Opinion
Afterpay sidesteps a tech cliche, but serious questions remain
Associate Editor, Digital
It's a well-trodden path in the high-octane world of tech enabled startups.
Entrepreneur develops a product that catches fire, explosive customer growth ensues. But controls are not in place, or don't keep up with a rapidly expanding business. The wheels begin to wobble, if not fall off. Regulators come knocking. Company suffers.
Some of the biggest names in tech - Uber, Twitter and Facebook - have experienced scenarios along these lines. The most discussed name in Australian tech at the moment, Afterpay, has followed a similar trajectory. But the $6 billion buy now, pay service has at least taken steps to avoid what often follows: a period of bitter boardroom infighting, and a protracted internal power struggle.
That is one of the positives for investors in Afterpay following the reshuffle of its senior management ranks and board, announced on Tuesday. Nick Molnar, who came up with the service, has demoted himself to chief revenue officer; while Anthony Eisen shifts from executive chairman to replace him as CEO.
Two new independent directors will join the board, one of whom will serve as chairman. High-profile co-founder David Hancock is leaving, while Frerk-Malte (Malte) Feller, an executive at Facebook, has been appointed chief operating officer.
All of this comes, of course, after a tumultuous few weeks for the company, during which it has been:
- Issued with multiple 'please explain' letters from the ASX after wild and unexplained gyrations in its share price;
- Molnar, Eisen and Hancock sold shares worth $100 million;
- Financial crimes watchdog AUSTRAC said it was investigating the company over potential breaches of anti-money laundering and terrorism financing laws and;
- Credit card giant Visa said it was trialling a buy now, pay later service of its own, which could pose a serious threat to the company.
Founders in tech often fight tooth and nail to hang on to the coveted CEO position. The Afterpay camp insists that is not the case with Tuesday's announcement. Molnar and Eisen have been joined at the hip during the company's meteoric rise over the past two years, and remain extremely close.
It is going to be a seamless transition, they say. Molnar will continue to play a key role in the company's next phase of growth, driving its sales and marketing functions and seeking to maximise the opportunity it faces in the gigantic offshore markets including the US.
So it's full steam ahead for Afterpay, with the chances of a Travis Kalanick-style destabilisation campaign, or a Jack Dorsey-style comeback, seemingly remote. Nothing is really going to change.
Yet if nothing is really going to change, then it begs the question: why make an announcement like this? And if the changes had been in the works for a while, as people inside the Afterpay camp are also suggesting (and recent speculation indicated), it makes the events of the past few weeks even more extraordinary.
In any case, we will soon know whether Afterpay is genuinely serious about resolving its governance issues. The two new directors it is choosing to join the board will tell us a lot about that.
Afterpay's business growth and potential is undeniable, but big questions about its future remain. The impact financial incumbents like credit card giant Visa may have on the buy now, pay later industry is difficult to quantify. And what AUSTRAC may or may not find in its investigation of the company's compliance is an even bigger wildcard, with even bigger potential risks. Board and management changes are a positive step, but not a panacea for these challenges.