With the news that another gem of Manchester tech is struggling financially, it has been revealed that the future of connected vehicle data company Wejo Limited is on shaky ground. The company recently announced their intention to file for insolvency and appoint administrators, after staff reported wages being recalled from their bank accounts on the 31st May.
Based in Manchester and founded in 2014, the vehicle data intelligence company soared to great heights with huge investors, such as General Motors, and a valuation of $800 million (£645 million). The connected vehicle data business had offices all over the world, over two hundred employees, and was once tipped to become a unicorn company before its troubles started.
Its tech offering was unique and compelling. Founded by Richard Barlow, a fan of F1 and motor racing, the company was capable of processing trillions of data points in real-time, a valuable tool for multiple issues such as monitoring inner city vehicle emissions or evaluating road safety. Wejo were a big player in the Manchester tech scene, the largest collection of tech companies and startups in the UK, aside from London.
At one point, Wejo’s flagship technology allowed them visibility on 7% of all vehicles moving around New York, and 20% of vehicles in Detroit – invaluable data for multiple uses and organisations. In 2021, they completed a merger where they received $225.7 million (£182 million) in cash proceeds. They were growing, and quickly, with innovation at their heart. It all seemed to be going well for them. So what happened to make them file for insolvency in recent weeks, and even recall recently paid staff wages?
There are several reasons why the once-strong business has gone into administration and filed for insolvency. Indeed, the price for the company’s shares went into freefall, losing at least 50% of their value, from 27 cents to 12 cents. And its once booming valuation of $800 million was sitting at a market cap of just $13.5 million. The company also stated that they expected Nasdaq to remove their shares from listings, as they are “no longer suitable”, and that Wejo would not be appealing the decision.
So why exactly has Wejo struggled? With a global recession still simmering, and the collapse of Silicon Valley Bank still fresh in investors' minds, removing once promising opportunities for investment. Investors are getting antsy and wary. Quite simply, the availability and appetite for investment aren't there in the current economic climate. Sadly for Wejo, they just didn’t have the capital to continue and were unable to raise enough to continue operations.
“Investors have been happy to throw money at the connected vehicle data company - but times have changed. The collapse of SVB, widespread job losses in the tech industry and the general economic uncertainty mean investors are giving a wide berth to high growth, loss-making, tech stock like Wejo. It's a cruel world and it's bad news for the North West," said Chris Maguire, Executive Editor at Business Cloud and Manchester tech expert.
It was definitely bad news for Wejo. Despite raising a massive $15.9 million in private investment funding less than 12 months ago, it wasn’t enough to protect them from insolvency and administration. The money was earmarked with an aim to reduce the business’ cash burn, which was said to be costing around $10million per month at the start of 2022. The company stated that the investment would reduce this burn to $5-6 million by the end of the previous year.
Despite a hiring freeze and a focus on revenue, this significant investment couldn’t stop the decline of Wejo’s finances, and they lost $31.5million in Q3 of 2022 alone. It was simply unsustainable without further capital raises. Even huge contracts worth substantial sums, and prominent backers such as General Motors, couldn’t do anything to defer the inevitable.
The closure of Wejo is a significant setback for the connected vehicle industry and will leave a void in the Manchester tech scene, where it has been a consistent player for nearly ten years.
“Unfortunately, the writing was on the wall for a while here. Wejo moved to One Red Flag within our insolvency index in March 2022. We are going to see a steady and steep incline in administrations this year, ” said Rich West, Managing Director at Red Flag Alert, to Business Cloud earlier this week.
At Red Flag Alert, we understand that no business is too big to fail and that it can happen to anyone. Unlike our competitors, we’ve predicted the fall of some of the largest players in various industries, sometimes months before anyone else.
Like in many other cases, our algorithm picked up on the issues at Wejo over a year ago, and we moved them to ‘One Red Flag’ in May. This told other businesses that they were at risk of being unable to pay their debts, and to be offered credit with caution. This was down from a “Bronze” rating in November 2020. Wejo is now listed as “pre-insolvent” in the Red Flag Alert rating system.
Red Flag Alert’s powerful algorithm is the most accurate currently available on the UK market when it comes to predicting growth and insolvency, with a 92% accuracy rating. We use live financial data to calculate credit ratings to provide our customers with an assessment of risk. The collapse of Wejo, and the rise of insolvencies in general in the UK, prove that undertaking sufficient due diligence is absolutely essential to avoid exposing your own organisation to the risk of bad debt.
Request a free trial today to find out how Red Flag Alert’s company credit checking solution can help your business or see how we compare to your current provider.