When Too Much Money Leads To Bankruptcy (The Pay By Touch Story)
A lot of businesses have closed their doors never to open again and one of such companies is Pay By Touch. If anyone would tell that Pay By Touch (PBT) would fail, it will be doubted since even in this current period, we still pay with biometrics systems.
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Pay BY Touch (PBT) was going to change the world’s method of paying by allowing customers to pay and get loyalty rewards while using their fingerprint which gives access to their financial account, allowing them to pay immediately. The company founded in 2002 by John P, Rogers had everything going well (maybe on the surface). It can be very disheartening when innovations fail and even though Rogers had a great idea, a solid business sense and s convincing pitch for a sales person, the business still failed.
Someday soon, stores across the country would be equipped with Pay By Touch terminals through which customers could access their financial account and pay for purchases with the touch of a thumb - John P. Rogers
He was able to convince a lot of people to join him and invest in his idea part of whom were former Oracle and Accenture execs and at the same time investors like Gordon Getty who invested around $50 million, John Burton, Ron Burkle, and Justice Wiiliam Newsom. The truth is luck shined on his idea as people invested up to $340 Million but I could say part of his failure was credited to a spending spree that took away $8 Million every month and $150 Million to buy out competitors.
Most early investors said having Brian Miller (a veteran startup expert for the Accenture Business Consulting Firm) as Executive Vice president reassured them about Rogers believe in the limitless future of Pay By Touch
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Although, he was able to get consumers to like his idea but people were still sceptical about their security as well as tiresome payments. Also the company bought other companies like Green Stamps which had nothing to do with paying with biometrics. A lot of people believed that the company failed especially because Rogers wasted company money. In the lawsuit filed against him, investors said Rogers hasten the death of the company by using company’s funds to party and constant abuse of drugs.
The company went on a hiring spree by employing more than 750 people which wasn’t necessary at the period. When Rogers misappropriation of funds got to the investors, Justice Newsom quitted the board after which roger fired two other board member who asked how he spent company’s money.
Having Too Much Money Causes Bankruptcy
A lot of companies declare bankruptcy not because they do not have money but because they had excess money which they end up mismanaging. Having excess money as a startup is having access to limitless possibilities at the same time it could spell doom for the company if the money isn’t properly utilized.
I give you the point that having excess money when starting a business is risky, because you generally lose your purpose and desire because you have great financial support. Too bad what happened with that company, because it had (and has) that idea great potential.
As a startup, too much money at the beginning doesn't often help to manage cost and doesn't often make the business owner focused on the long run rather they focus on the funds available and how they can spend it.
Some people say, give me the money then i will think of an idea. How will a person think of an idea after having funds, even those who had ideas squandered money more less a person with no idea.
If the idea isn't cooked up in the head before the money, then the business is dead before conception.
I hear a lot of people say lack of money made them which is true but at the same time, when a business do not have too much finance inflow, proper business management will be considered.
Both availability of money and lack of money is somethings businesses have and pulling through bigger is what the end result should be.
Hi @gbenga
Finally I found some time to catch up with Steemit and read some publications posted within our community.
Indeed, way to much money can cause mismanagement of those money and this in result may end up with bankruptcy. I surely never heard about PBT. Thx for sharing with us their story. Interesting case study.
Part of the problem is that most investors expect to see some quict results. They want to see GROWTH. And opening new offices, new shops, signing new deals or hiring more people give impression of such a growth. So this is very common problem. Those who manage to raise money (especially if they raise more than they need) feel pressured to show any results at all.
So more often than not - they end up spending money like there is no tomorrow. Wouldn't you agree?
Upvoted already,
Cheers, Piotr