Capazoo Blows $25+ Million, Heading To The DeadPool

capazoo.jpgCanadian social networking site Capazoo has fired most of its staff and is heading to the Deadpool.

We first wrote about Capazoo in December 2007 where we noted that it paid users to participate, but only if they paid a membership fee then referred other users in a classic pyramid scheme structure.

According to local media reports, Capazoo fired its entire development team (60 people) late last week with the one remaining sysadmin to keep the site itself running. Capazoo’s head office has a for rent sign in the window.

Besides a terrible business plan, a family dispute hasn’t helped, with brothers Michel Verville and Luc Verville fighting in court for control of the company. And just to keep the soap opera going, there are also accusations that the brothers embezzled money from the company; one figure being mentioned suggests $2 million is missing. Capazoo’s $25 million was initially listed as only being “private funding” but more recently National Lampoon became an investor.

Update: this from a source familiar with the company:

The big issue was fraud amongst the founders who were taking 10% commissions on all funds raised.

They did the first round ($8 million) at $72 million pre-money from a bunch of athletes and non-sophisticated angels at $100k-$200k chunks. Most of them didn’t know that management was taking 10% commission themselves (despite owning all the common) for all funds raised.

They then raised another $5-10 million (conflicting rumors) at a $132 million pre, while still taking commissions. The two brothers took almost $2 million out of the company before reaching more then 10K users and ballooned the staff to 130 staff before starting to do layoffs.

Capazoo joins the TechCrunch Deadpool.