Updated: Social gambling site Pikum cashes in its chips and closes

Pikum, an online social gambling startup which had £3.98 million ($5.92m) in investment from Virgin USA and First Round Capital has shuttered.

We’ve tried email and phone calls to get hold of the CEO and will update this post when we get official comment [UPDATE: See statement below from chairman and co-founder Sean Glass. We’ve yet to hear from CEO and co-founder Johannes Larcher]. However, the image on Pikum’s front page says it all:

Meanwhile, sources close to the company said “I think they ran out of money. As far as I know they spent a lot on getting the right gaming licences on Alderney and putting the infrastructure in place. Then they spent a lot on marketing.”

Pikum’s users could choose to play for fun or money but the latter meant it had to be registered as a gambling entity in the off-shore juirisdiction of Alderney in Europe – generally an expensive enterprise – and was therefore based in London, while engineers resided in South Africa. Competitors were sites like Party Gaming, 888, Betfair and Tradesports, but Pikum reputedly failed to gain much traction with users despite hefty amounts spent on marketing.

I gather Pikum was going for a second round of funding, but it was not helped by Virgin USA changing focus. Dan Porter, who is understood to have led the Pikum investment, left to join Iminlikewithyou as CEO.

Certainly Pikum spent plenty on marketing. One sources tells me they spent £5,000 on an adwords campaigns which yield, literally, zero results.

Pikum was the brainchild of 29-year old American entrepreneur, Sean Glass, who previously co-founded higher education-focused online financial services company Higher One (pictured right). Glass was co-founder and Chairman. The CEO was Johannes Larcher, who bizarrely remained largely invisible day to day, leaving Glass to front the business. Larcher was formerly with Academy123 and VP & General Manager, International, prior to that.

Glass was made to dance by First Round in their bizarre video Christmas video card last year (2mins in).

Pikum also probably spent a great deal on a weekly 10 minute-long video webcast “Mega Football TV” on YouTube featuring Setanta Sports presenter Charlotte Jackson. The studio-shot show started three months ago and ran for 14 videos until ending two weeks ago. The show never had more that 1,000 views an episode.

Then there were the “Pikum Girls” who warranted their own dedicated web site. These were six young women who were clearly aimed at the younger male end of the betting marketplace, to say the least:

But despite the big marketing budget, Pikum seemed to embrace social media – which can often help spread the word more cheaply – rather half-heartedly. Their Twitter account was started in March last year but only had 28 updates and the last tweet was Oct 28th, announcing that “Mega Football Pikum is coming”. All previous updates had simply been URLs only. Hardly the stuff to get any followers excited. Luckily there were only 28 of them. Chatter on Twitter was equally non-existantapart from the company itself.

Perhaps it’s a shame Glass only just came across VC Fred Wilson’s advice. In a Tweet on Feb 7, Glass noted: “@fredwilson post-J.Schachter- “reduction of services to the simplest user experiences is a powerful generator of focused activity.”-profound”. Did Pikum actually need Pikum Girls? Perhaps not.

At any rate, if his Tweets are correct, Glass is packing up and heading back to the US in May, presumably a lot older and wiser. At least during his year in London Glass threw himself into the local London scene, making plenty of friends and even guest posting on TCUK.

One site that won’t be shedding a tear is Flutterama, a boot-strapped site from design agency Vexed Digital – although players can not bet actual cash there.

Current Pikum players must now withdraw any remaining balance and any bonuses due. Any remaining balance not withdrawn by February 13th will be sent by cheque to a player’s registered address. Players can contact the site on here.

UPDATE: Chairmand and co-founder Sean Glass has now sent in an email response:

There was not a hefty amount spent on marketing. The amount of $ raised skews some things as when we raised it, the exchange rate was close to 2.1 : 1, and the money was being spent in pounds – so it was really £2.6MM pounds raised in Nov 2007 (there was a bridge so it closed in March 2008)… legal and infrastructure to be able to provide real money gaming was very expensive. It is disappointing that we were not able to find support to continue the business as the revised product platform had started to perform well, but the consumer focus required a large amount of funding even with the CPA we were getting – which was lower than almost any sports book we spoke to. We approached a large number of european funding sources and potential acquirers, but in the current environment, there wasn’t appetite, and closing become the preferred preference for our investors.