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Published 20 August 2013 11:41, Updated 26 November 2013 18:35
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.
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.