies in 2007. Its technology attracted some big name brands and retailers, which helped it raise around £120 million but with only £175,000 in the bank at the start of February and debts totaling £11.5 million the inevitable squeeze happened and Wagner found himself involved in another costly (to shareholders and employees) exercise.

While much sympathy can be expressed for the people who will inevitably lose their jobs from this sad demise, for me this is absolutely as far as it goes. Another day did come as I always expected.