A 'nonsense' valuation of $1 billion, a failed sale to Snap, and an investor fight: Inside Blippar's dramatic collapse

• British augmented-reality startup Blippar once claimed to be a tech unicorn worth $1.5 billion.
• The company is best known for the Blippar app, which identified real-world objects and provided additional information.
• The company raised more than $130 million in investment funding but collapsed this week after burning through the cash and failing to raise more money.
• The startup's story is a cautionary tale of overblown expectations set by a charismatic CEO, a changing strategy, and the challenges of augmented-reality technology.

There were only two weeks to go before Christmas 2017, but Blippar's Silicon Valley employees were under strict instructions from their chief executive Ambarish Mitra. No one was allowed to work from home, and all staffers had to be at the office at 10 a.m. for an important visitor.

Mitra too would be present, having flown to Blippar's offices in Mountain View, the Californian suburb that is home to Google's headquarters. He was in the midst of trying to a broker a potentially multimillion-dollar sale of the most valuable part of his augmented-reality company.

"Hi Blipparites in MV," he wrote in an email. "This Wednesday the 13th we will be having important visitors in the office and we'd like to see everyone in attendance by 10am." There would be, he added, a "town hall" of all the Mountain View employees with chief technology officer Omar Tayeb.

The VIP visitor was Evan Spiegel, the chief executive and cofounder of Snap, the parent company of Snapchat. According to two sources with knowledge of the matter, Spiegel was in town to talk to Mitra about buying Blippar's Mountain View computer vision team. Snap is arguably the only company to take augmented reality mainstream to date.

Christmas came and went and it was business as usual for Mountain View staffers. In February 2018, two sources said Mitra told employees that the company had received multiple acquisition offers, including from Snap. The workers read this as good news, given some had been told months earlier that their share options would vest early in the expectation that Blippar would be acquired or merge with another company.

But what happened next flummoxed the expectant workers, many of whom had waved goodbye to colleagues moving on to jobs at more established firms such as Apple, Twitter, and Facebook.

As winter turned to summer, Mitra had another update for employees. There was, in the end, no deal on the table and Blippar would be closing its Mountain View offices. All of a sudden, the 60-plus engineers Blippar said it employed in California were out of work. Some cursed themselves for not leaving while the going was good. To rub salt into the wound, they were also paid two weeks late.

As employees saw it, Mitra and his cofounders had inexplicably turned down an offer from Snap, and potentially other suitors, such as SAP.

But one source with knowledge of the talks said it was actually Snap that backed away. Blippar, this person said, had even offered itself at a discount — but the talks fell through. A second source said the talks had never been serious to begin with, and a formal offer never materialised.

It would not be Mitra's last emotional speech to a group of employees about to lose their jobs. Only six months later, the company would collapse into insolvency administration and lay off all its remaining staff.

Blippar "deserves to burn"

Blippar announced this week its collapse into administration. It is roughly the equivalent to filing for Chapter 11 bankruptcy in the US.

The company is best known for the Blippar app, which used computer vision and image recognition to recognise real-world objects and provide contextual information. Scanning a car, for example, might bring up on-screen information about the make, model, and year the vehicle was manufactured.

The firm's demise is a reality check for European technology and investors, as well as for the wider field of augmented reality. High development costs for augmented reality and an unclear business model put spiralling valuations for the likes of Magic Leap into question.

And Blippar's failure follows other high-profile startup British casualties, such as Powa Technologies, adtech company Ve Interactive, and music startup Crowdmix.

Insiders who worked at Blippar describe a company that created genuinely innovative augmented-reality technology, foreshadowing successes such as Pokemon Go, Snapchat, and Apple's ARKit.

Business Insider spoke to more than a dozen people with knowledge of Blippar, who ascribed the company's failure to decisions made by charismatic CEO Mitra (known simply as "Rish" to many), the company's high spend on expensive computer vision staff, and a board consisting of yes-men.

"There was nobody able to challenge, you just had Rish," said one former senior executive, who spoke on condition of anonymity. "You had the board, who clearly had a huge responsibility here, and investors likewise. Where's the corporate governance? They have to look at themselves in the mirror and ask: 'Did we do the right thing?'"

