SearchMe May Go Offline Tomorrow (Updated: Offline Now)

Michael Arrington
Friday, July 24, 2009; 9:24 AM

An Update to our post yesterday about Sequoia-funded search startup SearchMe. The company needs a new round of financing or a quick acquisition to stay online, but so far neither are happening. CEO Randy Adams wrote to me this morning with an update on where things stand. I reprint most of it below with his permission. Bottom line, The site may go offline at least temporarily tomorrow if a buyer does not step in (Update: The site now redirects to Google):

You are correct, we haven't closed the financing. We knew when we started the company that to compete with the likes of Microsoft, Google and Yahoo,it was going to take at least $100 million, half to build the back end across thousands of servers and half to get distribution (maybe more with Microsoft spending $100 million on Bing advertising alone). What we didn't plan on was the terrible downturn in the economy which made it impossible to raise another $50 million to get distribution (mainly through toolbar deals). In this economy nobody wants to invest that kind of money in a company that is pre-revenue, even if the net result is potentially a multi-billion dollar company.There are some positive things though. In the process of trying to engage strategic investors we discovered that our tech really resonates with the people in the emerging broadband TV market where you will soon be able to easily access all the internet's video on your TV. Directories don't scale well so you'll absolutely need search to find things to watch and visual search for multi-media content works much better than a list of links on your TV which you can't read from 10 feet away. We are putting together some deals with chip vendors and set top box manufacturers to port the software over to their platforms and we are going to concentrate on that market going forward.So the plan now (unless a buyer or white knight jumps in at the last moment) is to significantly downsize, take the site down for a while (probably tomorrow) and refocus the tech in a space where we don't have to have 3,000 servers costing a million a month to run on the back end. We are going to have to do some serious restructuring to deal with our debt and recapitalize with a different capital structure but at the end of the day we should be able to create a healthier company with a MUCH lower burn rate, with the IP intact and a significant distribution channel. Headcount will go from 45 in the current company to probably about 10 in the new one which is very difficult for everyone but unfortunately necessary. We've brought back our former recruiter, Deva Santiago, to handle placement for those affected employees and we have some great talent so I'm sure they will get snapped up pretty quickly.

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