South African start-up FireID has only a few months in which to find a white knight, before its cash runs out and the company is forced to close its doors.
The company, which launched six years ago, has been on the brink of disaster several times during its existence, and now faces the possibility of folding altogether if it does not find another investor.
This comes after Luxembourg-based investment company Reinet declined to pump any more money into the Cape-based company at the beginning of this year.
FireID plays in the mobile strong-authentication market, and provides banks and enterprises with simple, user-friendly solutions for secure access to online applications and information. Its applications negate the need for a one-time PIN to transact in an online environment.
Co-founder and non-executive director Justin Stanford says the company has been unable to raise the funds it needs to keep operating, and yesterday was forced to retrench 40 staff members. This leaves it with CEO Jenny Dugmore and co-founder CTO Malan Joubert as the only employees. However, it is not yet being liquidated.
Still hope?
Stanford says the company hopes to find another investor or a home for its technology, and has been in discussions with potential investors. He says, however, there is only enough cash left to keep the company going for a few months before it is down to the “very last cent”.
FireID is a “very, very promising company” with a good product, he notes. Stanford hopes its “talented” staff will be keen to return if FireID is bailed out.
Its last brush with potential collapse was in 2008, after the previous financial crisis, but it was rescued by South African entrepreneur Johann Rupert, who invested R8 million in bridging finance to keep it going.
That investment was followed, two years ago, by Rienet agreeing to invest just more than R48 million into the company in several tranches, says Stanford. However, this money will run out in a few months, which will force FireID to close unless it is rescued. Rienet is chaired by Rupert and has a “significant” stake in FireID.
Stanford explains the company fought as hard as it could to raise funds to keep operating, but does not generate enough revenue on an ongoing basis to pay its own way. “It's been a bit of an emotional rollercoaster for everyone at the company.”
FireID typically has a 12-month sales cycle and, as a result, needs to have enough cash in the bank to operate until its clients pay out, Stanford says. He adds that the firm has a promising pipeline of projects and has won several awards, including a Frost & Sullivan award towards the end of last year. It has also signed up local and international clients.
Reinet did not immediately respond to a request for comment this morning. However, according to its latest financial results, for the half-year to September, Reinet had a net asset value of EUR2.7 billion and had made a profit of EUR201 million.
The company does not strip out the value of its FireID investment, but its “other investments” portfolio was worth EUR83 million at the end of September.
In its results, published in November, it says this portfolio “includes small businesses with growth potential, as well as investments in specialised investment funds focused on developing markets and niche sectors”.
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