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

Appster

Appster co-founders Mark McDonald and Josiah Humphrey. Source: Supplied.

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 [email protected]

NOW READ: Appster co-founder Josiah Humphrey shares how startup founders can re-frame setbacks and maintain their mental health

NOW READ: App development company Buzinga collapses into liquidation after expanding

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Jason Andrew
Jason Andrew
1 year ago

Revenue of ~$19M with over 400 staff. Revenue per employee = $47,500…

It’s challenging to scale service businesses, particularly ones that rely heavily on non-recurring revenue. As soon as the revenue tap slows, you’re still left with a fixed cost base to leverage.

It’s a sad outcome, but these guys will continue to do amazing things. I can’t wait to see what the next project is.

Oliver
Oliver
1 year ago
Reply to  Jason Andrew

Most the work was getting done in India, reality is Apps took far too long, were low quality and required doing again from scratch. I know a group who burned over $100k with Appster.

Marcus Tarrant
Marcus Tarrant
1 year ago

I would be interested to know if the issue was triggered by recent unpublished changes to the AdWords algorithm (such as Changing the definition of a match which dramatically increases keyword competition among other changes) . We operate in a similar market (B2B) and have seen a dramatic reduction in lead quality and volume, with punishing quality score. I was aware that Appster was pushing AdWords hard, particularly a few years back.

Linda@alloverbins.com.au
1 year ago

Wondering why my post has been taken down?

Linda@alloverbins.com.au
1 year ago

This is why I signed up with them,

Hi linda,

I just wanted to send you an email and thank-you for contacting Appster.

One of the biggest questions people ask us in the early stages of talking to Appster is: why should I trust you with my idea?

Let me be straight with you, there’s a lot of reasons why we’ve become the #1 app developer. Here’s a few:

We make real startup successes. Our clients go on to achieve incredible results. An example is Bluedot Innovation achieved a $7.5m valuation in under 12 months, they also won Best Start-Up at the Global TalentUnleashed Awards (judged by Richard Branson and Steve Wozniak)

Appster has built a team of world-class disruptors including David Jaques Founding CFO of Paypal and the Former CCO of Virgin Australia Liz Savage who all believe in the Appster vision of ‘building an unprecedented development for the greatest ideas and innovations in the world’

We’ve been featured as an app startup thought leader & expert in Forbes, BBC, BRW, Sydney Morning Herald, Daily Telegraph, Australian Financial Review, The Australian, Sky Business, The Age, Venturebeat and literally dozens more.

Our clients rave about us. You can check our Google+, Facebook Page or Youtube Channel to find out what our REAL clients are saying about working with Appster. We have a track-record for delighting clients.

We don’t outsource. If you do some research you’ll see many of our Australian competitors have built great businesses by saying they just have Australian staff (mostly Project Managers) then outsource their work to 3rd party developers and pocket the difference. That’s crazy! You can’t be assured of quality or whether you even own your IP. All developers at Appster are on our payroll.

More Experience & Development Muscle than Any Developer in Australia. As one of the earliest app-developers we have over 100 staff with offices in Melbourne & San Francisco. Our CTO Martin Halford has over 20 years in Development experience and runs an agile-iterative driven development shop.

We help post-launch. Launching an app isn’t enough we’ll help you track the metrics which matter, run A/B split tests and train you on how to get users and traction.

There’s literally so many reasons why Appster has consistently been Australia’s leading app developer – but we’ll leave that to our clients to say more:

BUT HAVING TO PROJECT MANAGE MYSELF WITH INDIA! AND STILL AFTER $550,000 DO NOT HAVE A PRODUCT I CAN MARKET!
AGAIN MY PREVIOUS POST ( WHICH WAS TAKEN DOWN ?) THEIR BUSINESS MODEL IS BASED ON GRAB AND GO, THE CUSTOMER IS GARBAGE, TREATED LIKE GARBAGE. SO I ONLY HOPE NO ONE BELIEVES THIS COUPLE AGAIN EVER.

Oliver
Oliver
1 year ago

You are correct Linda, most the work was getting done in India, reality is Apps took far too long, were low quality and required doing again from scratch. I know a group who burned over $100k with Appster. Sounds like you burned a lot more.

Michael Thomas
Michael Thomas
1 year ago

“We don’t outsource. If you do some research you’ll see many of our Australian competitors have built great businesses by saying they just have Australian staff (mostly Project Managers) then outsource their work to 3rd party developers and pocket the difference.”

Wow I can’t believe they actually claimed they weren’t outsourcing. When I went to their office there was a handful of local developers (for smaller projects), and 99% of the work was sent to India. It doesn’t matter if they were on the payroll or not, the fact the work was sent overseas is clearly outsourcing. The only Australian staff there were account managers and others not involved closely with the projects. No wonder they came crashing down…