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As someone who is dedicated to supporting businesses to succeed and grow, I would never go so far as to celebrate the failure of a company.   I certainly have sympathy for the staff, suppliers, customers, and small investors who will suffer.  However, I have long been critical of the business model on which the rise and fall of was predicated. was founded in 2009.  It has only existed in a period of cheap money and overvalued stock markets.

It is a business model we have seen succeess time and again over the last decade and it has dominated the business landscape.  The model goes something like this: A digital business with a good idea raises hundreds of millions in cheap money.  That money is used to operate the business at a loss, outspend rivals on marketing, and operate at low margins to the point that small businesses can’t compete.  The plan is to just grow revenues as fast as possible.  You then use that revenue growth to float on the stock market at an overvalued price.  You then use your overvalued stock to purchase smaller (and often more innovative) rivals.  Once you have dominated or decimated the competition you increase prices and margins to become profitable.

Operating at a loss year after year, selling at low margins and spending heavily on marketing has put local owner managed and small bricks and mortar companies out of business.  They simply can’t compete. The business model was based on importing cheap, low quality products manufactured in low cost locations, and relying on up styling and heavy brand marketing to sell the products and dominate the market.  The only jobs these businesses create in the UK are low skill, low wage jobs in areas such as distribution.  Once all the small businesses have disappeared from the high street and all the UK factories have closed, they put up their prices.

At the heart of the problem has been low interest rates and cheap money.  I question whether low interest rates have been good for economic growth and productivity, or good for the Welsh economy or Welsh SMEs.    History may judge the last decade of low interest rates as having been a serious miscalculation by central banks and disastrous for the health of the economy.

Large institutional investors, large companies, and venture capital funds have been able to attract cash and borrow at insanely low rates and leverage their investments. raised around £140m and never made a p[rofit.  In comparison a small business borrowing just £140,000 would be paying many times above the base rate.  Highly rated large funds have been able to borrow cheaply, buy up cash generating assets or invest in loss making businesses, run them just cash extraction or valuation potential, sell them on the market at overinflated values, and bank the profits.  This has been to the detriment of well managed and innovative small businesses and is at the heart of the UK’s productivity lag.  The floatation of likely made a few of the early investors and founders rich, and the investment bankers were probably paid well, but all to the detriment of productivity, innovation, the economy, small investors, and small businesses.  The sudden realisation that these businesses need to actually make a profit may be contributing more than a little to our inflationary woes.   The problem is not capitalism, but that investor returns and the capitalist model of the last 20 years has been skewed by loose monetary and fiscal policy, to the detriment of the UK economy overall and SMEs in particular.

Technological innovation and the digital economy are important to the success of the Welsh economy, however, the bigger opportunity for Wales lies in reindustrialisation, the growth of our manufacturing base, and in supporting our SMEs.  The transition back to higher interest rates and the process of reigning in inflation is going to be painful, but our hope is that in the long term this return to normal will benefit well run and innovative small businesses.  An end to the era where cheap money has sustained loss making business models, stifled competition and innovation, and put well run smaller companies out of business, is in my view to be applauded.