Branded sportswear startup ONTHEGO has reportedly collapsed, after COVID-19 put a stop to community events and a partnership with Wesfarmers allegedly wasn’t as fruitful as hoped.
In early June it was reported that the business was in administration, but still actively trading, with founder and chief executive Mick Spencer saying the move was a proactive step towards saving the business.
Now, reports suggest the startup has collapsed, owing some $6.5 million to creditors, and is set to be wound down once its assets — including stock, IP and equipment — are sold on.
Speaking to SmartCompany, Spencer says the bulk of the debt owed was in secure convertible notes for investors, which were not due for some 12 months’ time.
The team had been in discussions to sell the business, he adds.
“We knew the secured debt was possibly going to be a hindrance,” he explains.
“The best thing for us to do was to go into administration to get a better structure for the business moving forward.”
Now, a sale is being finalised, and a new owner will take over the business and its assets. That means the business has been ‘mothballed’ for a few weeks until completion.
Spencer himself will no longer be involved, and says its “up to them” how the new owners operate the business.
ONTHEGO provides software allowing customers to design and order sports clothing and other accessories quickly and easily, through both online and order and in-store kiosks.
The collapse is being partly attributed to the effects of the COVID-19 pandemic, which saw many large orders for sporting events cancelled.
However, the Australian Financial Review reports that administrators are pursuing Wesfarmers for more than $500,000 allegedly owed, relating to their joint venture partnership. Wesfarmers disputes that any amount is owed.
Founded back in 2010 by Spencer, ONTHEGO then appeared on Channel Ten’s Shark Tank in 2016, securing a $600,000 investment — twice as much as he was asking for.
The deal never actually passed the due diligence stage, but thrived in the 12-months following anyway, increasing its valuation by some 250%.
ONTHEGO partnered with Workwear Group, a subsidiary of Wesfarmers, in 2018, with Wesfarmers taking a 5% stake in the business.
At the time, Spencer said the joint venture deal was expected to take ONTHEGO’s revenue’s to more than $10 million per year.
He saw the deal as an “opportunity to grow and evolve”, he told SmartCompany.
That included “nailing our in-store experience”, he added.
However, administrator Aaron Torline of Slaven Torline told the AFR revenues from in-store sales in the likes of Officeworks and Kmart were not enough to keep the business going.
“The Wesfarmers agreement didn’t deliver the revenue they expected,” Torline reportedly said.
In a statement to SmartCompany, a spokesperson from Wesfarmers said Workwear Group hasn’t been involved with ONTHEGO for more than 12 months.
“Workwear Group formed a partnership and took a small equity stake in ONTHEGO in mid-2018 to support the growth of the business and to gain insights into its quick run, self-designed customised sportswear,” the statement said.
“We value and appreciate the additional learnings the relationship provided.”
SmartCompany reached out to Torline. At the time of publishing, he has not responded to a request for comment.
This article was updated at 5pm on Thursday, July 8, 2021 to include comments from Mick Spencer.