Multimillion-dollar app development company Appster collapses into liquidation, leaving businesses stranded

Multimillion-dollar app development company Appster has collapsed into liquidation today, with business owners allegedly left empty-handed with unpaid refunds and poorly built apps.

A former golden child of the Australian startup and tech scene, Appster was once hailed as the ‘next Apple’ by commentators due to the company’s intense growth, boasting over $19 million in revenue and more than 400 staff across four international offices prior to its collapse.

However, today the Australian arm and headquarters of the company has been placed into liquidation, appointing administrator Paul Vartelas of BK Taylor & Co liquidators yesterday to manage the process.

Speaking to SmartCompany, Vartelas confirmed the business’ liquidation said the main reason for the business’ collapse was due to a “sharp drop” in work available over the last six months, leading to the business missing targets and losing revenue.

“The two directors are very young people, obviously highly successful, but both are really devastated,” Vartelas said.

“They tell me it happened very quickly, everything was normal but then suddenly their budget halved and they couldn’t meet any targets. It went down in a very quick way.”

Vartelas says he’s unsure if the collapse will affect the business’ operations overseas, and the headquarters in Melbourne currently has around 23 staff who will likely be affected.

“We’re probably looking to sell whatever we can. In this industry, people are primarily interested in IP and client databases, and work in progress,” he says.

“We’ll be looking at what work has been done and how much of it has been paid for.”

The company didn’t respond to SmartCompany‘s requests for comment prior to publication.

Appster was founded in 2011 by young founders Josiah Humphrey and Mark McDonald, who quickly grew the company into a major player in the app development space, winning a number of awards such as the Forbes 30 Under 30 for the APAC region, and the SmartCompany Smart 30 for two years in a row.

Started from just $3,000 in investment, the company had recruited a number of impressive advisors, including David Jaques of Paypal and 500 Startups fame, and Liz Savage, former group executive of Virgin Australia.

However, the company fell silent in 2018, with neither of the founders making any appearances in the media.

Businesses left empty-handed

Business owner Trond Smith tells SmartCompany he paid Appster a $60,000 deposit in June for the company to build him an app for his yet-to-be-launched tech company. However, on receiving the final result, the app was allegedly far from fit-for-purpose.

“What they designed didn’t work, it was kindergarten stuff,” Smith says.

“So we terminated the contract and asked for a refund, but they were unable to repay it and put us on a payment plan instead.”

Smith says he got two payments of $10,000 before the money stopped coming through, leading to the business owner taking legal action against the company to try and recoup the rest of what he was owed. However, with the business appearing to now be in liquidation, Smith isn’t hopeful about seeing the rest of his cash.

“This has happened to me three times, and you usually don’t get anything back,” he says.

Appster was popular for not only its apparent success, but also the ‘rags to riches’ story of the two young founders, with Humphrey telling SmartCompany last year the early days of the business were some of the hardest, involving them pulling themselves back from the brink of near destruction and focusing on reinvesting profits back in the business.

“I think [showing that struggle] is important with entrepreneurship, because a lot of it is glamourised. People think you just make millions and drive fast cars,” the founder said at the time.

However those struggles appear to have resurfaced for the company in its later years, and according to Smith, the writing was on the wall from the start of this year. He says when he went to the company to start designing his app, he was pressured into paying up quickly, with the business even offering him a discount if he paid fast.

“They employed this tactic where you’d get a 30% discount if you signed up within four weeks of doing the first workshop, which I found quite strange,” he says.

“They really put on the hard sell, and in retrospect, they were probably trying to get money in the door.”

Despite the liquidation, the founders of the business are still active on LinkedIn, with Humphrey posting regular inspirational statuses, as well as promoting an event in Melbourne next week pinned as a networking night for founders seeking funding for their business.

More to come …

Do you know more? Get in touch at news@smartcompany.com.au

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