Chipshot chief executive Brian Sroub attributed the company's struggle to the bear market for technology stocks.
"I think the business proposition was there," Sroub said. "But the financial markets were not there for our type of business. The markets cooled dramatically, and we were not able to survive that."
Chipshot is the latest in a string of e-tail bankruptcies and site closings. In recent weeks, Gazoontite.com filed for Chapter 11 bankruptcy protection, sweepstake site mValue ceased operations, and online jeweler Miadora.com closed shop and laid off its entire staff.
Before filing for bankruptcy last month, Chipshot, too, had been hit by rocky times. Through a series of layoffs, the company downsized its staff from some 200 employees in January to about seven now, Sroub said.
Despite the problems, the company holds out hope that it will not go out of business entirely, Sroub said. In the past several months, "three or four" investors have expressed interest in buying the company or its assets, he said. But Sroub said he did not know if or when Chipshot would be acquired.
"I've been saying (to employees) that we would know something by Friday," Sroub said. "I've been saying that for the last 15 or 16 weeks."
Chipshot filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of California in San Jose. Chapter 11 bankruptcy gives companies protection from their creditors while they attempt to reorganize their business.
"We're doing everything we can to preserve value for stakeholders," Sroub said. "If someone comes in in the next few days, we could still make Christmas."
Although Chipshot continues to operate its site, it has been notifying customers who place orders that all items are on back order. But Sroub said the company may shut down the site soon rather than continue to accept orders that it cannot fulfill.
"There's a period of time after which it becomes too onerous to be keeping the site up and not fulfilling orders," he said. But he added, "We view a live site as more valuable than a dead site."
Chipshot launched in 1995 and raised some $50 million in four rounds of financing, including $29 million in fourth-round funding in June. Among the company's backers were Sequoia Capital and Oracle Venture Fund.