Although there are startups who are doing well and growing in Montréal, like Akoha, Standoutjobs, or Mobivox, there have been numerous worrying reports about Capazoo, which was officially launched last October. People are calling the founders scum bagss, another MTW reader said they were dishonest with their employees, and I was told they were downsizing this week 50 out of their 60-strong development team, which makes them the black sheep of Montréal startups.
Of course, these might just be rumors, but they might be also signs about capazoo’s misguided efforts. Their technorati trackbacks are flat, and alexa shows they had more visitors November last year than what they have currently, although they officially launched the website last October (!). An “unofficial” blogreveals that in fact they launched in 2006, but failed to get traction, and that’s why they did it again in October 2007.
Official press releases don’t do them justice either. 11 days ago, they struck a deal with Savvis, which will provide them virtual servers and data centers facilities for $5 million. Who the hell pays $5 million to host your website? Certainly not a web entrepreneur, who would rather get an EC2 account from Amazon if he/she really wants a scalable infrastructure.
I really hope I am proven wrong, that their investors didn’t play the lottery game and thoroughly checked that the founders and the management team were wise, smart, honest and perfectly know the web space before putting in $25 million.
Comments
Daniel Haran November 23, 2007
What really got me is that there’s a Capazoo Debit Card. So on top of being a social network and a magazine, they want to play bank too.
Stephane Daury November 23, 2007
To be fair, the concept has worked in a few markets (mainly MMOG), but if you compare the attempts/success ratio, it’s a pretty high risk investment. But one that has proven too tasty to many VCs countless times.
Heri November 23, 2007
Stephane Daury November 23, 2007
Although I’m not passionate enough about the subject to hold my ground in a length debate about it, I’ve never been a fan of the virtual currency concept, the same way I’m not a fan of things like Air Miles.
The point, IMHU, is to disconnect user from the true value of what they are trading, and I have yet to find an implementation that proves me wrong.
But as I said, I respect one’s opinion, since I’ll be the first to admit I have no expertise in the subject. Just a personal opinion. :-)
ashkan November 24, 2007
1 – Just because specific companies from the areas of a) social networking, b) entertainment, c) personal services and d) financial services are individually successful, then for the love of all things holy, adding elements of social networking + entertainment + personal services + financial services and hatching a company does NOT mean that something will be successful…
In fact, it means you will be ok at many things while focused players in one of those spaces will out-hustle you. Worst off, potential partners in each space will view you as a foe and avoid working with you. Our company is a video producer for example (b in the breakdown above), we’re not competitors to YouTube (a), Match (c) or Paypal (d) so we can grow by way of partnering with them, for example, instead of competing with them all.
2 – Two years in development? That’s ironic because Capazoo is 6-18 months too late to market: Most users are wary of signing up to one more social network. The early adopters tried Friendster, the masses joined MySpace which got chaotic and noisy, then Facebook opened up at the right time and social networking is now mainstream. Facebook has the best online-to-offline paradigm because it perfectly mimics your social tree. MySpace is the best place for artists etc. Is there room for one more? Maybe, but that social network will have to be very different. Capazoo isn’t all that different.
3 – I actually went to Capazoo’s media shindig, they kept quoting “market research” but some common sense would be useful here: if a market research group knows that you are paying them AND as a client you want to get to a given finding, they will massage the facts and figures to reach the conclusion you are aiming for. This is exactly why you never want to get advice from a lawyer, he’ll tell you what you want to hear, then when the case doesn’t go your way you’re broke and the bad advice is moot. Sitting there I thought it was ridiculous that Capazoo violates rule #1 of web enterprises: forget the market data and try things out online, then make changes.
But, in Capazoo’s case, making changes won’t be easy. Ultimately, I don’t know any of the founders or managers to pass judgment, but I’d be curious to see the experience they have in free ad-supported consumer new media, where the only rule is “there are no rules”.
4 – Capazoo also breaks another major rule of successful web startups: they already have 108 people on staff + offices in Montreal, New York City, LA, Miami, London! Why not just burn money? Every successful company starts small and scales… Facebook, MySpace, Google, Yahoo, eBay, etc., all started by 1 or 2 guys and built slowly… with 108 people in numerous offices it will be impossible for Capazoo to make the important, critical changes to the gameplan in the early days.
In fact, I see #4 as the single greatest obstacle because all of the other points could change and I could be wrong, but at its core, Capazoo is bound to move slow in its critical early days, in my humble opinion.
