It’s odd to think now that Wonga was once the darling of the tech press with concerns about its business model shoved to one side in favour of paeans honouring its awesome algorithms.
Last week’s news that the firm will have to write down £220 million in debts for 330,000 customers is just the latest knock to a reputation that even animatronic grannies couldn’t soften.
Living on borrowed time
Reading Sara Lacy’s TechCrunch article from 2009 – recently resurfaced by Valleywag and written three years after Wonga was founded – highlights how grandiose some of the hype could be.
While noting the criticisms levelled at the company’s business model, Lacy pitched it as the saviour of finance:
Critics have said that Wonga is usurious by charging a 1% interest fee per day. But that’s a knee-jerk response.
Wonga is simply charging a premium because it allows borrowers quicker access to cash than any other service, the same way a town car is going to charge you more than a cab off the street.
Investors were equally taken with Wonga’s business model. It has taken $145.4 million in investment from firms including Accel Partners and Greylock since it was founded in 2006.
The initial story of Wonga was of a company that couldn’t lend to the wrong people because its tech was just too good at weeding them out.
The desperation among tech commentators and investors for Wonga to disrupt the industry led to far too much unquestioning belief in its secret sauce.
The downside of Downtown
The Downtown Project in Las Vegas, another tech industry darling, was also in the news last week with a shakeup among its leadership, layoffs and more attention on a series of suicides. Zappos CEO Tony Hseih has been the face of the project though he denies ever being its leader.
The notion of a startup city being built using the same self-governing holacracy structure Hseih promoted at Zappos produced lots of ecstatic press to start with.
The reality has proven to be a lot more complex than readers of Hseih’s book, Delivering Happiness might have been led to believe.
Stop the wishful thinking
The most striking element of an open letter to Hsieh from a now former member of the Downtown Project team, David Gould, was not what he said but the job title he held during his time there – Director of Imagination.
That’s arguably the biggest problem with initiatives like The Downtown Project – dreaming and imagination outpaces the hard realities. Behind the hype, it’s a real estate play with some startup gloss dripped over it.
The tech world is often too quick to accept grand visions and then find themselves faced with a reality check down the road.
With Wonga it has been ordinary people allowed to take on loans they should never have been given. With The Downtown Project it is startup dreamers finding themselves waking up in a chaotic situation where a plan seems to have been replaced by making it up as you go along.
We need to start asking the tough questions earlier and avoid getting swept up in wishful thinking.