FireID, a promising Cape Town-based start-up funded by billionaire Johann Rupert’s Reinet, is no more. The company retrenched its entire staff complement on Wednesday and will shut up shop.
Reinet has decided not to provide FireID with additional funding, forcing the company to close down.
It’s understood that FireID had as many as 100 employees, though this couldn’t immediately be verified. (Update: about 40 staff have been retrenched.)
FireID, a specialist in information security, was regarded as one of the country’s most promising start-up technology businesses. It built secure, “two-factor authentication” technology for mobile phones.
FireID co-founder and director Justin Stanford says the company could not raise the funds it needed to continue operating.
“People are down, but taking it well. The investor has made sure all the staff are well taken care of,” he says.
News of the company’s financial troubles will come as a surprise to many given that it announced a R48m cash injection by Stanford’s investment business 4Di Capital, a subsidiary of Reinet, just four months ago.
FireID was using the cash to fund a global expansion drive.
Despite having several large customers using the product, Stanford says the company was not bringing in enough revenue to sustain it. He says long lead times between sales resulted in the company getting into trouble.
“It takes a long time from sale to implementation and then payment,” he says. “It can sometimes take up to 12 months to bring in the cash. It is hard to demonstrate to investors on why they should keep investing.”
As the major shareholder, Reinet’s investment committee was not convinced and decided not to grant additional funds to the company to keep it going.
“Software is a tough business to make work and the company was making inroads. The problem was just cash flow,” Stanford says.
FireID also tried to get funding from other investors but was unsuccessful. “It’s a hell of a blow and a tough time for everyone,” he says.
However, Stanford says the directors are still hopeful a white knight will come to the company’s rescue. — Candice Jones, TechCentral
- Johann Rupert image credit: University of Stellenbosch
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