In a move that’s becoming common, another San Diego company operating in the Internet industry laid off employees after failing to secure additional capital investment.
StoragePoint Inc., founded in 1998, “furloughed” eight employees after an anticipated capital infusion didn’t materialize.
“A funding opportunity didn’t come through for us so the company felt the only prudent thing to do was cut back,” said Scott Zimmerman, a co-founder and the firm’s chief operating officer.
Zimmerman declined to reveal the size of the company, but last year, the firm told the San Diego Business Journal it had 40 employees.
He also did not say how much money the firm was seeking. The company has been raising money all along, primarily from private investors, he said.
The affected employees were working in engineering, marketing and administration. In addition to the staffing cuts, CEO Dennis Nau, who was hired in November, resigned. The company is searching for a replacement, Zimmerman said.
StoragePoint, based in Carmel Valley, produces a software package that complements Internet servers, providing controlled access to wireless devices.
Zimmerman said the firm’s product “establishes secure software connections between any type of Internet access device and corporate data centers.”
StoragePoint executives sought the needed capital from San Diego-based Mission Ventures on two occasions, most recently about six months ago, said Robert Kibble, a managing partner.
“We looked at the deal a couple of times, but we passed on it,” he said.
While the company had a good technology and good people, the cost for the money, at least $10 million, was apparently more than the owners were willing to pay, Kibble said.
Generally, venture capital firms take an equity stake in the business they fund.
Venture capital firms and angel investors are clearly not investing in high-tech startups in the same way they were about a year ago, making it far tougher for startups needing the money, said Cliff Numark, president of the San Diego Regional Technology Alliance.
Some firms focused on obtaining equity investment and relied on it to achieve profitability, but are more at risk today in light of a revamped market that scrutinizes business plans more and expects a shorter return on investment, Numark said.
Yet there are other local high-tech startups that pursued slower and more conservative business plans that are healthy and continuing to grow, he said.