Pollen CEO Cites COVID-19 and Tech Crash for Buyout Failure in Leaked Email

• Events startup Pollen is to restructure after failing to find a buyer, entailing job losses.
• The startup has been subject to weeks of speculation after failing to pay staff.
• In an internal email, CEO Callum Negus-Fancey blamed COVID-19 and the economic downturn for its crash.

The CEO of imploding events startup Pollen has cited the tech stock crash and COVID-19 as reasons for a failed company buyout, while also complaining of media leaks in an email to employees on Wednesday.

Pollen has been subject to weeks of speculation after it cut 200 jobs in May and missed payroll and expense repayments and customer refunds.

Workers at the startup told Insider this week that the firm had been non-responsive and opaque through July and August about apparent salary freezes and late payments.

Following a Sky News report Tuesday that Pollen was about to go into administration, 32-year-old CEO and cofounder Callum Negus-Fancey sent a lengthy email to his 500-600 employees complaining of media leaks and saying the company had been “limited” in what it could share. Negus-Fancey said the firm would undergo a restructure after failing to find a buyer, entailing further job losses.

“I’m writing to tell you that our parent company (StreetTeam Software Limited) is appointing administrators to restructure after we were not able to sell the company in its entirety,” Negus-Fancey wrote, before signing off the email “Cx.”

Employees will learn today whether they are being kept on under the new structure. Those being made redundant will be “connected” to other startups backed by Pollen’s investors.

The London-based startup was launched in 2014 by brothers Callum and Liam Negus-Fancey, and curates exclusive events and travel experiences from music festivals to club nights. It partners with influencers, promoters and music festivals, and has held events with Justin Bieber and Duran Duran.  It has offices in the UK, US, Canada, and Poland.

As pandemic lockdowns put an end to in-person events, Pollen ran into difficulties. In May 2022, the firm laid off around 200 employees — 30% of its workforce — just a month after securing a $150 million in funding from European venture capital heavyweights such as Northzone, Backed, Lansdowne Partners, Molten Ventures, and Kindred. It also received funding from the Future Fund, a taxpayer-backed rescue initiative launched by the UK government. Pollen received total investment of $305 million as of April 2022, per Pitchbook data.

The company reported a pre-tax loss of £57.3 million ($70 million) on revenues of £48.4 million ($60 million) for the full year 2021.

One US employee at Pollen told Insider their fortnightly paychecks have not come through since the beginning of July. UK employees are given monthly paychecks, but these have also not materialized since the start of July, the person said, adding that Pollen had stopped funding health insurance for US workers.

“Unknowingly uncovered for all of July is wildly dangerous in the US given healthcare costs,” they said.

Pollen did not immediately respond to a request for comment from Insider.

Read the full email from Pollen’s CEO here:

I’m sorry some of you heard versions of the below information, incorrectly explained by some media. A third party that we work with leaked confidential information to journalists – this was not our intention and I apologise. I have attached the official press release that we will be sharing with the press.

I’m writing to tell you that our parent company (StreetTeam Software Limited) is appointing administrators to restructure after we were not able to sell the company in its entirety. Our parent company owns all our technology and brands (such as Pollen, IMS and our college travel business). We have already received bids for the consumer facing subsidiary companies meaning customer experiences and refunds will not be affected. However as a result of the restructure the college businesses are going to become independent from the destination travel experience business.

For those who we are asking to work for the college or destination travel businesses you will be invited to a call tomorrow to learn more about the opportunity and who’s involved. For those leaving you will all receive an email tomorrow to let you know and give you more information about your specific situation. We’re also working with our shareholders to get everyone leaving connected with their best portfolio companies to help anyone who is interested to find their next role – we’ll be sharing more details of that tomorrow too. You were all hired at Pollen because you are extremely talented and I know that any company will feel lucky to have you.

I am sorry that I wasn’t able to close a deal in which we sold the business in its entirety and kept the whole company together. I have been building this company for more than a decade and it’s been the centre of my life. There is nothing I wanted more than to continue building on the collective vision, culture and community that we have created together. However, I am pleased that big parts of the company will continue on a new journey. Everything we have achieved is because of all of you. Thank you for believing in Pollen and being part of our journey. Building this company with all of you has been the greatest privilege of my life.

