Internet marketing and advertising start-up PowerAgent has shut down just weeks shy of launching its flagship service, said its chief executive.
The Menlo Park firm, which promised to link advertisers and consumers through personalized and reward-oriented electronic ads, laid off all but a handful of its 60 employees yesterday after failing to secure its third round of financing.
"Yesterday was certainly a dark day for the company," said PowerAgent founder and chief executive officer Dale Sundby. "We lost much of our family--most of it. It's particularly frustrating because the product, which is so robust and has been so well-received, is so near completion."
A product delay may have been the author of PowerAgent's woes.
The company originally had planned to launch its service in June, but in March moved that date back to October, according to Sundby. Revising the service bled money from the company coffers, so when it approached investors for a third round of financing it did so empty-handed, both in terms of cash and product.
PowerAgent launched in October 1994 and secured $3 million in financing a year later. A second round of financing late last year brought another $13 million. And the company raised another $4 million though debt.
PowerAgent's shut-down demonstrates the hazards inherent in the volatile world of Internet start-ups. But problems specific to PowerAgent may bear most of the blame in this case.
"When you're running a start-up, you really need to grow a big oak tree from small acorns," said Timothy Draper of Draper Fisher Jurvetson, one of PowerAgent's original investors. "I think they were too aggressive in how they spent the money. It got to be such a high expense rate that we couldn't support it."
Despite his misgivings about how the company handled its cash, Draper praised the product and noted that the company was down but not out.
"Start-ups fail, that's just the way it is," said Draper. "There's still some value there. If there's some way to split up what's left, they may survive."
Sundby characterized the current crisis as "a fundraising problem" and vowed to press on with PowerAgent. He said he was actively raising money for two more rounds of financing, the first to complete the product and build promotional partnerships with high-traffic Web sites, and a second to rebuild the company.
The company had projected revenues of $42 million for 1998, said Sundby. He said he planned to have the company back up and running with a new product by the first quarter next year.