Blippar burned through more than $130 million (£102 million) in funding, and overblown claims from its founders went unchecked by a still-nascent UK tech ecosystem desperate for Europe to produce its own Google, Amazon, Apple, or Facebook.

Before the warning signs became alarm bells, Mitra and his cofounders were embraced by the government, were heralded as speakers at high-profile conferences, and won entrepreneurial awards and plaudits. Mitra boasted on social media of his meetings with celebrities, posting selfies with Indian superstar Shah Rukh Khan, and astronaut Buzz Aldrin, among many others. Mitra's Instagram feed, now set to private, was a brochure for the life of a successful, globe-trotting entrepreneur.

In 2015, Prince William visited Blippar's offices in Tokyo, and he met Kate Middleton, the Duchess of Cambridge. In late 2016, Mitra was crowned entrepreneur of the year by advisory firm EY. And in 2017, Mitra was appointed to a government advisory panel about tech investment, despite Business Insider and The Financial Times raising questions about the prospects of his company.

At one point, according to a 2015 Financial Times article in which Mitra was interviewed, Blippar was valued at $1.5 billion thanks to a rejected acquisition offer. Blippar would spend the next three years basking in the glory of that purported valuation. One person with direct knowledge of the discussions described the valuation as "nonsense."

Mitra's confidence was also clear in other pronouncements about Blippar's potential. The CEO said he was trying to build a company that would be "bigger than the internet itself." "We believe we’re going to be one of the biggest businesses in the world," he said.

As yet, the administrators' report giving the full details of Blippar's demise is not out. But it has been clear for more than a year that the company was in trouble.

In April 2017, sources estimated the firm was spending around $3 million (£2.4 million) a month and was at risk of running out of money within a year. At the time, Blippar denied claims it was about to run out of cash but did acknowledge its high spending on technology.

Blippar earnings for the period, published a year after Business Insider's article, vindicated many of the sources' claims. The numbers showed that Blippar lost £34 million in the 12 months to March 2017 on revenue of £5.7 million. In these same accounts, the firm warned it urgently needed cash.

Despite additional cash injections following the earnings report, the firm ultimately couldn't stay afloat. The news of the administration, and layoffs of the remaining employees, is still painful.

One insider told Business Insider that Mitra had held an emotional meeting with staff at Blippar's headquarters in London on December 10, where he told them an investor dispute meant the firm was about to run out of money. He broke down during the message and had to hand over the task of giving bad news to chief operating officer Libby Penn, who had only been in the job for six months.

By this time, most people had stopped working. While London was thronged with people squeezing in a festive after-work drink, Blipparites, as they nicknamed themselves, gathered at a pub to discuss the company's prospects. Some were worried about losing their jobs before Christmas. They were right to be concerned. And for some, concern spilled over into anger.

"Blippar deserves to burn," one furious worker told Business Insider during Blippar's final days.

Some of those who have been laid off are messaging contacts looking for a job in the New Year. According to one message seen by Business Insider, employees are speculating that they won't be paid for their work in December.

Some of the firm may yet be salvaged. BI revealed this week that Dan Wagner, the founder of failed tech unicorn Powa, wants to buy Blippar's image-recognition tech. 

Employees have publicly defended Blippar during its collapse

Some Blippar employees showed staunch support for the company even as it neared collapse. Before the company confirmed its demise on December 18, current and former staff strongly defended Blippar and its chief executive on social media.

"It takes loads of guts, character & vision to build a global business & it has been one of the best tech brands from UK," Blippar's former India managing director, Arnav Ghosh, wrote on Twitter. "I have been extremely lucky & fortunate to be part of this journey."

"We have always tried our best and made some incredible stuff, which should be celebrated and showcased," wrote developer Eddie Long. "The people make Blippar tick, regardless of the past problems it's always been a vibrant, energetic and fun place to be."

