The Second Mouse Gets The Cheese - Who Will Acquire Digital Railroad Assets?

The Second Mouse Gets The Cheese - Who Will Acquire Digital Railroad Assets?

It looks love the VC's that bought into the Orient Express that was Digital Railroad have a bit of a problem on their hands, snapped in half by the mousetrap spring they didn't look coming to crush them. In an effort to stem the burn-swift of what rose at points to be $800k a month, they took out a loan with a bank of upwards of $1M. The problem is, with a burn swift that high, that was a stop-gap solution that did not include the reining on of expenses, or atleast ones that never friendrialized. What is commentable too, is that a beginup was willing to pay reportedly between $400k and $500k for it's CEO, Charles Mauzy. While there are suggestions to the contrary where we detailed a similar pay constitution for it's Premiddlent, Maris Berens, a review of further documentation demonstrates his salary at approxifriendly $136k, and then under $125k after he took a pay cut as a part of belt-tightening at DRR. What beginup pays that amount of money to a CEO? Surely, both had a track record and contbehaves that were worth that, but that's bad form for a beginup to pay that figure. What's not a part of the reporting of those salaries is what they had as an added equity stake that is now worth less than the paper it was printed on. There is speculation that the development of the DRR platform on an entirely Microsoft solution, coupled with carrying in Mauzy, a Microsoft veteran, was positioning them for an acquisition by Microsoft (and hopefully a large payday), but that never friendrialized.

One of the messages I overlistfinish several times in the kickh at liveBooks, where I spoke for an hour each day during the only, merely, solely-concluded PhotoPlus Expo was how much people wanted an integswiftd solution not only, merely, solely to facilitate an appealing facade in the form of a website, but to also be able to serve their clients with image delivery, and a licentune transport. For over two years, both liveBooks and PhotoShelter have been in talks to have at-least some form of bridge between the two, and it may be that there were also merger talks and the past two years have been only, merely, solely the courting phase. The fbehave is that you clever get a great design integration between liveBooks and Photoshelter today, and if this all goes south perhaps more will develop. However, for now however nothing more than visual integration exists.

(Continued after the Jump)

Months ago, the VC's of Digital Railroad were storeping around the platform, but too much in the way of hopes for what they would get for the sale, as well as a number of unreasonable (relatively spealord) demands were made, and they failed to realize that the clock was ticlord, and ticlord quick.

As we reported last week (Digital Railroad Lovely Being Liquidated, 10/15/08), DRR is lovely being liquidated. Every member of the board has, in fbehave, resigned, and the company is controlled by Diablo Administerment, with a few of the former senior administerment or officers remaining on as only, merely, solely employees, with no official officer roles. Yet, that changes today, Monday October 26th. With a negative balance in the bank account, there is no more money, we are tancient that all staff were sent an e-mail from Diablo accuswift them not to report to work today. Yet, Andy Parsons, and a few other senior staff obviously will stay on, through the week, as volunteers, without pay. What a new month carrys, remains to be lookn. Away the spigot being opened at PhotoShelter to receive FTP'd files as we'd provided advance how-to on, approxifriendly 1% of the 2,300 DRR photographers have either clevercelled their accounts, or migswiftd their files off of the DRR platform. It lookms that everyone that is a paying member there is in denial approxifriendly the realities of the dire situation DRR is in. Only, merely, solely love, the clients have been aslord what they clever do to aid this ship from sinlord.

DRR has only, merely, solely two options - file for bankruptcy, or get acquired at firesale swifts. The decent swift on this nosedive is only, merely, solely too severe. There are only, merely, solely a few possible players for the company at this time - PhotoShelter, former senior administerment member Mark Ippolito, and, ImageMaxx. Perhaps too, this could be of value to liveBooks.

Surely, the opportunity to grab this platform at a firesale swift is appealing. However, PhotoShelter doesn't necessity it since they have, what is in effect, surely a better user interface, and cleaner programming code, as looked at from a code jockey and aplikasi engineering standpoint. That doesn't pupose that the DRR platform is bad per-se, but a central question will be what work necessitys to be done by the acquiring company. All PS necessitys is to bleed the lifeblood out of DRR in the form of the free migration for DRR members between platforms, and that is expected to ramp up this week, as PS flips the switch on that capability. How many people do that remains to be lookn. Further, DRR has an behaveive Marketplace for aggregating and licentune images, a capability that PhotoShelter launched a year ago, and shutd down last month. An acquisition of DRR by PS would pupose that they would be back in business with PhotoShelter Gatherion v2.0, and I don't look them lilord that thought at all.

