It had a technology that investors apparently lusted after, and a roster of blue-chip media partners. So why is push pioneer Ifusion seeking protection from a bankruptcy court while suffering attacks from former key executives and once-zealous employees? Because even at the hyper-accelerated pace of Web development, it's still possible to do too much, too fast - spending money and severing relationships in the process.
On 28 March, Ifusion Com Corporation filed for Chapter 11 protection in Manhattan and terminated some 140 employees.
"I didn't think we were being very responsible with our resources, or very open with our employees," says Andrew Cohen, the company's former chief technology officer, summing up the assessment of a number of people familiar with the company's troubles.
Cohen helped to develop the core technology behind Ifusion's Arrive product while he was with Virginia-based technology company and defense contractor BTG Corporation. He joined the company officially in February 1996 as chief technology officer, and resigned his position in mid-February of this year.
Cohen worked closely with Ifusion founder and CEO Michael Recanati beginning in the summer of 1995, when Recanati was the chief operating officer of the Overseas Shipping Group. Recanati, who spent 17 years working in the maritime industry, had never worked at a media or technology company before founding Ifusion.
According to former employees and others familiar with the company's operations, who spoke to Wired News, Ifusion had established a management environment and spending habits that didn't reflect the harsh business realities of a start-up. And Recanati's ambition for Ifusion, it seems, knew few bounds. "He was always talking about Ifusion as if it were the next Netscape," says one former member of the management team, who asked for anonymity.
From its founding in October 1995, Ifusion grew quickly. The company established operations and hired staff in a number of locations: a technology center in Vienna, Virginia, corporate headquarters in New York City, and a creative unit in San Francisco. There were also satellite operations in Phoenix, San Diego, and Seattle.
Several sources said the company was simultaneously wooing new employees with salaries twice what they would have earned in similar jobs in the industry. "Ifusion overpaid very many people," says Cohen, "and it went very hand-in-hand with the company's other problems."
But while steadily increasing staff and expanding geographically, Ifusion earned very little in the way of revenues. According to documents filed by the company with the US Bankruptcy Court Southern District of New York, the company's most recent 30-day cash flow estimates show US$222,500 in payroll and operating expenses, and $0 in approximate cash receipts.
Ifusion's only product, Arrive, went into a limited beta release in late January, but sources say its final form was still very much in flux, because of repeated clashes between the company's technology unit in Virginia and its creative staff in San Francisco.
"The company was burning far too much money too fast," says Robin Wolaner, a former Ifusion director. Beginning in November 1996, several sources say, the company asked a number of employees to defer their salaries until new financing could be obtained. In a conference call with at least 20 key employees, Recanati told employees he needed time to "get the company's valuation up" while trying to attract new investors. But that new financing never arrived; the company temporarily met its obligations using loans from its existing investors.
Recanati could not be reached for comment. Callers to his home were told he was out of town and unreachable.
Wolaner, the founder of Parenting magazine and a veteran of previous media start-ups, joined the board in January 1996 at the request of Recanati. But she resigned her position shortly before the company decided to file for Chapter 11 protection. "It's very sad," Wolaner says. "I really believed in Michael and his vision. And I was wrong." Wolaner, like Cohen, cites Recanati's behavior toward his employees as a major reason for her change of heart.
"I would call him a coward - I'm not ashamed in saying that," Wolaner says. Wolaner and Cohen said that when the company decided to close its San Francisco offices several weeks prior to the Chapter 11 filing, Recanati ignored recommendations that he or another senior member of management take charge of the situation. "I thought senior management had a responsibility to go out to the San Francisco office and meet with employees when the office was closing," Cohen says.
Like Cohen, Ifusion's one-time CFO, Lance Maerov, says he resigned his position after repeated clashes with Recanati about company direction and management. "They were numerous, and they had to do with the way he was operating his company. It became clear to me that for ethical reasons, I needed to leave the company," Maerov says about the disputes. Maerov refused to elaborate on his statement. He said he was named vice president of finance in November 1996 to make way for a new CFO, Tom Wraback. But Wraback left after only five days on the job, for what he says were personal reasons. (Another CFO was later installed.) Maerov left the company in January.
Company management is now in the hands of Prudential Securities. Ifusion's acting president, Kelly Kaminski, was previously with the investment firm. Prudential joined Recanati and his family's investment arm, 511 Equity Corp., to provide the company's investment capital. Kaminski insists that the company still holds a valuable technology, and plans to continue operations following its reorganization. "Quite simply, our plans are to maintain and produce the Arrive system ... with the understanding that anything we do will be under the supervision of the bankruptcy court," Kaminski says.
Arrive's push-media product is typical of the array of technologies emerging on the Net. Like PointCast, BackWeb, or Berkeley Systems' After Dark Online, it offers a selection of "channels" created by well-known media companies like CNNfn and the Weather Channel which deliver a constant flow of stories and advertisements to a customer's computer desktop.
Employees are venting their anger at Recanati and others whom they believe are responsible for their fate on a Web-based bulletin board created in the wake of last week's firings. In between jokes about Recanati's wealth and his Ferrari, they're posting updates on the company's status, exchanging job inquiries, and discussing how to recover back pay.