Jessica Butcher, Blippar's cofounder and former chief marketing officer, said there were "lessons" from Blippar's crash, but did not go into detail. In a Medium post after Blippar's administration announcement, she said:

"I feel compelled, through a heavy-heart for those grieving this week, to add some much needed context to a story that’s bound to be sensationalised and boiled down to eye-watering valuations, funding rounds, burn-rate, personalities and lazy indictments. It was never about any of that. It was just about a vision and a bold quest to pioneer, invent and create value at scale."

Blippar, meanwhile, publicly laid the blame for its collapse on a single shareholder who blocked funding in a statement. Although it did not name the shareholder, it is understood to be Malaysia's sovereign wealth fund, Khazanah Nasional.

Blippar's board has made no public statement. Financial backers including property tycoon Nick Candy, company chairman David Currie, and Qualcomm Ventures investor Jason Ball have not responded to repeated requests for comment.

The shareholder dispute was the straw that broke the camel's back, but sources said Blippar's strategy was muddled from the very beginning.

Blippar struggled to nail down its business model

The European technology scene has developed rapidly since Blippar was founded in 2010.

At that time, Facebook was still a private company and Snapchat didn't exist. The UK had technology success stories such as ARM and Raspberry Pi, and there was hype around trendy startups such as Mind Candy, Last.fm and, of course, Blippar.

Blippar would benefit from the boom in capital flowing into startups. According to Pitchbook, there was €6.9 billion ($7.9 billion) invested in European startups when Blippar started out in 2010. Now that's ballooned to almost €19 billion ($22 billion).

As sources told Business Insider last April, Blippar originally borrowed its augmented-reality technology from another company, Vuforia. The sources said Blippar didn't develop its own proprietary augmented-reality tech until it acquired a competitor, Layar, in 2014. 

At the same time, Blippar was trying to persuade advertising agencies to run augmented-reality ads with its technology. The idea was that consumers would download Blippar's augmented-reality app, scan or "blip" real-world objects, such as a Coca-Cola can, and then trigger sponsored content or images on their screens.

Here's an example of how scanning a coke can would trigger a Spotify playlist:

At first, Blippar landed big-name brand deals with the likes of Pepsi and Nestle, working directly with advertisers as well as ad agencies. But agencies had questions about whether consumers were using the tech.

"The challenge was that the behaviours just weren’t native to everyday consumers," one senior media figure told Business Insider. "It felt like [the] tech was trying to solve a problem that normal people don’t have. My feedback from clients was that it was very expensive to do a campaign and performance was pretty poor as consumers didn’t know what they were meant to be doing."

Blippar would claim it had 65 million users across its group of services. Sources told Business Insider that the Blippar app had around 504,000 active users in 2015. The bulk of Blippar's users, they said, came from the acquisition of Layar. Blippar has never confirmed the figures but said monthly active users weren't a good way of measuring its business.

As Blippar looked beyond advertising campaigns, chief executive Mitra started thinking bigger and began describing Blippar's app as a visual browser. People, he said, would point their phones at objects such as flowers and then see them identified on screen.

He presciently suggested companies like Google should build visual search into their services and work with Blippar. "I think they should," he told TechCrunch in 2015. "And I think they should work with us." Apple, Google, and Samsung went on to build augmented-reality platforms into their offerings, but none would involve Blippar.

Blippar investors were won over by the CEO's idealistic vision and easy charm

Ambarish Mitra, in person, is a youthful-looking, energetic man whose thick-rimmed glasses give an owlish appearance. He moved to the UK from India in his twenties to pursue a career in technology.

His assumed air of naivety appears to be one of his most compelling qualities. When he describes Blippar onstage and in interviews, it's with a kind of beguiling innocence.

"Words are not enough," Mitra said in a 2016 talk, pitching Blippar as a possible solution to global literacy issues. "Let's not forget a seventh of the world can't even read and write, and there is another two-sevenths of the world where people have very basic literacy, reading sign languages or currency or road signs ... the entire internet phenomona is based on words."

His easy manner and his stated ambition to build something magical won over not only his colleagues, Blippar insiders told Business Insider, but investors too. In Silicon Valley parlance, this is the "reality distortion field", usually used to describe Apple founder Steve Jobs. It isn't always a compliment, reflecting a tech culture that at times encourages gross exaggerations and even delusional thinking.

