Sparkcentral, the digital customer platform that was founded in 2012 by the young entrepreneur Davy Kestens, comes after a few turbulent years into the hands of its competitor Hootsuite. The Flemish shareholders – including the government – tore their pants at the story.
Sparkcentral once spoke about the tongues as the Flemish challenger of the older and larger Hootsuite. Both developed a platform that companies use to manage relationships on social media, for example as a tool for salespeople or for customer service.
But as Hootsuite continued to grow, Sparkcentral has gone from bad to worse in recent years. Today, the Flemish start-up falls like a bite-sized chunk in the hands of its Canadian competitor. Hootsuite is the global market leader in social media management, with over 200,000 paid accounts, and millions of users around the world.
The sellers of Sparkcentral are the Limburg investment company LRM and Group MC – the family vehicle of Caroline Maesen, co-owner of Actief Interim. That is remarkable, because barely nine months ago they presented themselves as rescuers of Sparkcentral, which was financially in bad shape. LRM and Group MC bought out the US venture capital funds Split Rock Partners and Jackson Square Ventures in March 2020 and invested 2.5 million euros in a restart for the company.
Both LRM and Hootsuite are tight-lipped about the takeover amount, but according to informed sources, it is no more than a few million euros, a fraction of the valuation of tens of millions that was once placed on Sparkcentral. The company is out of cash and is on the verge of bankruptcy, it can be heard.
American dream
How it came to this remains an unanswered question. The then 23-year-old Kestens founded the company, initially under the name Twitspark, in 2012. De Limburger became the figurehead of a generation of young entrepreneurs who dreamed of building a digital global company.
Kestens would have brought a very expensive lifestyle – think of luxury parties in the gambling city of Las Vegas – without justification as an expense.
Did success and praise go to the head of the young twenties? The fact is that in the years that followed, the relationship with his investors gradually soured, according to several sources, because he was more concerned with spending than earning it. Kestens would have used expense accounts to finance a very expensive lifestyle – think luxury parties in the gambling city of Las Vegas. Business also started to go downhill with Sparkcentral. The company lost more customers than it attracted and was rapidly driving its investors’ money through.
Kestens does not want to comment on the mistakes that are blamed on him. Another observer does not think he has made unforgivable mistakes. ‘Especially in the early start-up phase, he did a very good job, for example by attracting the airline Delta as a customer. You just have to do it as a young guy. If I can blame him for anything, it is that he did not surround himself in time with more experienced managers. ‘ Increased competition from other platforms also meant that Sparkcentral failed to grow into a larger company, it sounds here.
Restart
In 2018, Kestens’ story came to an abrupt end. He was kicked out by the shareholders and replaced by the American Joe Gagnon. In early 2019, LRM and the Americans pumped an additional $ 5.8 million into the start-up, and a year later LRM and Group MC bought out the Americans. With Christoph Neut as CEO, the company would make a European relaunch in which the platform would be fully positioned as a digital customer service, it was said at the time.
According to Neut and LRM CEO Tom Vanham, those plans were thwarted by the corona crisis. ‘Our pockets are also not so deep that we wanted to invest again. Selling to a major player like Hootsuite was an opportunity that we could not pass up, ”it says today.
Whether the corona crisis fully explains the bad course of events is open to debate.
According to our information, there were also bids on Sparkcentral in 2018 and 2019, but LRM did not want to accept them at the time. Whether the corona crisis fully explains the bad course of events is open to debate. According to Hootsuite CEO Tom Keiser, the demand for his platform was never greater than during the pandemic.
Giant dilution
Vanham does not want to say how much the investment company, which is owned by the Flemish government, has lost in total to the start-up. Most of the investment was already written off in the 2019 financial year. In that year, the LRM group went into the red almost 9 million euros, perhaps largely due to the Sparkcentral debacle.
However, the damage is relatively much greater for the investors of the first hour, who literally lost 99.9 percent of their money. They were enormously diluted during the capital operations of 2019 and 2020 because the main shareholders created additional shares, without being able to make a statutory contribution to this.
Private investors who have lost money include well-known entrepreneurs such as Peter Hinssen, José Zurstrassen, Lorenz Bogaert, Sébastien de Halleux and André Duval. For some, the damage amounts to several tens of thousands of euros, for others it amounts to hundreds of thousands of euros.
Employees
The positive note in the story is that there is still a future for the thirty employees of Sparkcentral at the Corda Campus in Hasselt. According to Hootsuite CEO Tom Keiser, the chances are that there will be two or three times more people in the next twelve months, given the ‘enormous opportunity’ in the market. Current CEO Neut will join Hootsuite, where he will be responsible for sales as a board member.
Keizer calls Sparkcentral’s focus on customer service complementary to Hootsuite’s focus on marketing and sales. ‘We do expect those partitions to gradually disappear. Companies increasingly need a seamless workflow across all departments, ”he says. ‘Sparkcentral will continue to exist as a brand name for the time being. In the long term, we will also look at what we do with it, ‘says Keizer.