5 – The incentive for anyone to signup is low. I know, the “zoops”. First off, an Italian company is already using the zoops term… but I digress. The bigger issue is this:
Social networking worked in Web 1.0: Geocities selling for over $2B to YHOO is an example. As a result, when the market developed, then new players in social networking such as MySpace and Facebook succeeded as social networking sites in Web 2.0.
However, online virtual currencies were a spectacular disaster that burned shareholders in Web 1.0 (Beenz and Flooz) and I don’t see anything different about Web 2.0… what will happen is that the zoops won’t add up and that will lose its sex appeal very quickly.
6 – User generated content is not monetizable. While Capazoo is aiming for content from semi-pros and pros, they’ll end up with a much higher portion of low-quality content, which is not going to be monetizable. When it comes to high-quality content, there are already way too many distribution outlets. For example, as a content owner, I see no value in also being on any site other than MySpace and or YouTube… so sure, some content owners might add content, but will they continue to add content? Nope. Not a chance.
I could go on… I wish them success (disclaimer: I pitched them some marketing ideas with our company)…
But as it stands now, this one is built to burn money sadly…
One clarification, I was befuddled when I found out that the company had raised $20-25M… but it turns out that the funding came not from VCs but private investors who might not have been as realistic about the risks in the space.
One thing I must say though, good investigative work Heri, I did not know the company had actually originally launched in 2006, only to relaunch this year.
Sorry for the crazy long post, but I’ve never met a startup I didn’t like to discuss…
Heri November 24, 2007
bet there are a lot of unhappy developers/web designers/project managers from capazoo out there
Daniel Haran November 24, 2007
Vas November 25, 2007
» Capazoo, déjà un flop? - Le techno-blogue à Steph! November 26, 2007
[...] parle de Capazoo parce que j’ai lu un intéressant post sur Montreal Techwatch (merci à Phil). Ho, c’est un délice pour ceux qui, comme moi, ont misé [...]
tonsils November 26, 2007
Capazoo overpays their employees, paying them more than what any other respectable Montreal web company would. They’ve needed to overpay to get people to work for an idea that shows so little promise.
For this reason, I would hazard against feeling sorry for anyone at capazoo, developers, designers, managers or otherwise — they went to work there for the money, pure and simple, and from what I understand, pretty much none of them believed in the service they were designing.
They also knew the ride would end at some point, so I guess it’s finally arrived.
While many have commented that the company seems built to “burn money”, I’m not sure they realise just how right they are! There’s something very strange about private investors willing to put so much money into a wishing well. I don’t believe for a second that the company was designed with the intent to be successful, and I’d love to know just what the real reason behind its existence is.
Good work, Heri, on your honest analysis of an intriguingly lost cause.
Quelques règles pour les entreprises Web en démarrage. — Michael Carpentier November 26, 2007
[...] lecture d’un billet sur la possible – et hautement prévisible- débâcle de Capazoo a donné lieu à un échange de commentaires extrêmements intéressants, exprimés par des gens [...]
Eric Baillargeon November 27, 2007
A nice growth, but like you guys, a don’t believe in that concept !
Montreal Gazette November 29, 2007
[...] they can later convert to cash (think Linden dollars).The startup, which has been getting mixed reactions, is hoping the anger at Facebook’s Beacon ad tool will spur a mass exodus to its site.I’ll be [...]
Dan Almont December 13, 2007
Capazoo or Crapazoo? : The Drama 2.0 Show December 19, 2007
[...] posts (like this one) make similar claims and an article by a Baltimore Sun reporter indicating that the president of [...]
matthew December 19, 2007
We just inked a partnership deal with National Lampoon, an entity that reaches one out of every four college students in the United States. Capazoo now has a presence on NL’s site and we will grow our presence on their other properties in the coming months. This is just one example of the exciting things we are doing.
As for the worries and complaints and negative reaction to the various rumours, jaded points of view and other slanderous retorts about us, I will say this:
It’s important to note that Capazoo.com built and is growing something that has never been done before online. While our resources amount of capital raised are impressive, we have to remember that Rome was not built in a day. There is trial and error in any new venture, especially in one where we are doing something never done before.
Mistakes have been made, but lessons and incredible insight were gained along the way as well. We feel better about Capazoo now then we ever have- collectively.
Putting the right pieces in place and not stopping until they all fit properly is something that takes time. Well, we feel that most of the pieces are finally in place and the world is our oyster right now.
