The news that promising local start-up FireID has retrenched all its staff and is facing closure has been met with despondency by analyst firm Frost & Sullivan, which says the Cape Town-based company had a winning product.
Frost & Sullivan was one of the companies that showered FireID with praise — and awards — for its mobile authentication solution.
TechCentral broke the news on Wednesday that FireID had failed to raise the investment it needed to keep its doors open. About 40 employees have been laid off.
Frost & Sullivan analyst Protea Hirschel says start-ups in SA have long had a tough time in finding the investments they need to keep the lights on. She says many start-ups here face the same battle.
“It is difficult to access funding in SA, much more difficult than in other parts of the world,” she says.
According to Hirschel, technology start-ups are regarded as a risky investment, even if their intellectual property is strong.
She says these companies often have a tough time getting payment from clients in time. “The trouble is investor timelines are sometimes not in line with what’s required by the start-up,” she says.
Justin Stanford, who co-founded FireID, says lead times in the software environment were what contributed to the company’s downfall.
He says in some cases software projects can take up to 12 months to bring in meaningful sales revenue. “It is hard to demonstrate to investors why they should keep investing.”
FireID was unable to convince its main benefactor, Reinet, which is chaired by billionaire Johann Rupert, to continue funding it.
However, Stanford, who heads 4Di Capital, a Reinet subsidiary, still hopes a white knight will come to the rescue.
Hirschel says there is good reason for investors to come to FireID’s aid because its product is “definitely sellable”.
“The mobile authentication market is by no means saturated and, with the rise of cyber security threats to Internet services like social networking, there is definitely a need for it,” she says.
“FireID started as a small group and a good team with strong marketing and development expertise. My sense is they increased the employee numbers too quickly,” Hirschel says. — Candice Jones, TechCentral
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