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You learn a lot when marketing to 18-25 year olds - most especially the fact that they're not thrilled about paying their bills. That, in part, explains how L.A.-based Amp'd Mobile, which managed to snare $350 million from top-flight investors that included MTV, Universal and a bunch of VC firms, filed for Chapter 11 bankruptcy protection. (A document filed with the court on Monday found that as many as 80,000 Amp'd Mobile subscribers were likely to be "non-paying customers," according to DealBook.)
Amp’d has said it plans to reorganize and stay in business, but at this early stage it is impossible to know how much, if anything, preferred and common stockholders will recover. Amp’d must still find a way to pay or restructure its more than $100 million in liabilities. It owes $30 million to Kings Road Investment in the form of a secured note and owes $33 million in unsecured debt to Verizon. (In most bankruptcies, equity holders are wiped out completely.)
Matt Marshall of VentureBeat summed it up this way:
These so-called “mobile virtual network operators” are tough to pull off because they don’t own their own spectrum, but resell services using the network of other mobile phone operators. Branding is hard to create, given the dominance of established carriers.
But, er, why didn't all those VC folks figure that out before cutting their checks?
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.