If things had worked out differently, OpenMoney could have been mentioned in the same breath as FinTech giants like Revolut.
Launched in 2015, its mission was simple: make financial advice accessible and affordable to everyone.
Duncan Cameron, co-founder of MoneySuperMarket, liked the idea so much he invested an estimated 拢30m+ of his fortune in the startup.
It was a great idea – but fast forward eight years and those dreams lay in tatters.
A consultation by the new owners will decide how many of the current workforce, which peaked at 92, will still have jobs at the end of the process, but redundancies are inevitable.
The reality is that a FinTech set up to offer financial advice to the public should have done a lot more to get its own financial house in order.
The truth is that after eight years, OpenMoney was burning cash at a rate of 拢600,000 a month and generating less than 拢1 million a year in revenue.
They were the sort of numbers that convinced Cameron to cease all funding from the end of March 2023 and spark a desperate search for a buyer.
One of the first things turnaround specialists聽Will Mallard and Patrick Leahy did when they bought the business for a nominal sum was to put the loss-making parent company 鈥� OpenMoney Limited 鈥� into a聽Company Voluntary Arrangement (CVA) and embark on a major restructure.
One insider told 老九品茶Cloud: 鈥淪ome of the costs that were allowed to build up were crazy for a business that size.鈥�
Eyebrows were raised at some of the hefty salaries paid to several senior managers, extended contracts and the decision to move everyone to a 4.5-day working week at a time when they were trying to find a buyer.
Hardly surprising then that angry members of staff like聽Dan Ormisher, a principal engineer at the FinTech, took to Twitter in response to the events of last week.
鈥淚 work for OpenMoneyUK, a company set up to bring financial wellbeing to the masses,鈥� he tweeted. 鈥淎nd guess what? They鈥檙e laying off their staff and not even paying them for the month they鈥檝e just worked. Woohoo!鈥�
So where did it all go wrong?
To understand that we need to go back to the beginning in 2015 when Anthony Morrow had the idea for the business.
Between 2006-15 Morrow worked as a founding partner of Tatton Asset Management, which subsequently floated in 2017. 鈥淚n 2015 I decided I wanted to create a business that helped people who didn鈥檛 understand money that well to make better decisions on what to do,鈥� recalled Morrow.
The startup –聽聽originally called evestor聽鈥� subsequently rebranded as OpenMoney.
Morrow went into business with long-term friend Duncan Cameron, who鈥檇 sold his stake in聽MoneySupermarket in 2007 for a reported 拢162m.
Cameron had 52% of the startup and Morrow 48%.
鈥淒uncan definitely put in the lion鈥檚 share of the money,鈥� admitted Morrow. 鈥淚 would say he鈥檚 invested more than 拢30m into the business.鈥�
OpenMoney faced two big problems. The first was getting new customers, which was expensive. The second was its huge cost base, which far exceeded its revenue.
As well as the parent company two subsidiary businesses聽鈥� OpenMoney Adviser Services and WorkLife by OpenMoney 鈥� were launched.
They were the customer-facing, cash-generative side of the business and weren鈥檛 saddled with the same cost as the parent company OpenMoney Ltd.
Headquartered at Manchester鈥檚 ABC Building in Quay Street, Morrow was CEO while Cameron was a hands-off investor.
鈥淒uncan had no day-to-day involvement,鈥� recalled Morrow. 鈥淗e鈥檇 come in every now and again and meet the developer team. He took a real interest in the OpenMoney app. It was a personal finance app that would enable people to see all their accounts in one place and we鈥檇 give them budgeting advice.鈥�
OpenMoney grew customer numbers to around 20,000 and had 拢145m of assets under management – but the business continued to burn cash at an alarming rate.
Accounts filed at Companies House show the FinTech lost 拢9.3m before taxation in 2021 against revenues of 拢593k, compared to 拢7.6m and 拢582k respectively in 2020.
By聽2021, the two co-founders wanted to take the business in different directions.
Cameron wanted to focus on the app, which he thought had the potential to compete with Revolut, while Morrow wanted to “stick to our knitting”.
鈥淢y view was it was a really concentrated market,鈥� explained Morrow. 鈥淭here was no real clear view on how we were going to make any money out of it and it was incredibly expensive for us to continue to run compared to my preference to continue with the OpenMoney investment service and the workplace business and look to generate revenues through partnerships.
鈥淚 was conscious that if we were going to go out and raise investment we needed to get our revenues growing.
鈥淭he management team backed Duncan so I was done. It was awful. OpenMoney was my business. I鈥檇 fronted it up and brought all the team along.
