No Ahoj aboard The Mother.Ship
By : Roseanne Gerin
The Mother.Ship Poland (MSP) will be hard-pressed to land a white-knight investor within the next two months to save its sinking Ahoj portal, local Internet professionals said last week.
"They need a lot of luck to catch that train now, but if I were betting money, I would bet they would not get it," said an industry professional familiar with Polish Internet start-ups, who asked to remain anonymous. He added that the portal probably would not find a last-minute investor due to the dismal investment climate for dotcom start-ups.
"What Ahoj had was a lot of wishful thinking," he said. "Investors of these companies want to see old-economy facts and numbers behind them, (such as) revenue and profit. It's hard for Ahoj and similar companies to prove on paper they are able to generate a positive cash flow soon."
Marcin Gruszka, spokesman for MSP, refused to disclose any financial data about the portal, which publically addressed rumors last Monday that it was on the verge of bankruptcy. "In this business, for the next two years at least, it's difficult to (make) a profit, so anyone who wants to invest in this area must wait one to one-and-a-half years for a profit," he said.
Piotr Pajewski is a senior investment manager at the Warsaw office of bmp, a German venture-capital firm that invests in IT and Internet start-ups. He agreed that Ahoj probably would not find a white knight in the current business climate where investor enthusiasm for Polish dotcoms isn't as strong as it was a year ago.
Industry professionals pointed to other reasons for Ahoj's demise as well.
The portal's financial downfall was partly due to its cash-burning business model, whereby the firm had high operational expenses from employing its own staff of journalists to provide original content, they said. One observer estimated that for 60 full-time employees, Ahoj would have to spend about zl. 500,000 a month on operational costs.
Ahoj, the fifth-most popular portal in the country, had 150 employees in November, but after a round of job cuts it now has 80 full-time and 20 part-time workers, Gruszka said. He refused to disclose the portal's monthly cash-burn rate.
Ahoj's lack of both a "unique selling point" and first-mover advantage on a market already dominated by two or three big Internet portals consuming the lion's share of online ad revenue, was also to blame for its downfall, industry professionals said.
Nevertheless, Ahoj is negotiating with five investors, including both Polish and international companies involved in Internet and media. The negotiations are expected to conclude by the end of February, Gruszka said.
Ahoj's recent round of problems began when Deficom, a subsidiary of Belgian media/Internet venture capital firm Deficom Group, which signed an agreement to invest in the portal at the end of last year, withheld the second tranche of funding until MSP found another investor, Gruszka said.
Deficom's agreement with MSP specified that the Polish firm would have to find at least one more public company to form a financial consortium to invest in Ahoj, he said. Deficom issued the first tranche of its investment to MSP in January. It would issue the second tranche of funding once a second investor had been found, he said, but added that he did not know the total amount of the Belgian firm's investment pledge or the number of tranches.
The Mother.Ship's funding negotiations with a second prospective investor in January fell through, Gruszka said, but he declined to name the European firm.
If Ahoj fails to find an investor to form a consortium with Deficom, MSP would try to sell a minority stake in Ahoj to a single investor for zl. 20 million ($4.87 million) or sell a majority stake to a big public company, Gruszka said. He blamed the downward trend in the IT market for the portal's difficulty in finding an investor.
Jeff Grady, the CEO and co-founder of MSP, told a news conference last Monday about his company's financial troubles after rumors surfaced that Ahoj, launched last May, was facing bankruptcy. Grady is also the chairman of New World Publishing, owner of the Business Journal.
