Investors Avoid Answering Where Wonga Went Wrong

For the second time, Accel Partners and Balderton Capital have stayed silent about what went wrong with the the payday loans company Wonga, according to an article by techcrunch.com on Monday (Oct. 20). This time, however, the cone of silence was made publicly on stage among a panel of investors.

The article explained the past details of where Wonga went wrong, which started with writing of the loans of 330,000 customers and waiving the interest and fees for another 45,000. This all came after admitting it “failed to a adequately assess affordability.” Basically, it lent money to people who couldn’t pay it back. Investors were asked about the issue during a discussion about the European investment ecosystem in London.

“Look, I think Wonga should have been quite clear they’ve made lots of mistakes about where the business is at,” Daniel Waterhouse of Balderton Capital said at the forum, according to techcrunch.com. “They have a big loan book, they’ve said they’re working closely with the FCA to offer a great product to market. They’ve been pretty clear about what’s happened in the past and what they’re doing now and moving forward.”

“Wonga’s business has also drawn censure from sector regulator the Financial Conduct Authority (FCA) for sending fake lawyers’ letters to customers in arrears. It was required to pay out a further £2.6 million in compensation for that,” according to techcrunch.

Index Ventures’ Saul Klein, also on the panel, focused his comments on the need for investors to be more hands on when investing with startups. Klein specified Indext was not an investor in Wonga, but his father — Robin Kelin  — was chairman of the Quickbridge (Wong’s board) until Nov. 2013 when he stepped down, according to techcrunch.

“An investor needs to get their hands dirty, whether they’ve been an operator or whether they haven’t been an operator it’s really about what we would call Series A muscle,” Klein said at the forum. “It’s about really getting your hands dirty, getting involved with the team, being accessible, being a resource, having a network — that allows them to hopefully make their mistakes because there are a lot of mistakes we’ve all made in our careers and hopefully we can pass on the benefits.”