Published on: December 8, 2008
There is a fascinating piece in the San Francisco Chronicle
about the rise and fall of Pay By Touch, the biometric payment company, and John P. Rogers, who convinced investors – including Gordon Getty, Ron Burkle, a number of hedge funds and even five former NFL quarterbacks - to give him hundreds of millions of dollars to turn his dream into a reality.
According to the story, “Investors were intrigued by the intense, charismatic Rogers' vision of a future in which shoppers would pay for their purchases with a thumbprint rather than a credit card or cash.
“But today, Pay By Touch is bankrupt, and the millions are gone - squandered, investors contend in lawsuits, in an extraordinary spending spree that burned up venture capital at a rate of $8 million per month.
“In a lawsuit filed in October in San Francisco Superior Court, an investors' group says the company's crash was hastened by Rogers' frequent partying and ‘constant abuse of drugs’ - behavior that allegedly impaired his business judgment and contributed to destructive behavior.
“The CEO's suspected drug use became of such concern that a member of Pay By Touch's board said he arranged a hotel-room ‘intervention’ for Rogers, an investor says.
“To some, the spectacular rise and equally spectacular collapse of Pay By Touch is a cautionary tale about the vagaries of venture capital, the importance of background checks - and, perhaps, the risks of taking your broker's tip at face value.”
Among the points made in the story:
“The company spent more than $150 million buying out rival firms that also were pursuing biometric bill-paying, court records show. Pay By Touch also went on a hiring spree: at one point, more than 750 people worked there. Rogers also leased 90,000 square feet of prime office space in a new Mission Street high-rise.
“The company made some sales, signing contracts with the Albertson's and Piggly Wiggly supermarket chains to install payment terminals. But the company never came close to breaking even. In 2007, Pay By Touch lost $137 million on $600,000 in revenues, court records show.
“Long before that, some investors had come to believe the problem with Pay By Touch was not its business idea, but Rogers.
“The investors' suit filed in October claims that after a party in Florida in 2003, Rogers offered cocaine to an unnamed member of the Pay By Touch board. An employee later approached a company official and expressed concerns about Rogers and cocaine abuse, the suit also says. Rogers began missing work - or showing up looking disheveled, the suit claimed, while a prospective deal with American Express fell through after Rogers missed a scheduled meeting and did not show up for days. Meanwhile, a lawsuit filed by former company executive Jon Siegal accused Rogers of advising a female employee to submit a false expense account to pay for drugs.”