Popular money management tool 22Seven has been acquired by the UK division of Old Mutual for an undisclosed sum of money.
While rumours have been flying around that the tech startup with tumultuous beginnings has been courting the financial juggernaut for a while, the two companies have only now confirmed that the deal is going through.
The buyout will see 22Seven absorbed into Old Mutual’s plans to develop digital support for its customers.
According to 22Seven founder and CEO Christo Davel, the startup needed an established, well-respected international brand to help grow the company in the future.
“We’ve always had big plans for our service, and what we think it’s capable of doing. With Old Mutual’s support, the evolution and enhancement will happen much faster,” says the CEO.
Things haven’t been all that peachy for the sexy cash management tool, as one of its original funders Hasso Plattner Ventures Africa pulled out during its Series B funding stage due to non-performance.
“When you have a bunch of funders there is a likelihood that some of them will decide to carry on and some don’t. This was the case. During the second round of funding there were very specific reason in their [HPV] mandate that prevented them from carrying on. They remained shareholders in the business until this transaction went through,” says Davel.
Old Mutual bought out all the original shareholders at 22Seven making the company the sole owner of the startup.
Inking this deal doesn’t mean the company will move its base operation. Although though most of the acquisition as been done through Old Mutual in the UK, and was led by the company’s Strategic Marketing Director Carlton Hood, 22Seven will stay in Cape Town and run business as usual.
As part of its strategy with Old Mutual, 22Seven will expand its offering to include multiple currencies, a clear road for global expansion as well as technological and strategic partnerships with Old Mutual companies such as Nedbank.
“22seven brings energy, innovation and world-class capability to our global digital strategy, and has already helped so many people change the way they think about money,” says Hood.
“We’ve opened the channels of communications with Nedbank around the technology and sharing. Nedbank is quite open to it, though there are no firm plans as of yet but will develop those plans. And where can share stuff we absolutely will,” says Hood.
Hood reckons one of the top priorities for the multinational is to expand 22Seven’s offering not just in South Africa but globally.
“We want to expand this product to some of our other territories and the first territory that we have targeted is the UK. So we are now actively working to take this offering into the UK market,” says Hood.
The reason the company chose to begin with the UK is because of its established customer base and the current digital programs that are already in place. Hood does however say other territories, including the rest of Africa, are being considered.
“What’s great right now is that we have started this relationship with this interesting partner and now from within the corporate everybody wants a piece of it. There is currently a queue for where we will roll out. We just need to deal with strategically and agree on a sensible footprint. First thing is to include the multiple currency functionality.”
While both companies are excited by the deal, word on the street is that this was more of a bail out than an exit. A well placed source told Ventureburn that 22Seven investors aren’t all that happy with the sale, with many having lost money.
22Seven launched with a brouhaha around data and security from users and banks. While that drama has died down, the company will hope that its alliance with Old Mutual, which is a trusted name in finance, will help calm the waters.
According to Davel, “the wave died down the minute Nedbank launched their own product [My Financial Life]. People realised that they needed to look at their money differently. It is a worldwide trend, for people to still keep banging the drums that you can’t share data, it’s going to end soon”.
Hood notes that “at the end of the day it is the costumer’s data and it is their choice what to do with it. Our job is to take the risk down to zero and reassure people about the security of the service.”
The company is also currently working a mobile app for users. It reckons that more than 80% of its user base feel this is something that’s been missing from the 22Seven experience. The company still hasn’t given any concrete user numbers, although they are rumoured to be dwindling. If true, an aggressive advertising campaign set to launch in the near future is likely part of a bid to turn this trend around.
“Some tech startups measure their success by how many subscribers they have, that’s not us. It’s a subtle game we are trying to play and it’s game that a lot of players are going to crowd into. There is a certain bit of proprietary information we keep and the number of subscribers is part of that,” adds Davel.