Keek Inc., heralded as one of Canada's most promising technology startups, has moved from a billion-dollar valuation trajectory to a struggle for cash in a nearly vacant office.
The Toronto-based company makes a popular application that enables mobile phone users to record and share short videos. While the app is a hit with users, 65 million of them at last count, Keek has been trying to raise the money needed to finance further growth.
After using up the $30-million it raised in earlier infusions of venture capital, the company earlier this year hired Morgan Stanley to raise more money needed for system enhancements that would accommodate the growth in site traffic.
The money never came, and now existing investors in the company are trying to find a way to refinance Keek to keep it going. Earlier this month, there were concerns that Keek had only a few days worth of cash left and would not be able to keep its operations going without more money, threatening to end the company's transformation into a fully fledged contender in the social media space.
Complicating the situation, the chief executiveofficer, Isaac Raichyk, is said to be at odds with some key investors over how to fix the cash shortfall. In the meantime, according to one person familiar with the situation, Keek has laid off all but about a half dozen staff to conserve funds.
Mr. Raichyk said he is "in the middle of completing some transactions." He declined to elaborate.
He spoke in a brief interview outside Keek's office, where a reception desk was unoccupied and a conference room visible from the foyer lacked a table. A speakerphone sat on the floor in the centre of the room.
It is not clear why Keek was unable to raise more money after hiring Morgan Stanley. Keek was an early entrant in the video sharing game, but the company now faces more competition. Twitter has since launched its video-sharing application, Vine, and Facebook Inc.'s Instagram application also now has the same capability.
Keek has pitched its longer videos – 36 seconds – as a differentiating factor from the seven-second videos offered by Vine. So far, there are signs Keek has been holding its own. As of June, the company said it was the No. 1 social networking app in 70 countries.
Even so, going up against those established Internet companies with their huge access to financing is a daunting challenge that could spook some potential investors.
Keek was also seeking an aggressive valuation, with talk that the latest round of financing would have valued the company in the range of $600-million to $900-million.
The company also attempted to make inroads a very tech-savvy investor base. Its current investors are largely Toronto-based. The summer fundraising attempt was a move to broaden Keek's backers to a more U.S. audience, with a focus on California and its sophisticated venture capital scene.
Keek has also taken an expensive route to growth. As Mr. Raichyk told Report on Business Magazine earlier this year, the company spurned the cloud, preferring to run is own data centres. Mr. Raichyk said that enabled the company to offer a faster app, but it also means higher costs.
Mr. Raichyk refused to confirm or deny to the magazine speculation that he would consider a buyout offer greater than $1-billion. With the company's offices now appearing empty on a recent visit, Keek seems a long way from that kind of number.