Blipfoto Ltd: The Last Acts (Investment)

Update 30/3/15: Since writing this blog entry I've a number of others. The last,  'Barking up the wrong tree? A reinterpretation of the Blipfoto/Polaroid tie-up' should be read alongside this one.  Thanks.

This is the fifth in a series of blogs about the demise of Blipfoto Ltd and the future for its user community.


This post attempts to shine some light (however weak this in places might be) on the events behind the downfall of Blipfoto Ltd. in March 2015.


The only official explanation that has been given thus far is found in the message from Joe Tree of 18th March and an article in The Scotsman of 18th March which quoted Blipfoto Ltd. Chair, Ian Ritchie.


Joe Tree, founder, CEO and a Director of the company said,


Two weeks ago, following events outside its control, the Blipfoto Board of Directors took the incredibly difficult decision to put the company into liquidation.


The Scotsman article of March 18th 2015 said,


Ritchie said yesterday market research had suggested that the strength of the Polaroid brand would ensure a leap in subscriber numbers, but it did not happen.


He said: “Because of that some other funding that was due to come in was no longer available and the company found itself in a position where it could not continue trading. The loyalty of members was very strong, but we didn’t have enough of them.”


That is all we know so far. On March 2nd Joe Tree and Graham Maclachlan (co-founder, Head of Community and Content, Company Secretary and a company Director) posted their last blips - at least for now - and on March 3rd the Polaroid Blipfoto Facebook page posted its last post.

In the middle of March news broke that Blipfoto Ltd. had been placed in compulsory liquidation. This news was published in The Gazette on Friday 20th March and confirmed that the company had put itself into liquidation.

Publication of the Petition to Wind Up Blipfoto Ltd From The Gazette.
Publication of the Petition to Wind Up Blipfoto Ltd From The Gazette.

News also broke of a preferred bidder to buy the Blipfoto's assets but I have covered that elsewhere in these blogs. At the moment an eery and unsettling silence reigns.

So what did happen?

This blog looks at a crucial event shortly before Blipfoto announced its partnership with the Polaroid brand to the world at the CES convention in Las Vegasthe in early January 2015.  By March 2nd something so catastrophic had happened that it forced the Directors of the company to petition for liquidation and appoint a liquidator.

According to the Chair of Blipfoto's Board of Directors two key events took place in this period. Firstly, a leap in Blipfoto subscribers did not take place. And secondly,  'some other funding that was due to come in was no longer available'.

The sources of evidence for examiningg those two linked events - the one appearing to cause the other - are pretty sparse indeed. These include past Blipfoto statements, media coverage of Blipfoto's rise as a tech start-up, and the documents Blipfoto Ltd was obliged to post with Companies House. A last source of information comes from Blipfoto itself.

It is ironic and, I think unique, that Blipfoto - the photo-journaling company where 'history lives' - can shed additional  light on this period because two of the key players, Joe Tree and Graham Maclachlan as senior managers and Directors and Secretary of the company, were posting publicly-viewable daily journals and photographs during this period.

Maybe one to place to start is the second event - the investment that was not forthcoming.


Well. what do we know about that?


Almost nothing. It was supposed to happen but it didn't because of the absent 'leap' in new users/subscribers. 


But as Ian Stevenson of Salient Point, the Edinburgh startup advisers, implies in his really useful blog entry of today companies don't just raise investment with a snap of the fingers. A whole number of things need to be set in place to issue new shares and such like. And where will that be documented but at Companies House.


And there we find a document that is publicly available (for a quid) called ADOPT ARTICLES 12/12/2014.

Excerpt of list of filings by Blipfoto Ltd at Companies House.
Excerpt of list of filings by Blipfoto Ltd at Companies House.

So what is this document about?


Firstly, it is about creating new Blipfoto Ltd shares. And secondly it is about the adoption of an amended set of Articles of Association - which is the rule book that the company is run by (like a constitution) and something that the Company Secretary has to ensure is complied with by the company's Directors.


It appears from the document and it's timing - in the middle of December 2014 - that this was preparing the way for a new round of investment in the company.


With regard to share creation the Board of Directors agreed through an Ordinary Resolution on 12.12.14 to do the following:


  • create 222,202 ordinary 0.001p shares with a subscription price of £4.09 per share - the 'Ordinary Shares'
  • create 24,690 0.001p convertible redeemable preference shares - 'the CRP shares'
  • create 110,223 ordinary 0.001p shares for an options agreement for Directors and staff - 'the Options Shares'
  • create 5,928 ordinary 0.001p Warrant shares - the 'Warrant Shares'

As I understand it this suggests the company was preparing for new investment that would be made through the sale of the 222,202 'Ordinary shares'. The other share issues - CRPs, Options and Warrants - were issued without a purchase price because these were to stop the dilution of other shareholders' percentage holdings of the total share capital of the company.


