Bad luck to Andy Cockburn and the Wigadoo team, following the news that it is closing down.
I really liked the Wigadoo model, and so did the likes of Brent Hoberman, who backed it. Wigadoo basically helped people to go Dutch online, for group outings such as events. So rather than having one person pay for four tickets, each person could chip into a central pot.
Simply put, the company ran out of time and money, and the appetite from the investment community wasn’t there to issue a new round of funding to take the business forward.
I interviewed Andy in February and he candidly discussed some of the issues the company ran into in starting up. I’m sure he’ll be back in action again before too long.
The closure for me reflects two problems. The first problem is the lack of availability of early stage funding for European businesses. Yet this was a company with a solid, pre-defined business model, and I felt it had a lot of options to expand that model from transaction fees to affiliate revenue and beyond. Somebody, someday, will make this model work.
This leads me onto the second problem, which is age old: achieving scale. That takes time, and time is money. Unless a startup can achieve scale quickly, and unless it has a revenue model that will at least cover costs (or the majority of them), then it will become a casualty.
There are going to be a lot more startups like Wigadoo that, simply put, don’t have enough money to sit out the downturn.
Startups with much bigger costs than Wigadoo are arguably at even greater risk, and will be more desperate to secure funding. As such there should be some great opportunities out there for investors who take a longer view, but the risks of getting it wrong loom large.
But during this slump many investors seem to be keeping their hands firmly in their pockets. It’s exactly how it was in the period I like to call The Doldrums, between 2001-2004.
I hope it doesn’t stay this way for too long.