There are very big things planned for January- both on the site and externally, and it’s my hope that everyone who has ever spoken negatively about Capazoo will visit the site with an open mind and see for themselves what is transpiring before their very eyes.
That said, there will always be concerns and we welcome them. We also welcome media types to get in touch with us rather than fill in the blanks on their own.
I am reachable through my Capazoo page – http://www.capazoo.com/matthew ….
Happy Holidays to all and thank you for letting me express my views on what has taken place on this MTL Tech Watch…
Daniel Haran December 19, 2007
matthew December 19, 2007
Montreal Gazette December 21, 2007
[...] Zoops into cash, but only if they have a premium account of $25 to $35 a year.Bloggers have come down pretty hard on Capazoo, saying its misguided, all-in-one model will only burn money like it’s 1999 [...]
jcap December 22, 2007
And for the post that say that there is no advantage to be member of capazoo and that myspace is better well you should ask to the artist that put their stuff on capazoo and already earn over 100$ in real money only in a few weeks.
I’m not sure but i think it’s more than what they have ever done by being on myspace for years.
And i wonder why people hate so much about new product.
even if it doesnt become the amazing new site they promote why say they are bulshit and etc??????
i can’t wait to see tyhe upgrade they promote for january !!
And i would be stupid to not put my join page and get chance to make my referal grow and maximise my chance of making money so come see me at
http://www.capazoo.com/jcpoirier22
Capazoo: MLM 2.0 — Some French Guy December 22, 2007
[...] thread on Montreal Tech Watch’s Capazoo Update got increasingly surreal this week, first with their Director of Communications heralding their [...]
matthew December 22, 2007
One way you can earn additional Zoops on the site is by having the top rated, viewed or tipped video, photo or music file of the week. We award 2500 Zoops to our 9 weekly winners.
investor relations December 22, 2007
===
Unfortunately this is a ponzi scheme on a number of levels.
The company (from my private sources who have seen the deal) raised $8 million on a pre-money $76 million from private angel investors who knew nothing about tech. This primarily came from famous sports personalities who knew nothing about investing in startups and were chasing the exhaust & hype of the MySpace acquisition going back to 2005.
They then raised another $7-8 million in cash from another group of similar angels at a valuation that was over $125 million.
They used the hype of famous people investing to get other famous people investing while spending their cash at pre-bubble levels.
A bunch of unsophisticated investors have thrown close to $15 million of real cash that my sources say has been spent. There money is ALL GONE.
The company is on the verge of missing payrolls, since they staffed up last year to more then a hundred employees and a burn rate of over $1.3 million a month they have spent almost all the real cash they raised.
No VCs will touch them due to the crazy valuations and a cap table that includes hundreds of small angel investors throwing in $100-$200k chunks.
They now run around raising more funds on a month to month basis to keep the doors open, all the while they have less then 10,000 members on the site and continue to burn huge amounts of cash.
This is without assessing the merits of the idea which combines as pointed out by Duncan basic social networking features with an AllAdvantage multi-level marketing scheme.
Their place in the deadpool is coming a lot quicker then you may have realized.
My bet for the deadpool insertion is by April 2008 they will be gone.
===
http://www.techcrunch.com/2007/12/10/capazoo-wants-to-pay-you-for-your-social-networking-time/#comment-1833782
intouch January 10, 2008
They’ve fired more than 90% of the team before christmas. The guys running the show were very well know in the web industry before…back in the 90′S they’ve raised more than 30 millions for a forex platform that actually never generated a cent!
Some people at Capazoo were payed third time the market price…In terms of management we can say it was a real joke.
Capazoo is really running out of cash. The end is near.
Conclusion: it’s a real mess and I’ve one essential question: looking at Capazoo situation Who’s going to invest in new technology and website in the future???
matthew January 10, 2008
We remain over 100 employees strong, with several offices in the building we reside. There have been no mass firings and there has been no cash problems.
Today we updated the site with several key changes, including upgrades to the navigation menus and to the online magazine.
We invite ANYONE who wants to visit the offices to come on down and see for themselves. It’s a real shame that a fine site like this has a bad apple to ruin the otherwise great news that comes out of tech watch.
There seems to be these erroneous postings about Capazoo, perhaps for no real reason other than the fact that we have been more ambitious with our company structure and business model.
We have received nothing but great feedback and optimism from investors, partners and members, other than this portal’s misguided postings.
Now, had the previous posting been a result of an investigation into our resources, partners and offices, then there would be nothing to dispute. The internet allows everyone to become a journalist and sometimes novice ones don’t do their due diligence.
