A source said UBO's staff of 270 was notified earlier this week that the company was running out of money and was attempting to acquire additional funding by Friday. The source said that move was unsuccessful, and on Thursday all of the staff members were laid off except for the executives.
"Last night, they told everyone that it was over," the source said. The executives' roles are "going to be to clean up the mess."
The company also filed Thursday for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.
UBO is a network of sites featuring music, arts and sports; it targets hip-hop and Latin culture enthusiasts.
The announcement comes as reports circulate that venture funding is declining, particularly in the third quarter, marking the first time since 1996 that funding has fallen for two consecutive quarters.
UBO was one of 10 to 12 companies assisted in an ongoing effort by Interfase Capital and investment company Capstar Partners to provide financing to struggling dot-coms.
In August, Interfase Capital and Capstar Partners formed an investment partnership, Eco Associates, aimed at investing in distressed, underfunded e-commerce companies by the end of 2000 through its Eco Opportunity Fund.
In late September, Eco Associates provided $3 million in interim financing to UBO and was negotiating to lead UBO's preferred equity round of financing, provided that certain conditions were met. Those included a requirement that the company establish alliances with significant partners that would help provide a foundation for its profitable growth.
Eco Associates said UBO did not fulfill those conditions, and on Oct. 16, it notified the company that it was formally withdrawing its offer to participate in its round of financing.
"We are pleased that we have been able to provide the funds to ensure that the UBO employees have been able to receive a paycheck over the last weeks," Scott Hyten, CEO of Eco Associates, said in a statement. "Unfortunately, we do not have the resources to support a business that is losing approximately $3 million a month."