The high-profile investors in the infamous and short-lived incubator 12 Entrepreneuring are witnessing the end of a chapter.
According to documents obtained by PE Week, nearly all of the assets of Grand Central Communications-one of three companies launched by 12 Entrepreneuring-are about to go to the highest bidder. The minimum acceptable “all cash” bid for the assets? A mere $250,000.
That’s a fraction of the $50 million Grand Central had raised over three rounds from the likes of Marc Benioff, CEO of Salesforce.com, Marc Andreessen, co-founder of Netscape, Tim O’Reilly, founder and president of O’Reilly & Associates, and Richard Bergmann, CEO of SymphonyRPM.
It is unclear which of the investors will get to divvy up the auction proceeds, although one investor from the first round said he was washed out by the third round.
Grand Central was incubated at 12 Entrepreneuring by Halsey Minor, best known as the founder of CNet. Minor, who is Grand Central’s chairman and onetime CEO, did not return repeated requests for comment. Grand Central’s acting CEO, Brian Mulloy, could not be reached.
Grand Central’s assets were transferred on Nov. 10 to Uecker & Associates, which has been serving as an assignee for the benefit of Grand Central’s creditors and has been operating the company while it completes the sale of its assets. The last bid was accepted on Monday.
Grand Central had raised roughly $25 million from the investors of 12 Entrepreneuring, who famously gave the incubator a grand total of $130 million in 2000 before it imploded in 2001 amidst accusations that 12 Entrepreneuring had spent too much money on things like its $45 million office lease.
After 12 Entrepreneuring shut down, Grand Central struck out on its own and raised another $25 million in two rounds of financing. It raised $10 million in October 2004 from Benioff, O’Reilly, Bergman and Court Square Ventures in Charlottesville, Va. Grand Central raised another $15 million in January from Bergmann, Court Square Ventures and Attractor Ventures in Burlingame, Calif., according to SEC filings.
Grand Central was one of three investments made by 12 Entrepreneuring. Two of the startups have gone out of business. (The other one was iBuiding, a San Francisco-based application service provider for the commercial real estate industry, while Oxygen Software, a wealth management software startup, has changed its name to NorthStar and is a going concern.)
12 Entrepreneuring was founded in early 2000 by Minor and Scient founder Eric Greenberg. The incubator received backing from a Who’s Who of investors, including Andreessen, former Vice Presidential candidate Jack Kemp, famed angel investor Ron Conway, Benchmark Capital and Goldman Sachs. Yet 17 months after the incubator launched, its investors asked the company to return what was left of their money. Those investors received $40 million, according to documents obtained by PE Week.
The Grand Central assets that are being auctioned, according to a memo issued by Grand Central’s assignee, are primarily software programs. The first is Swivel, referred to in the memo as “a workspace on the Internet that combines best-of-breed applications that help managers more productively run their business.” Grand Central is also selling a software application called Business Services Network that “allows teams working on projects to leverage a growing collection of pre-existing business services and easily share new services,” and Bluespark Small Business Intranet Portal, “a fully integrated system of on-demand applications including Accounting, HR, Payroll, Email, Calendaring, Salesforce Automation and More.” (The memo notes that “the Bluespark Portal is not for sale” but rather that the “integration platform that belongs to Grand Central is the item that is available and common to both Swivel and BlueSpark.”)
Also up for auction are customer contracts; company rights, like trade names and brands, owned and leased equipment, and licenses (including an Oracle license).
On Wednesday night, Uecker President Susan Uecker said the winner of the auction had not yet been determined, even though bidding ended last Monday. “We’re still countering on the bids,” she said. “The purchase price is still being negotiated.” Uecker hopes “everything will be wrapped up” by this Monday (Dec. 12).
Uecker is one of handful of Bay Area specialists who help dismantle collapsing businesses and told one reporter several years ago that she called herself a “liquidation expert” whose company acts as a neutral third party in a proceeding known as general assignment of creditors, an alternative to bankruptcy that lets a company skirt the court system. The practice invites people like Uecker to step in and sell of anything of value, distributing the proceeds to creditors.
Asked in recent weeks about what was happening at Grand Central, one board member said: “I’m not going to comment. There’s no benefit to me in discussing [Grand Central], only risks.
Reached last week, another Grand Central board member, Randy Castleman of Court Square Ventures, called what was happening behind the scenes “growing changes of the sort that many startups go through” and suggested that PE Week speak to Minor for more information.