Inside the collapse of ispONE: Near-death episodes and a broken partnership

Andrew Heathcote Rich Lists editor

Inside the collapse of ispONE: Near-death episodes and a broken partnership

Published 20 August 2013 11:41, Updated 20 August 2013 15:56

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Zac Swindells (left) and Chris Mochings of ispONE. The two founders started their business in a bar, but Mochings left the business late last year. Photo: Arsineh Houspian

For a business that had its genesis in a barroom argument, it may not be surprising that ispONE’s remarkable run has come to an ugly end. The Melbourne-based business built a lucrative niche as a wholesaler of mobile and internet services. It was a remarkable success story and emblematic of the opportunities on offer in the fast-growing telco sector. ispONE was turning over as much as $55 million last year before trouble struck. The administration of the business will have serious ramifications for its owners, retailers like fellow BRW Young Rich list member Ruslan Kogan, and the 280,000 customers who rely on its services. Like many high achieving businesses, ispONE had an inauspicious start. It was founded in 2002 when Zac Swindells and Chris Monching met at a Melbourne bar. The story goes that a minor altercation followed after one was caught adding drinks to the other’s bar tab.After putting aside any initial difference of opinion, the pair quickly hit it off. Both were yet to turn 30 and had strong interests in building a company – so each put in $2000 to start one.

Following six months’ of research into the telco sector, they bought a struggling internet services company for $16,000 with the assistance of a credit card. The company was renamed ispONE.

Swindells, who has been interviewed by BRW several times over the past five years, has always been open about difficulties the business faced.

“In the first four years of this business we should have shut five times,” he said in 2011.

In the first four years of this business we should have shut five times. 

One of its closest shaves occurred in 2007, when they were left scrounging for funds after a supplier changed its credit terms with little notice. They brought in an investor and found the money they needed just in time to save the business.

ispONE’s recent dispute with Telstra concerns the alleged non-payment of bills, reportedly worth as much as $12 million. The company was put in administration on August 19, shortly before ispONE was due in court to fight the allegations. Early estimates from the administrator, Ferrier Hodgson, put ispONE’s total debts, to as many as 50 creditors, at between $25 million and $30 million.

Trouble brewing

Internal problems at ispONE may have been brewing for some time. Co-founder Monching walked away from the company in November last year and has sought to distance himself from it since then.

The exit of a founding director is normally accompanied by the sale of shares but this didn’t happen when Monching left. His unwillingness or inability to sell his 30 per cent shareholding was perhaps prophetic of future problems.

Swindells told BRW in 2011 that ispONE was never about making a quick buck.

“We never got into this business for money, never did,” Swindells said.

“If we did, we wouldn’t have been here for the first four or five years. We wanted to do something so 20, 30 years down the track, we can sit back and say, ‘we created that’.”

The collapse of ispONE will lead to Monching and Swindells’s exit from the Young Rich list of the 100 wealthiest self-made entrepreneurs in Australia, aged 40 and under. The next edition of Young Rich will be published on September 19.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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