| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
  What exactly happens when a venture-backed startup deadpools, we wondered last week while covering the demise of online video service maniaTV Network Inc., after raising $22 million from VCs?Roger Ehrenberg has nothing to do with maniaTV, but he does know what it's like to close the doors on an entrepreneurial endeavor. When Monitor 110, the tech company he co-founded with Jeffrey Stewart, closed last summer, Ehrenberg was remarkably candid about what went wrong and the lessons he's learned from the experience. These days he focuses on investing in startups, including Buddy Media, StockTwits and WallStrip, but he took time out from angel investing to give us the entrepreneur's perspective on shutting down a startup. - Mary Kathleen Flynn
The Deal: ManiaTV shut down after trying to negotiate a sale.
But surely it and other startups in the same situation must have some
stuff left to sell after closing -- like computers, Web site domains,
maybe some intellectual property?
Roger Ehrenberg: There is physical equipment. Often intangible assets like Web domains, software code, patents. Sometimes below-market leases (though not in this environment.) Do investors ever get paid back? After the firm is liquidated, there is a pecking order: trade creditors; venture debt holders; preferred stock; common stock. In a liquidation, generally the most you can hope for is to pay off both trade creditors and the debt lender. Preferred and common generally get nothing. How did the process play out with Monitor 110? We paid our trade creditors. We sold our physical assets -- furniture, fixtures, computers, servers. We then broke up our intellectual property into 13 discrete lots, approached logical buyers and ran an auction. The highest bidders won the lots. Proceeds of the sale went entirely to our venture debt lender, whom we paid nearly 100 cents on the dollar. How unusual is it that Twitter Inc. co-founder Evan Williams repaid investors when he closed Odeo Inc. a few years ago, and how much good will did that earn him with investors? Ev raised approximately $1 million from angels and another $5 million from Charles River Ventures in February 2005. He bought back Odeo from investors in October 2006 after the core Odeo offering wasn't doing well and he wanted to run an incubator (renamed Obvious Corp.). There was presumably a lot of the original financing left (which was returned) and supplemented by his own money in order to make the investors whole. Since he had some businesses successes before Odeo, he was able to come up with the funds necessary (Blogger, etc.). (Editor's Note: Pyra Labs, which created Blogger, was sold to Google Inc. in 2003 for undisclosed terms.) This makes him unusual both due to the gesture (not running Odeo into the ground and squandering investors' money) but also due to his ability to do this (by having the financial resources few entrepreneurs possess). Many of his Odeo investors did subsequently invest in Twitter. Categories Deal Video
    Community
 Elsewhere on The Deal.comDealwatchThe Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||||
|
|
|
|
|
©Copyright 2009, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.
