Naked stripped bare – startup runs out of cash, enters liquidation

Naked, a UK-based social messaging startup, has entered administration and the assets of the company are to be liquidated. Sources say the company ran out of money at end of April and an administrator was appointed in May to wind up the company, which went into liquidation last Friday. All 12 employees were made redundant at the beginning of May. Begbies Traynor has been appointed the administrator (they can be contacted here).

The news is tragic timing – the site was launched in February with private beta testers but was only just poised to release a full public beta at the start of next month. We will now probably never know what Naked was capable of.

What happened?

Naked’s stated aim was to give users a better way to communicate with people they really care about, more freely, in private. Tools included were status-updates, private messages and group messages – a sort of combination of Twitter and e-mail, aimed at a more mainstream audience (if that’s possible, now that Twitter is getting bigger).

Naked demo’d its application at the Mashup Innovate on April 1st. (Anyone got any video or record of that?)

But on May 7 they emailed their own private beta users saying:

Our start-up has run out of cash. Just weeks before opening up the service more broadly and igniting the buzz… However, we haven’t given up the faith. We will need to regroup, see who’s still on board, and work out a way forward. In the meantime we’ll do everything possible to keep the service going. We’ll update you when we have more news.

Co-founder and engineer James Salmon (who is now looking for a new role) had also been blogging about Get Naked and on May 7 blogged the following:

Naked update…
Naked has had a tough few days – we’ve run out of cash and are facing some very disappointing consequences. And all this comes at a time when we were literally a few weeks short of opening up the service as a full Private Beta. I’m therefore exploring all options to see what can we can do. No-one ever said start-ups were easy ;-)

On Tuesday this week, official Naked blogger “Biff”, wrote a final post, A Line In The Sand:

It’s been quiet on here of late. The reason being that I am no longer Naked Community Voice. There may also, very soon, be no more Naked. It’s gutting getting so close to something you’ve worked intensely hard for, and then losing that to forces beyond your control. To put it painly, Naked ran out of cash. Liquidation has started. There may be a possibility of Naked carrying on, but I don’t think I will be a part of that. But then again, who knows.

Why and how did Get Naked come to this point?

One source told me that the company was too reliant on CEO and main backer Robert Bonnier as sole investor and he was unable to secure additional funding from external sources within the time frame needed to keep the company afloat (about three to six months).

Who is Robert Bonnier?

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Robert Bonnier was CEO of Get Naked. I called him at midday today for comment on his mobile, he said he’d call me back but so far he has not returned my call as of 3.30pm.

Bonnier was one of the stars of the first dotcom boom.

The Dutch-born entrepreneur who started and exited was also once a financier for the Swiss Bank Corporation in the mid-1990s. He was investigated, and cleared of any involvement, in an insider-dealing scam during that time. At the height of the dotcom boom his stake in Scoot was worth more than £150m. But in 2001 this stake was seized to repay Scoot’s debts and Scoot eventually fell on hard times. In 2006 Bonnier ended a five-year exile from the financial markets (in 2004 he was fined £290,000 for market abuse) to become chief executive and the largest shareholder of £130m Aim-listed cash shell Future Internet Technologies.

Who is Tom Vandendooren?

Vandendooren – Brussels-based technology marketer by background – was COO of Naked and says he was the originator of the ideas behind Naked. Speaking to me via Skype today he said Naked started out as a “unified messaging client with a key focus on mobile”, along the lines of Nimbuzz. But the complexity of developing a Java client for the many hundreds of mobile handsets proved to much, so the strategy was switched to “creating a messaging environment to open up to close circle of friends they care about.

Development work started in September of 2007 on Ruby. The implementation and execution was more web based with messaging from email and mobile”.

They got to an alpha in early January and finally a private beta version end of February, early March. But by then they had run out of cash. He says: “Naked was funded entirely privately via the investor Robert Bonnier”

The “idea was to go from private funded to public beta then start a formal external financing round. But because of a very personal issue with Robert, who was going through a nasty divorce which came out of the blue, his assets were frozen in that process and we were forced late in the process to reach out to external funding sources. Given the time frame we were unsuccessful. We were left with only a few weeks but had to honour staff and costs.”

Did Naked fail because they ran out of cash or because the application was no good?

It looks like the application never really got a chance.

Vandendooren told me that the feedback they got from investors was that it was either too early or too late for them to come in to a financing round. It was too early for some, in that although the application could be demonstrated, there was too little validation from user numbers, as it was till in private beta: “They wanted us to go through public testing first for a few months.”

For other investors it was too late “because this was a second version and we had already put in significant amounts of cash and it was therefore too late to seed as an angel round. So it was an in-between stage for external investors.”

But Vandendooren says “I haven’t come across anything that does what Naked does. We were very much at the intersection of microblogging, messaging, and social networking. Crossing in the middle is the compartmentalisation of social lives and exchnages. Being open to share intimate things based on relationships and context.”

Is there a buyer?

Right now, there does not appear to be a buyer.

Vandendooren would like to re-start Naked some how, possibly out of Belgium, but he acknowledges he has “no more rights to the assests than anyone else.” He says he would not plan to work with Bonnier on any re-started version of Naked.

User experience agency Clearleft had worked on some design for Naked, and New Bamboo had worked on the platform, though its doubtful either of these players will be interested in taking on Naked’s assets.

One former employee tells me:

Naked was a good idea but a bad brand (the constant conflict with porn). They are trying to sell the IP/code but there is so much competition these days and even open-source projects that do a similar thing. Maybe someone in the adult industry would be interested in the domain name.

What about the application?

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What appears to be the case – from what I understand about a beta that was never shown to me – is that the application “had legs”, especially give that the general trend in social messaging and networks is towards contextualising and adding privacy controls. But we may now never know.

What’s left now?

All that is left of Naked now is the old site, the blog, and some Flickr photos. The office in St. John’s Square, Clerkenwell, London has been vacated.

Update: The former development team can be contacted here, though luckily many are already sitting on job offers.

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