So how big was this round of investment to be?


Multiply 222,202 by the purchase price of £4.09 and you get £908,806.18. That's nearly a million quid and would have practically doubled the investment in Blipfoto Ltd since its inception.


It's a very precise sum and you wouldn't go all to all the trouble of passing and drafting the resolution and the new/amended articles unless you had a very firm offer of that new investment.


So that's the investment side of the 12.12.14 filing at Companies House. It really was a major, major development.


What about the stuff with the Articles?


Well. it's complicated. Very complicated.


But a few things first on the invovlement of Polaroid through the parent company, PLR IP Holdings.


From the 12.12.14 document we now know the license agreement with PLR IP Holdings (Polaroid) was signed on 15 May 2014 (see 'License Agreement' in Defined Term 1.1) and that the CRP shares to PLR IP Holdings (Polaroid) were issued on the same date (see 9.9).


And that PLR had the right to have an observer at Board meetings with no voting rights (8.1.4) and that provisions were included to ensure that the Articles could not be changed without PLR's written consent (9.9 CRP shares protective provisions).  And that the PLR share capital holding of the company could not be reduced below 10% of the fully diluted share capital (9.10.1)

(The PLR observer status was granted in the 15 May 2014 Articles rewrite - and named as 'Scott W Hardy' who is CEO of Polaroid.)


Further new issue of CRP shares to ensure PLR's share holding was not diluted were to be paid up by the capitalisation of available reserves of the Company - ie of Blipfoto Ltd (9.10.2.a).

(NB This was also the case with the CRP shares in the 15 May 2015 allotment - 9.10.2a - and to be fully credited as paid up in cash 9.10.2b and 'rank pari passu [on an equal footing]' with all existing Ordinary shares 9.10.2c.)


As for the rest of the Articles the impression they give is of an increasingly carefully defined relationship between the major shareholders/investors, their particular directorships, and the company. There is also generic reference to possible 'Underperformance Events' and a provision (8.15) is made to allow the Board (excluding the executive Directors - that is Joe Tree and Graham Maclachlan) to remove any director and appoint up to two additional directors.


From the mention of these 'Underperformance Events' - that is, where the Company is adjudged by the Directors to have failed 'to deliver any material aspects of the Business Plan (1.1) - it seems that the Directors may have been increasingly aware of, not a coming crisis, but rather of the mission critical nature of key upcoming events - which reading between the lines and with hindsight related specifically to the launch of the rebranded website in the next month and projected new user figures that were forecast to flow from this. (NB 'Underperformance events' are not listed in the Defined Terms 1.1 of the May 15 2014 adoption of new Articles.)


As to who the new investors were to be we have little indication. But the fact that a new named directorship is not created in the Articles of December 2014 tends to suggest that the the new investment was to come from one or a combination of the existing investors, with the probable exception of PLR IP (Polaroid).  I deduce this latter opinion from the issue of more convertible redeemable preference shares which in went to Polaroid and were issued at the Blipfoto's expense.

The passing of the share increase resolution and the new Articles of Association was a huge, huge day for Blipfoto and it came just shy of a month before the launch of the new website and Polaroid partnership in Las Vegas.

You can imagine how hopeful this development must have made the Board feel. The proposed injection of investment could have really boosted the company and provided a cash buffer to fund new development until that magical point of positive cash flow was reached (see Ian Stevenson here on the importance of this.)


Joe Tree's Blip for 12 December gives a sense of the occasion. It entitled 'Ends and Starts' says,

It's the end of the week, almost the year, and a long, long process. Next week is the start of new things, opportunities and adventures.

It was a hopeful time. 

But everything rested on the success of the new launch and media campaign to pull in new users. The Board must have been very confident that the company was going to make its numbers. But just in case there were those caveats about Underperformance Events written into the Articles.

Point 9.3.5. in the Blipfoto Ltd adopted Articles of Association of 12.12.2014. A clause which seems to allow a 21 day grace period for those acquiring shares if an Underpeformace Event 'subsists or occurs during the 21 day share offer period'.
Point 9.3.5. in the Blipfoto Ltd adopted Articles of Association of 12.12.2014. A clause which seems to allow a 21 day grace period for those acquiring shares if an Underpeformace Event 'subsists or occurs during the 21 day share offer period'.