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The Secret Technology That Attracted $76 Million And Could Eat Amazon's Lunch

This article is more than 10 years old.

When UK-based POWA Technologies managed to raise $76 million in a series A last month it turned a few heads. Why? Because it’s not every day that a British tech firm – or any tech firm raising capital for the first time – attracts such a large sum, and from a single American financier, no less.

Does this mean that UK tech firms have graduated to the big time? Will U.S. venture firms descend upon the island nation in search of the next Tumblr? The likeliest answer is that the company has a product up its sleeve that's made a serious impression on investors—a mystery platform called PowaTag that will allow people to buy things by simply taking a photo of them with their phones.

See It, Buy It

No longer will you have to scour the web for the pair of shoes you just saw someone else wearing. Just snap a photo with your smartphone and make the purchase.

POWA founder and CEO Dan Wagner still won’t disclose which U.S. firm provided him the recent cash-injection (rumor points to the Boston-based heavyweight Wellington Management) but he’s so confident in the company and its new product that he invested $20 million of his own money to develop it before he took a dime of outside capital.

“When it’s out there people will go, ‘wow, that’s so simple and that’s so cool,’” said Wagner, during a visit to FORBES’ New York headquarters this week. Wagner is understandably cagey when talking about the new mobile buying platform, which is due for release at the end of October. He doesn’t want to let anyone in on how it works, emphatically insisting it will be transformative.

 “This is something that you’re compelled to want to use all the time,” says Wagner. “It changes the game in terms of payments.”

Every time the technology is used to make a payment, Powa receives 40 cents U.S. from the merchant, or ten basis points—whichever is greater. PowaTag has about 15 companies signed on to use the platform for their products, including Harper Collins, Electrolux, Hoover and Lavazza.

Using PowaTag will sidestep middlemen retailer sites and allow manufacturers to make direct sales. “Normally I’d look at that book and go to Amazon and buy it and they’d get 30% of the retail price,” said Wagner. “It’s a game-changer for manufacturers.”

In other words, PowaTag will be eating Amazon's lunch, as well as that of any number of low-price online retailers. All manufacturers will have to do, it would seem, is lower their prices to match those of their competition.

Is the technology clonable? Of course it is and Wagner admits as much, despite the patents and IP involved. When PowaTag hits the ground running, he figures the company has about a year head start as a first-to-market player. Making that lead count is where the recent capital raise comes in.

Spending $76 Million

Part of Powa’s $76 million will go to building a supporting infrastructure for PowaTag. Additionally, the company will be hiring “hundreds” of sales personnel in the next year and they will not all be focusing on PowaTag. By licensing its already released Powa ecommerce platform to retailers, it hopes to change the in-store buying experience by offering the personalized touches associated with online shopping, i.e. remembering your likes, dislikes and customer profile. Self check-out, Wagner said, is also part of the package. “There’s a demand from the retailers to change the physical experience and you’ve seen elements of that in the Apple store.”

The United States is ripe for this kind of change due to the country’s shift to chip-based credit and debit cards, away from the magnetic strip technology that’s been in place for two generations. Europe has been quicker to adopt chip-based cards.

Powa's Square-like mobile payment device. (Image by None via CrunchBase)

“There’re 27 million (point-of-sale) terminals here in the U.S. and they need to migrate over to a chip-based card system so that provides an opportunity for us to come in with a new platform that will provide the chip and pin reader and the infrastructure to support tablets and mobile phones,” said Wagner.

Another area for expansion is emerging markets like India, China, South America and Africa, which Powa intends to attack with its mPowa—a Square-type device that lets retailers take card payments on the go.

IPO

Wagner started his first company in 1984, licensing periodicals and trade journals for sale to corporate libraries. Nowadays, in addition to his role at POWA, he chairs the boards of online merchandising firm Locayta, the incubator and holding company Bright Station Ventures and SaaS e-commerce company Venda. Through Bright Station he owns over 70% of Powa Technologies.

Wagner intends to take Powa public in 12 to 18 months. In fact he has to, as his secret investor insists upon it. The company has not filed, nor decided whether it will IPO in the United States or the UK, so it’s early days. Given the tech focus here on this side of the pond, Wagner may be leaning toward a Wall Street public offering, not a party at the London Stock Exchange .

UK Tech Scene

Wagner has been outspoken in his criticism of the way government officials in the UK have resisted calls to ease the development of the country’s burgeoning tech and entrepreneurial scene. What’s needed, he claims, is to educate UK investors on the nuances of the tech realm by having financial institutions take the tech sector seriously, hiring specialist analysts so financiers understand how to approach entrepreneurs. Wagner has also been a strong proponent of doing away with capital gains taxes for startup investors.

“If you want to invest in an entrepreneur’s vision, the likelihood is you’re going to lose your money,” says Wagner. “If you are successful, then you get taxed 28% on your gains and I think that’s just ridiculous.”

Is Powa an indication that the UK is heading in the right direction as a tech hub? According to Wagner it shows that U.S. investors will back what they think is a moneymaking enterprise no matter where it is. It also underscores the fact that moneymaking enterprises in tech can bloom outside of the U.S. “Investors will look a little bit more openly internationally at the opportunities that are afforded outside of the United States.”

Follow me on Twitter @KarstenStrauss