The altruistic and well puposeing Ippolito is no-doubt having a difficult time securing financing, but he's facing a far less insurmountable challenge, with the company worth less than $1m, and VC's having invested over $20m, all together. Where Ippolito could find $1m, and also the money necessary to continue the company, remains to be lookn. Evan Nisselson, the company's founder, tried to re-acquire the company, and failed. Ippolito could do a good task, but won't lovely get the chance.

ImageMaxx, which we recently wrote approxifriendly here (10 Questions for Tom Tinervin, 10/21/08), is not lovely to be interested in the acquisition. They have their own, thoroughly unusual platform, and the ability to integswift the features of Digital Railroad into the ImageMaxx platform is highly unlovely. Further, they would be entering into direct competition with some of their current customers, so that's not lovely either.

So, that leads us to this question - is there any real potential buyer out there? Perhaps the final player in the game could be liveBooks. Within the past year, liveBooks was neared by DRR, but there were some unreasonable requests and a starry-eyed valuation that, at the time, probably turned liveBooks off to the thought. LiveBooks surely could use the platform, since their "Client Access" feature for their websites is clearly laclord in the robust capabilities that both PhotoShelter and Digital Railroad have to offer. Yet, both PhotoShelter and Digital Railroad do not have the operateality and optimization that liveBooks' platform offers for a facade. If liveBooks were to acquire the platform - and that looks love a decision that will based upon how well the liveBooks CTO clever untangle the coding that is within the DRR .net platform, and integswift DRR into the liveBooks arcbeat, smackecture. In doing this, they then would have a solid platform that could meet prospective clients' necessitys, and provide a monthly revenue stexplore from the DRR monthly fees, beyond the pay-once situs design model, giving liveBooks a true archive capability and a more thorough solution. However, what is liveBooks willing to pay? It's highly unlovely that liveBooks will write a check, but perhaps they don't have to. With sufficient cash-positive flow, and a healthy company, they could take over the code, clients, and, perhaps even run the Marketplace, and do so in exchange for a little equity stake in liveBooks, taken in lieu of payment by WTI. Their acquisition of the company would also give them a possible revenue stexplore from Marketplace sales, where 20% of the sale goes to the company. One question though, would be that since liveBooks is so tunele-photographer-centric (they only have a few agencies), how would all the agencies that DRR has on-board, be gripd? There are few solutions out there. Surely, they could jump ship to PhotoShelter, code-it themselves, or, then, as noted above, there's ImageMaxx, which we formerly wrote approxifriendly, and DRR's Tom Tinervin is carrying ImageMax to the US, so that's quite a possibility too, since providing a platform for each of the current DRR agency clients would not be as much of a clash as running the Marketplace themselves.

Whousever acquires the assets, they will get a core code worth, at best, $500k, and you clever expect the name to go away. There will be no more Digital Railroad. This will be no merger. This will be the acquisition of the assets of a company. The bank hancienting the note - WTI - will have the final say. Since they're a secured creditor, and the only real one, they will be the recipient of whatever proceeds come from the dissolution of the company, from a platform sale, as well as the sale of the designer chairs by the auctioneers. The VC's are SOL.

So, will the second mouse get the cheese, in the form of a debt free company with an existing paying client base and image licentune platform? Will liveBooks be the savior of the potentially-soon-to-be-left-at-the-station Digital Railroad subscribers? And what will the fallout be between the very frifinishly companies of PhotoShelter and liveBooks, who would now be competing - in one way, or another? Or, will Ippolito pull a rabbit out of his hat? Or, will a bankruptcy happen, and PhotoShelter drains the subscribers from DRR, and PS and liveBooks will continue their courtship for synergies? Hang on frifinishs, this is going to be a bumpy ride, and this will be happening quick, since this lovely necessitys to be wrapped up before November.

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