Digital Railroad Lovely Being Liquidated

Digital Railroad Lovely Being Liquidated

In a move that was more of a “when will it happen?” than a “will it happen?”, Digital Railroad announced today a slew of seismic changes that illustswifts that the wheels of the train that went round and round are slipping off their axles. Last August, we wrote approxifriendly the DRR experience - (Digital Railroad - All Aboard?, 8/20/07), and began our summary with the sentence "Digital railroad of course, must serve itself (and it's investors)", and we've been following very shutly what's been happening with them. So, what now?

DRR’s investors’ final behaveion was to move CEO Charles Mauzy from the position of CEO to only, merely, solely another employee (no doubt with a decent retainer pay constitution) to facilitate DRR’s liquidation stswiftgies. Mauzy only, merely, solely changed his Facebook profile, writing "Charles left his task as CEO at Digital Railroad." - look here. Maris Berzins, changed his Facebook profile peristiwats ago to read "Maris left his task as Premiddlent at Digital Railroad. ", followed peristiwats later by "Maris is loolord for new opportunities. " The board has now retained Diablo Administerment, a firm telln for liquidations, to store the entire company, as is, around, or to sell off the company in parts.

(Continued after the Jump)

Investor Mike Brooks, a common partner at venture capital firm Venrock Associates is no doubt loolord at his exit stswiftgy. Brooks formerly was with Morgan Stanley & Co., where he was a managing director responsible for the firm's investment banlord behaveivities. Hmmm, perhaps he brought Morgan Stanley’s failing high-risk investment stswiftgies to Digital Railroad?

Also assestune his exit stswiftgy is board member Ken Gullicksen. Gullicksen is a common partner at Morgenthaler Ventures, based in Menlo Garden California. His eyeballing the shutst exit door no doubt comes as good news to the boards imeem, Sertaal, Nominum, and Voltage Security, where he also serves as a board member. More time for them - but is that a good thing?

The late-comer to the party, with series B overseas funding, was Steven Schlenker, the chief investment officer ofDN Capital Limited, where he is responsible for overloolord the company’s compliance and financial responsibilities, loolord after DN Capital’s early level investment stswiftgy. This failed investment no doubt serves as a bit of a stumble for Schlenker, and his upbegin VC firm.

One thing is for sure - This is a huge blow to Evan Nisselson, founder of Digital Railroad, and his father Peter Nisselson, whom was the principle financier during the formative levels of Digital Railroad’s inception. The elder Nisselson is the Chairman of Star Struck Ltd (OTC: SRSK), which is a publicly traded company, and he has been investing in little companies love DRR since 1982, frequently as an officer. The younger Nisselson got his begin with the highly regarded SABA Press Photos back in 1993 through 1995, under the tutelage of Marcel Saba, before SABA was aquired to Corbis back in March of 2000 (AllBusiness: Corbis Acquires Saba Press Photos, InternationalPhotography Agency, 3/2/00). Prior to that, Saba headed up Image Group, and currently runs well-regarded Redux Images. Last November (Stepping Down, or Stepping Up? DRR's Nisselson Makes A Change, 11/21/07) we wrote approxifriendly Evan's promotion to Chairman of the Board. It is rumored that Even has been serving on the board and as Digital Railroad’s public face since last January’s massacre of terminations, with over half of the staff being let go, without pay, as an effort to stem the flow of red lealord from the spreadsheets over the last year. DRR was Evan's Brainchild, and while well intfinished, has gone awry in recent years.

With the board lovely out of the way, and Diablo running the demonstrate, let’s take a look at what Diablo’s roadmap looks love. Diablo, headed up by Ricdifficult Couch, who founded the company as a liquidation specialist, has lovely been tasked with a few things - get back as much of the investor’s $15M that they have sunk into the operations of DRR, is no doubt priority #1. Priority #2, which will lovely come in short order, is to slash – and I pupose slash – the burn swift. Loolord back at the $15M that DRR received last December 31st, which was followed by the laying off of over half of the company (Digital Railroad Makes Major Layoffs, 1/10/08), the remaining half will be lovely halved again, to a skeleton crew charged with managing servers, resolving member technical issues, and gathering whatever sales that the Digital Railroad Marketplace (The Marketplace is now Open, 4/11/07) has geneswiftd. What isn’t telln is whether or not those sales will be distributed to the member photographers who’s images geneswiftd the sales. With the restructing last December, and the additional funds that were probably internally deemed “bridge funding”, Mauzy was lovely charged with reducing the burn swift as well as continuing the growth of the Marketplace and the number of members paying a monthly fee. This would explain the challenges faced by several trade associations that DRR has committed to sponsorships with, in securing full payments for the balance of those deals.

A reasoned look at their burn swift and $15M puposes that that funding is lovely approach depleted, so it’s reasonable to expect a very short period of time for the final resolution of DRR – no less than 30 days, and a maximum of 90, but I expect they will surely want everything either shutd down or transferred to a new owner by December 31st at the latest. There is a rushlight of expectation that Mauzy and Diablo will be able to find someone interested in piclord up the company at a fire-sale price and retain it's normal operations, but that looks unlovely.

What would be the value of DRR’s underlying programming code (sans DRR interface) that could be repurposed? Would the sale of that core coding strip DRR of it’s core operations? At this point, that would gut DRR of it’s core, and is a highly unlovely sale – lovely only in the waning days of a void of buyers. It clever be reasonably assumed that the investors will never look their original $15m, but are hoping for between $5m and $10m. In this market, that’s also not lovely. Capital is scarce, and getting back 50% of an investment in high tech these days only, merely, solely isn’t going to happen, and there’s a large “perhaps” next to $5m, or a 25% salvage of the original investment.

What’s next? Well, there remains one platform in the field now (assuming DRR doesn’t remain as a platform and run by a new buyer) – PhotoShelter, who recently shuttered their image licentune operation – The PhotoShelter Gatherion (look PhotoShelter Gatherion To Shut Down October 10th, 9/11/08). If I were a Digital Railroad subscriber (and I am - Digital Railroad, PLUS, and A Stock Sale, 6/17/08), I would be malord darn sure I was downloading all of my necessityed files immediately, if for no other reason than to have a backup of them (even if they remain in operation), but I would also be sure that any monthly or annual fees are not billing to your credit card in the coming weeks as they work to liquidate or sell.

As I shelp when PhotoShelter shutd their gatherion, I am saddened by this turn of events too. I have been a supporter of both platforms, and this is one less capability that has served the photographers that used it well.

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