Cx

I understand this has been a difficult and confusing time, and we’ve been limited in what we could share, and for those of you who would like more context on how we got to where we are now and decisions we’ve made, I have included detailed information below.

Why we are where we are:

The company was hit with multiple unexpected shocks in 2022 which combined, materially impacted our financial position and our performance against our financial plan.

Omicron negatively impacted sales for future experiences and meant a lot of partners wanted to delay launching their experiences until it was over, delaying sales. Both with the industry and with customers there was a ‘COVID fatigue’. This had not been seen at any other point in the pandemic when our sales were extremely strong. At the same time, complex government protocols around reopening strategies, eg vaccine passports and traffic light systems, created unexpected costs with some of the experiences we did operate, and meant we had to cancel some experiences entirely, where major protections didn’t always apply. Both of these factors materially impacted profitability.

The tech stock crash meant we raised less money than we planned. In our Series C given investors changed the size of their commitments or unexpectedly chose not to invest. This was characteristic of the environment where technology companies, particularly those in the consumer space, saw globally renowned VCs withdrawing term sheets and re-calibrating valuations, with a backdrop of the fastest decline in VC investment in over a decade.

The change in the macro environment led to record lows in consumer sentiment across our key US and UK markets. This impacted i) desire to purchase with some customer segments and i) what products some customers wanted. As a result, we had to delay launching many experiences as we adjusted the products / who they were targeted at. In turn, this impacted sales. Sales cycles also changed for some audiences looking to commit to purchases later which further impacted sales in the period. Another factor, was the unusually large amount of pressure on people’s time due to pre-existing commitments that had been condensed in to the period following Covid restrictions ending, eg multiple weddings, travel vouchers, postponed vacations.

Although we developed a winning strategy to tackle the above, and were seeing sales recover strongly, particularly for experiences later this year or into next year, it was too late. All of this was after 18 months of battling the pandemic.

We could have sustained any of these shocks individually but their combined effect has been too much and resulted in us having far less cash than planned in a very choppy and unpredictable market. As a result we hired Goldman Sachs to help us find a new partner.

Why was the process with Goldman unsuccessful?

In light of the deteriorating VC investor backdrop, we agreed with shareholders to run a process to find a long term strategic partner for the business. The macro environment continued to deteriorate in Q2 with further severe de-rating in the valuation of high-growth loss-making tech businesses. Overall M&A volumes also fell materially from levels only a few months earlier. This effect was exacerbated by a heightened public market focus on all companies to preserve cash and focus on core operations given rising interest rates, high inflation and fears about their ongoing impact on consumer behavior and discretionary spending.

As result, given we are a loss-making business, innovating in a nascent category, we were not considered a big enough priority to buy in this climate, even by companies who had tried to buy us for significantly more money previously.

Why we ran the process the way we did: We have been searching for a way to secure long-term funding for the company in a way which had the best outcome for customers, employees, and our shareholders. All our decisions and comms were guided by our duties, morality and the legal and expert advice we have been receiving. As part of this process, we have been legally unable to share detailed updates with you due duties of confidentiality and various agreements we had with potential buyers. We did not want to risk sharing anything that could jeopardise the process.

Selling the company in its entirety would have been the best outcome for everyone, including all employees i.e. it would have saved the most jobs and resulted in better packages for those not staying with the company. We were in very late stage discussions with more than one buyer and so we felt it right to see these conversations through for as long as it was viable that they would close in a sensible timeframe. We recognize how difficult this was and how much pressure it put on the business and all of you. Please know that throughout this process we have been putting all stakeholders interests including yours above our own.

We met with our advisors and board twice a week to determine if it was correct to continue running the process the way we did, in order to hold ourselves to account and make sure we were making decisions in line with the above criteria. Based on feedback from buyers it became clear to us it would take too long to close this type of deal in the context of the financial pressure the company was under. At this point, we immediately executed on the contingency plan I outlined at the top of this email that we had developed in the background in case the process was not successful.