Backplane, the startup company backed and promoted by pop icon Lady Gaga, has run out of cash.
The company, which allowed individuals to create niche-based communities made up of like-minded people connecting through shared interests, used up the $19 million that it has raised since it was founded in 2011.
According to TechCrunch, Backplane has gone out of business, with the company selling its assets to a group made up of a mix of new and previous investors in the startup.
Backplane was able to raise $12.1 million in 2012 from Lady Gaga, her manager Troy Carter and top Silicon Valley venture capitalists, with the company posting a valuation of $40 million. This was despite the fact that Backplane was not much more than a fan website for Lady Gaga at the time, as it created Lady Gaga's LittleMonsters.com, with the startup then also looking to launch social networks for brands.
Backplane was able to raise $5 million more since then, but after three years, there has been no progress on the startup's product. There were reports that the company was failing, and the startup attempted to bounce back by pivoting to Place.xyz, hiring a new CEO in Scott Harrison and restructuring into a self-serve social network maker mobile app.
A total of 15,000 communities have since been created on Backplane, with plans to create apps for LSU and Burning Man. However, all this was not enough.
Upon using up its funds, Backplane could not get its investors to put more money into the company. Liquidation preferences for certain investors in case the startup exited scared away new investors, and previous reports on the struggles of Backplane hurt its capabilities to raise funds. A Chinese investor was supposed to lead a fundraiser for $2.5 million to inject new money into Backplane, but those plans fell through.
Backplane has now burned out, serving as an example of the dangers of raising funds at valuations too high and how a company can be bled dry by lavish lifestyles, with its founders running two fancy offices at the same time.
The startup, while out of money, is not yet completely buried, however.
"The system continues to operate and efforts are under way to continue business operation and release a number of new apps," Harrison said.
The group that purchased the startup's assets will attempt to relaunch Backplane, with partners such as Lady Gaga to become paying clients and not just strategic partnerships.
