How does that song go, “Do you remember rock-and-roll-Clickradio?” Maybe not quite. Clickradio may have died young, but the fight over the beautiful corpse it left behind continues. The New York Post (ick) reports that a trial opened April 5th in Manhattan Supreme Court to settle whether the company was scuttled to allow a group of investors to buy its assets at firesale prices. The piece goes on to tell the story of the rise and fall of our little startup:
Clickradio was founded in 1998 as a free, advertiser-driven, digital radio service that played over the computer and downloaded programming from the Internet.
The company held licenses from six of the seven largest record companies in the U.S. and several independent labels. Before it went under, Clickradio had signed potentially lucrative distribution deals with Kmart and Wal-Mart, and its software was being bundled with new Gateway computers, according to the suit.
Sensing Clickradio’s promise, Drazan’s firm Sierra Ventures invested about $8 million and took a stake in Clickradio in 1999. Baystar pumped more money into the firm in 2000. The investments gave Baystar and Sierra majority ownership of Clickradio and two seats on its four-member board of directors.
Philips Electronics also put $8 million into Clickradio and Merrill Lynch threw in $2.5 million.
When they took control, Syncom claims, Goldfarb and Drazan conspired to oust Williams and Clickradio co-founder David Benjamin, repeatedly lashing out at Clickradio’s Williams in meetings, calling him “a moron” and working behind his back to kick him out as CEO. An e-mail from Goldfarb to Drazan read: “I would like our first action to be to fire Hank and David.”
By May 2001, Goldfarb had installed himself as chairman of Clickradio, as the company added new subscribers and geared up for a massive distribution campaign.
All the while, Drazan, Goldfarb and Hicks were consolidating control and scheming to sink Clickradio and buy its assets out of bankruptcy, the suit alleges. This time they would own the firm outright, dispensing with other shareholders and minority investors with whom they might have to share profits.
In August 2001, Clickradio’s board notified other investors that the company needed an immediate infusion of cash to stay alive and recommended the company try to secure a $5 million bridge loan. Hicks, who had not invested in Clickradio, was asked to provide cash for the bridge loan but passed on the chance.
And we all know what happened right after that. Suddenly, after September 2001, investors, some of whom had just had their offices blown up, were in no mood to re-up their investment in a risky start-up. A handful of us kept things running, pro bono, right through the first three weeks of October.