Pseudo had been struggling to attract new investors for months and finally ran out of cash, according to Mark Berniker, an executive editor at the company. He said chief executive David Bohrman had been hopeful of landing a new backer just hours before he announced the closure to the company around 2:40 p.m. ET, but the financing had fallen through.
"He decided it would be better to let people go than risk them not being paid," Berniker said.
The failure ends one of the earliest experiments in bringing broadband media content to consumers over the Web. Pseudo was launched six years ago as an Internet chat company and began broadcasting original Web video programming in 1997.
Company spokeswoman Jeanne Meyer said the company was ahead of its time.
"I fully expect to see a company doing what we tried to do in about two or three years," she said.
New York-based Pseudo's collapse follows the closures of other online entertainment pioneers including Digital Entertainment Network. Such failures highlight the risks of moving first into a market dependent on high-speed Internet connections, which so far have not been widely implemented.
Only 6 percent of the online population is using the Internet at high speeds, according to research firm CyberDialogue.
The company's failure comes just months after it laid off 58 employees and announced an ambitious plan to produce live Web programming.
While Berniker admitted the company had made its share of mistakes, he said the chilled climate for dot-com investing played a part in bringing the company down.
"It's not the same for anybody dot-com raising money these days," he said. "It's a sad day. (We) were ridiculously ahead of (our) time, but we made some strides in the last year or two."