CitiKey fails to unlock further cash

The dotcom downturn has claimed another victim, in the form of mobile travel guide startup CitiKey.

In a sign of the times, the company is filing for bankruptcy after squabbles between founders and backers left it broke, just eight weeks ahead of a planned £15m funding round.

In May, PricewaterhouseCoopers warned that most UK-listed startups would run out of cash in 15 months, with one in four risking a crash by November. Some 80 CitiKey employees in London, Stockholm, Paris and Rome will lose their jobs. "We ran out of money before we planned to," said CitiKey chief executive Ian Ashby.

The company burned through its £7.2m first round funding in a little over six months, after disappointing sales and a costly European expansion.

Bridge financing would have seen CitiKey tided over until the planned second round in January, but the company's founders, who objected to the conditions attached to the deal, vetoed the possibility.

Venture capitalists (VCs) hired Ashby last summer to replace CitiKey's 26 year-old founder Ziad Ismail as chief executive. "I was hired basically because the VCs recognised that the founders weren't up to the job," claimed Ashby. "Business goals hadn't been met, and revenues were disappointing."

In October it became clear that the company was running short of cash, and a £1m bridge financing deal was agreed with three VCs. All went well until one of the three backers dropped out of the deal, and the remaining two insisted on a dilution of shares in return for the cash.

"The service was extremely limited technically, and in terms of the cities it covered," said Rosie Secchi, European wireless and mobile communications analyst at IDC. "It's a service that could have worked last year, but today wireless companies have to move a lot faster."