FT Article / Ve Interactive20 Jun 2017 13:34
https://ftalphaville.ft.com/2017/06/15/2190150/ve-interactive-might-not-have-actually-owned-its-us-branch/?mhq5j=e1
Ve Interactive might not have actually owned its US branch
Back when Ve Interactive was a high-flying billion dollar “unicorn” startup, its biggest market was the US. In 2015, America was the biggest source of revenue for the British digital advertising business and earlier this year former boss David Brown (pictured) singled US employees out for praise, saying in an email, “we all salute you”.
But now the company has fallen to earth and been sold to new owners, a dispute has arisen about the relationship between Ve Interactive and its purported US subsidiary. According to Ve’s administrators, Smith & Williamson, it appears the UK company didn’t actually acquire ownership of shares in the disputed US business, Ve Interactive LLC. Brown’s lawyers reject the claim.
At the heart of the matter is millions of pounds the administrators say is owed by Ve Interactive LLC to the UK entity, which could help boost meagre recoveries for creditors who lost £50m when the British company was put into administration in April. The dispute also raises questions for the UK company’s auditors, Menzies.
Until its collapse into administration this year, Ve Interactive was considered by some to be a leading British tech startup with a coveted “unicorn” valuation, meaning it was valued by its investors at over $1bn. Now under new management after being bought out for £2m, Ve Interactive has become another cautionary tale about the dangers of startup hype and excess in the tech sector.
The business, founded in 2009, sold software for online retailers that boosted website sales and placed adverts that followed customers after they moved on to other sites. While most startups chase venture capital or other institutional funding, Brown raised around £100m in primary and secondary share sales to individuals, accumulating over 500 investors by the time he was forced to step down in March. The result was little external scrutiny of the close links between Ve and Brown’s other ventures; the sales of his personal shareholdings, which he says helped fund the business; and the spending on expensive furniture, company cars and parties.
Ve Interactive LLC launched in 2011 in the US, which was one of 28 countries the loss-making group operated in. According to unaudited management accounts, the American branch made £5.4m of revenues in the first half of 2016. Brown said in an email to staff in January the US was Ve’s biggest source of revenue in 2015.
Ve Interactive Limited’s 2014, 2015 and 2016 audited company accounts list a 50.1 per cent holding in Ve Interactive LLC. The documents said the US company’s finances had been consolidated into the UK entity’s accounts.
However, according to Henry Shinners, an administrator of Ve Interactive Limited
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