Most of failed £1.8 billion tech unicorn Powa's 1,200 clients hadn't signed contracts

The failed £1.8 billion tech unicorn Powa Technologies collapsed into administration last week and we just found out another key reason why that happened - a majority of its clients didn't actually sign up to deals.

Business Insider has been told that the majority of the 1,200 companies that Powa claimed to have signed up to its mobile payment app had simply signed non-binding letters of interest in the technology.

Companies had signed what's called a "letter of intent" - a non-binding signal of interest in a product or service. While they may result in a deal, they are not a contract and neither side agrees to exchange any money or deliver any products or services. Such letters can be used for marketing purposes by allowing the company to talk about potential clients and interest among future customers.

Most conversations with potential clients did not progress beyond the "letter of intent" stage, three former employees told Business Insider. Adidas, a company touted in the press as clients of PowaTag by CEO Dan Wagner, also confirmed to Business Insider that reports they were working with the company are "incorrect."

Powa, which fell into administration after running out of cash last Friday, has three main business lines: PowaWeb, which built online shops for retailers; PowaPOS, which built a mobile card reader to rival the likes of Square; and PowaTag, an app the would let consumers buy things by scanning QR code, print adverts, and audio of TV ads.

Powa has touted its app PowaTag, launched in 2014, as the centerpiece of the company. CEO Dan Wagner told the Telegraph of the app in 2014: "You don't win brands like Adidas when you're a startup business, before you've even launched a product, without having truly transformational technology. Most would say, 'I'll wait and see'."

Powa claimed in the press release announcing the app's launch that over 240 brands including Reebok had signed up for the app. While the app is consumer facing, Powa had to sign up brands to work with so that there would actually be products customers could buy and adverts that they could scan.

As recently as 16 January 2016, Powa claimed that: "Over 1,200 worldwide brands including Universal Music and Carrefour have signed up for PowaTag."

But Business Insider found out that those statements were not strictly correct. Powa's administrators, Deloitte, who now act and speak for the company, declined to comment.

Three former Powa employees, speaking on condition of anonymity, separately confirmed to Business Insider that the majority of the 1,200 deals touted by Powa were based on the letters of intent or early stage meetings. The majority never delivered any revenue or even got as far as execution.

A former Powa employee estimates as few as 50 actual deals came from the 1,200 letters of intent, which in the employee's opinion "weren't worth the paper they were written on."

Another former Powa employee who liaised between clients and development teams told Business Insider: "There was no commitment for them to actually do anything. If you look at that space, Amazon has a similar product, Apple has a product, Android has a product - the retailer and brand has so many different options. Their contracts were not bound to do anything."

A spokesperson for Adidas Group, which represents both Adidas and Reebok, told Business Insider that the quote Wagner gave to The Telegraph in 2014 was "incorrect" and said: "While we were in touch with this company back in 2014 we ended up not working with them."

Powa CEO Dan Wagner did not respond to BI's email asking about his comments to the Telegraph in 2014 and the number of "Letters of Intent" signed by companies. He could not be reached by phone.

Both Carrefour and Universal Music told Business Insider they couldn't verify whether they were or are working with Powa in the timeframe given. Both are big multinational companies and it can be difficult to work out quickly which bit is doing what.

Business Insider has seen a copy of both a signed and dummy copy of a "Letter of Intent" that Powa signed with brands. The body of both letters concerns a joint marketing agreement that says "each party may refer to each other and use trademarks and/or logos."

The letters seen by BI contain no terms and conditions and is unlikely to carry much, if any, legal weight. It also makes only passing reference to PowaTag, saying that Powa will take a £0.25 transaction fee or 0.1%, whichever's bigger, if any partnership is set up.

The letters of intent go some way to explaining why Powa was in such a dire cash position despite touting its success. Wagner told staff that the company was "basically pre-revenue" shortly before falling into administration, according to a video seen by the Financial Times.

Accounts filed with Companies House show that Powa had just $250,000 (£179,500) in the bank at the start of February and debts of $16.4 million (£11.7 million). The company, once valued at $2.7 billion (£1.8 billion), has raised at least $225 million (£161.6 million) since 2013.