Depending on which Blipparite you talk to, Mitra is either an inspiring, visionary entrepreneur or a showman unwilling to let anyone or anything puncture the dream.

"I used to hold him in very high regard," one person told Business Insider last year. "But I've lost respect for him since I left based on his treatment of me."

"I think he can play people very well," another said this week. "He’s very charismatic."

This charisma would help Mitra win investment from unlikely figures including property tycoon Nick Candy and Azman Mokhtar, the then-head of Malaysia's sovereign wealth fund, Khazanah Nasional. Lansdowne and Qualcomm Ventures also invested.

One person said Mitra met Candy and Lansdowne senior partner Peter Davies through Duncan Logan, the founder of shared workspace company RocketSpace. Filings show Lansdowne held Blippar shares from 2014, while Candy invested in 2015.

"Both [investments] were bizarre, but they happened very quickly," the person said. "It was just a few meetings and then 'here's £15 million or £20 million.'"

The person said this wasn't necessarily as rash as it looks. Neither Davies or Candy are short of cash. Investing in Blippar, which was generating considerable buzz at the time, came with advantages. For Candy, it was about generating positive publicity for his then-nascent venture fund. For Davies, it was a chance to learn more about technology startups.

It was Blippar's Series D funding in 2016 that would really put the feather in Mitra's cap. The company raised $54 million in a round led by Khazanah, bringing its total funding to more than $100 million and turning it into one of the best-funded startups in the UK. Khazanah would appoint its new representative in London, Javier Santiso, to Blippar's board that year.

"Rish had a personal connection with [Khazanah chief Azman Mokhtar]," one person with direct knowledge of the deal said. "One thing Rish is really good at is playing the big guy, moving in those circles."

The person attributed some of Mitra's social charm to his well-heeled upbringing in India. "Being at the top of the food chain gives you that presence. He's very interesting, very smart, very articulate, and was able to charm the main guy."

At the time, the person said, Khazanah had opened its London office and wanted to make a splash. The funding, this person said, only delayed the inevitable. "Let's face it, the business could have gone bust by this point. Khazanah came out of nowhere and put in a huge amount of money," the source said.

Sources say Blippar's ambitious focus on computer vision meant it didn't prioritise revenue

But even as it pocketed huge amounts of investor cash, the narrative around what Blippar actually did became more confused. There was also internal conflict about what the company should be prioritising and how it should be making money.

Publicly, Mitra talked about wanting the Blippar app to recognise "trillions" of objects, a research and development endeavour that meant adding expensive computer vision engineers to its offices in San Francisco and Mountain View.

But it wasn't clear how the commercial side of the business would develop to try and balance those high costs. According to several sources, Blippar prioritised its computer vision activities over the part of its business which made any money — its advertising arm. That included Blippbuilder, a self-service tool that let advertisers create their own augmented-reality campaigns.

"Blippbuilder just wasn't invested in," one person said. "It made all this money, but [they] spent nothing on it. It was very high margin, but very low cost."

Other former commercial staff said it became increasingly tough to sell Blippar into agencies, thanks to the switch in technology from Vuforia to proprietary capabilities, the low user engagement, and low user numbers. "The shift to the new technology wasn't as good," one person said last year. "We had a lot of issues with live campaigns."

Even now, former staff struggle to articulate Blippar's commercial strategy.

Through 2016, Blippar cut its commercial staff in New York and London, and shuttered its offices in Turkey and Japan. By March 2017, the number of sales staff had dropped from 58 to 46. The number of engineers had almost doubled from 60 to 112.

Business Insider calculated in April 2017 that Blippar had about a year before it would run out of cash. The company's subsequent accounts show that Blippar went on to raise $27 million through convertible loan notes later that year. The company has never disclosed who handed over the funding, but Candy Ventures often funds its portfolio companies through convertible loan notes.

As 2017 wore on, Blippar would go on to release more products to build out its own platform, not always successfully.