鈥淚 could see the problem. We had his big cost base because we were building all this stuff without any revenue. At some point it was going to give. In 2021 we parted company and I did other stuff.鈥�
Despite the change of direction, OpenMoney continued to lose money and in September 2022 Cameron announced he wasn鈥檛 prepared to keep investing money into growing the business.
Morrow recalled: 鈥淎t the end of November he said to me 鈥榶ou鈥檙e going to need to find another investor for OpenMoney because I don鈥檛 want to put any more money in鈥�.鈥�
No timeline was given but Morrow re-joined in January 2023 as NED to try and find investment.
鈥淎ll the structural problems that were red lines to me in 2021 were still there,鈥� said Morrow.
Could the management team at OpenMoney have done more? Clearly the high salaries paid to senior managers and the lack of any major cost-cutting measures couldn鈥檛 have helped in the search for a buyer.
FinTech 50 – UK’s most innovative financial technology creators for 2022
Morrow had serious discussions with one company about a full acquisition but it fell down in February due to the complexity of the deal and the restructuring costs.
Other serious conversations were had, but the stumbling block was always the combination of cost base and lack of revenue growth.
OpenMoney needed to undergo a major restructure but the business simply didn鈥檛 have the money to pay for it.
鈥淎t the end of March 2023 Duncan turned round and said 鈥業鈥檓 not going to put any more money in full stop鈥�,鈥� said Morrow.
鈥淭hat really put the business in a tough place. The business had always been funded by Duncan on a monthly basis.
鈥淎t the end of the month he鈥檇 put some money in and that would pay the bills for the next month. There was no financial resilience and very little buffer.
鈥淲hen he made the decision not to put any more money in you鈥檙e literally talking weeks of runway.
鈥淥ur options were to either put the whole business into administration or find some fire-sale buyers of the subsidiaries.
鈥淭here was interest in both subsidiaries聽but we simply didn’t聽have the time to move at the pace that corporate buyers move.鈥�
It was then that talks began with turnaround specialists Will Mallard and Patrick Leahy,聽who run a financial wellness company called Elva.
In the end the pair bought everything for a nominal sum.
As part of the deal Cameron wrote-off loans that he was owed by the business, which ran into the millions.
Everyone knew that major restructuring was unavoidable.
After a slight delay getting Cameron to sign the contract, it looked like everything was completed by Tuesday April 25th听.
As part of the deal, Morrow left the board and Mallard and Leahy issued a statement outlining the size of the job ahead.
It said:聽鈥淥penMoney Limited is to enter a period of essential restructuring following its majority sale to financial well-being entrepreneurs Will Mallard and Patrick Leahy earlier this week.
鈥淭he restructuring proposals, once agreed, will likely involve a number of operational redundancies after consultation.
鈥淭his is deemed necessary in order to ensure the successful and sustainable future of the business and its client facing operations 鈥� OpenMoney Adviser Services and WorkLife by OpenMoney.
鈥淪adly, as a result of the seriousness of the situation, payment of salaries for a number of members of staff across the business has been delayed pending legal and professional advice.
鈥淭he pair bought the business with the express intention to grow it. The proposed restructure, while difficult because of the impact on those members of staff whose roles will be made redundant, is essential if the business is to fulfil its potential for stellar growth.
鈥淚t is important to stress that there is no impact to clients as a result of the proposed changes.
鈥淔ounders Duncan Cameron and Anthony Morrow will continue to retain minority holdings in the business.鈥�
Put simply, Mallard and Leahy want to focus on the advice side of the business and say they鈥檙e genuinely excited about embedding financial wellbeing into the workplace.
So where are we now?
Morrow is in reflective mood but admits it鈥檚 the failure to pay staff that upsets him.
“The date Duncan pulled the funding is disappointing because it left me with nowhere to go in terms of continuing to sort stuff out,鈥� he said.
鈥淲e had made great progress with partnerships that would generate revenue in the medium/long-term but obviously we were still struggling with costs.
“OpenMoney remains a great business that’s been badly run and as a co-founder I聽accept聽my share of the聽blame.聽We were too reliant on Duncan鈥檚 money and I should have got external investment earlier.”
If there is a silver lining it鈥檚 that the new owners say there is a future for OpenMoney Adviser Services and WorkLife by OpenMoney.
They insist that the outstanding salaries will be paid as the company embarks on a consultation but warn redundancies are inevitable.
The irony is that a FinTech set up to offer financial advice failed聽because it didn鈥檛 get its own finances in order.