Blippar would roll out the "Halos" facial recognition feature inside its app, seven months after it was first announced. The feature would last 12 months. Then Blippar built a light-hearted consumer app called FaceJam, separate from the main Blippar app, which mashed up people's faces with those of celebrities, seemingly without sufficient content moderation. Business Insider found the app populated with images of notorious figures such as Ted Bundy, Osama bin Laden, and Gurmeet Ram Rahim Singh.

Over in the Silicon Valley office, engineers were working on some impressive advancements in computer vision — but were by now racing against big competitors such as Google, which released its Lens image recognition app in the summer of 2017.

Blippar and its investors had a tough 12 months

There were more unwelcome distractions through 2017, thanks to headlines not just about Blippar, but its investors.

Nick Candy is one half of the Candy brothers, an extremely wealthy duo who made their money through developing high-end property. Nick has diversified beyond property into technology, and invests in startups through his fund vehicle Candy Ventures.

Along with his investment in Blippar, Candy put approximately £10 million into British social music startup Crowdmix. In July 2016, Crowdmix would collapse into administration and Nick Candy would snap up the remaining assets and take control after its CEO was ousted.

While Blippar was trying to build out its computer vision capabilities and control its spending, Nick Candy would then be bogged down in an ugly court case for most of 2017. The suit was brought by a former property developer who had borrowed money from Nick Candy and his brother Christian.

The brothers won the case, but not before an array of unwelcome headlines. Crowdmix's ousted CEO, Ian Roberts, would appear as part of the case to describe Nick Candy as "a gangster."

If executives at Blippar felt any tinge of alarm about these stories, life wasn't about to get any easier.

The spring of 2017 brought twin bombshells: The Financial Times uncovered embarrassing inconsistencies in Mitra's life story, contradicting his claims that he had studied at LSE. Less than a month later, Business Insider revealed the extent of Blippar's financial difficulties, and that its app user numbers were likely closer to 500,000 than the 65 million it often touted.

In the wake of The Financial Times report, Mitra tried to quell internal doubts with a memo attempting to explain away the inconsistencies in his life story. That memo was leaked to Business Insider.

After multiple denials, Mitra would eventually tacitly admit to having made, at the very least, an error. He told The Times in June 2017 that he was "embarrassed and ashamed." He said: "I don’t know what got into my head and I take full responsibility for it. There was no agenda. It is a shame that my CV is in question. I’ve never hired anyone based on their grades and stuff like that."

A combination of factors prevented Khazanah from reinvesting

One person who knows Mitra well said they were shocked when The Financial Times article disputing his past came out. "I just believed it, I never questioned it. When it came out, I was like 'Oh my God ..." they said. "But I think it's a means to an end. It didn't hurt anybody."

This person said this would have caused serious questions at Khazanah, and may have contributed to the Malaysian fund blocking further investment in the company. Blippar was also late in filing its 2017 accounts, another red flag, the person said. Khazanah's former chief, Mokhtar, is also no longer head of the fund, possibly thanks to political upheaval in Malaysia this year.

"Why would you put any more money into a business that won't make it?" the person said. "Khazanah's motivation was that [Blippar] probably wasn't going to work. They weren't doing it to be spiteful, it's just logical to do that ... in the end, it's just basic pragmatic, economic sense."

That explanation will be scant comfort for Blippar's employees, looking for new jobs at a time of year when most people are winding down.

Business Insider has contacted Mitra for comment. He is yet to comment on his firm's collapse, but did tell Inc: "[Now] is not a good time to talk due to the demands of the process."

A week before Blippar's administration, he liked a tweet from the astronaut Buzz Aldrin which might indicate his state of mind: "But failure is not a sign of weakness. It is a sign that you are alive and growing."

But failure is not a sign of weakness. It is a sign that you are alive and growing. #chinup

— Buzz Aldrin (@TheRealBuzz) December 11, 2018

Mitra's cofounder Jess Butcher echoed the theme in her blog reflecting on the company's demise, describing her time at Blippar as a "rocket ship" ride.

After the company crashed back to earth this week, employees and investors would no doubt agree.

SEE ALSO: Dan Wagner, the founder of failed tech unicorn Powa, wants to buy collapsed augmented-reality startup Blippar

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Contributer : Tech Insider https://read.bi/2V88yXB

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