On Dec. 6th, we held a press conference in Toronto and subsequently had incredible interest in our company on various levels. We invite you to see our media room for more on recent news at http://www.capazoo.com/media-room.html … Our morale is good, our market strategy is about to be implemented and our partners like National Lampoon are on board and excited about the possibilities.
It’s our hope that our own city support us as well as everywhere else we have a presence.
Lastly, have a look at http://www.capazoo.com/kmart30bday and see our recent footage with some of the biggest sports and entertainment stars, as we attended Kenyon Martin’s South Beach birthday party .
intouch January 11, 2008
matthew January 11, 2008
So if really want to hurl insinuations from behind a rock anonymously, and it is something you need to do, there is nothing we can do from our end. Capazoo is moving forward on great footing at the moment, with some great new plans and modifications on the site.
As for Mr. Delage Roberge? His role is public knowledge. He is the President of Capazoo Quebec, having purchased the French rights to the site, period. This was reported in the Gazette.
As for the site itself? Still no slamming of the actual platform, and this is what is most important to us and our partners.
Venting about frustrations in the form of inaccurate slander is your perrogative.
The balance between being a start-up and a well-funded operation that has learned from trial and error is tricky. As you learn about the business and put the right people in the right positions, you invariably are not going to make everyone happy along the way – and apparently this is what we’re seeing with these attacking postings.
At present, the site is on a great new path and I reiterate my invitation to anyone who wants to see the operation for itself in person. Simply contact me from the media room page, as opppose to getting your Capazoo news from jaded sources that are clearly only interested in ensuring Montreal technology ‘in-the-knows’ have a bad view of the company.
Get the truth from the source, rather than someone who really isn’t ‘intouch’ ….
veejaytsunamix January 11, 2008
I’m still waiting to get paid…
Obiously they didn’t (like) take my advice.
Now on myspace I have more friends then they have members & I work alone without founding.
We’ll be at Sundance in a week!
Looking for alternative booking…
Have projector & might end up in a bar,
or even on the street (have generator)!
We are in Chicago presently!
We’ll be in California, in February,
producing TsunaMiXes in HD for the Next Wave!
This is real & I made it happend without a robot.
intouch January 12, 2008
“Michael Jordan plays ball, Charles Manson kills…Mathew talks!”.
You’re the best!
-HOW MANY MEMBERS?
-Tell us about the FOREX platform adventure (Nightmare)
-What do you think about firing employees one week before x-mas?
-about the x-mas party, I’ve been told couple employees resigned during the party. MOTIVATING and UPBEAT no doubt!!!
- What about the ROI?
I’m still looking for the CAPAZOO added value as a social websites…capazoo=mybook or facespace combination of the worst of my space and the worst of facebook!
I was quite amazed when I rode the last comment. With a 15m$ budget Capazoo should pay his vendors and suppliers instead of overpaying Partners and management team. don’t you think?
I can’t stop thinking about the original Myvirtualmodel.com when i’ve Capazoo in mind. Same feelings: Lack of vision, Stupid burn rate, overpaid managers, no transparancy, ridiculous income,…
Consider ourself lucky, in Capazoo situation it’s private investors instead of caisse the depot money (Canadian citizen money!).
Mathew keep up the good work! You’re the man!
matthew January 12, 2008
My name is Matthew Ross, Director of Communications for Capazoo, and I am being paid fair market value for my position, what is your name and who do you know that is being overpaid?
This is a slander campaign that is clearly grasping at straws when one person at a festive Christmas Party was in a bad mood and this is a source for horrifying news? A little silly and not exactly terrible news.
And someone quit before Christmas, really? That is too bad, it’s always tough losing a valuable member of the team, but to my knowledge, I am unaware of the individual you are talking about. Could you drop a name to substantiate this claim?
I am afraid the connotation of being ‘intouch’ is supposed to be a fact-related nickname, and not one of heresay and inaccurate facts.
Has Capazoo reached its goal of members? This is an ongoing process, of course.
I invite ANYONE to come and see the team, the facilities and the operation as a whole instead of listening to someone who clearly is referring to the couple of miscues that were committed well before the new regime came on board in early 2007 and that were clearly learned from.
Officially, Capazoo is finished commenting on unsubstantiated rumours and inenudos from unidentified sources who backtrack and re-position themselves from one comment to another (I refer you to the ridiculous 90% firing to 2 people quitting – which still is not confirmed, as I am unaware of who they are.
Alex January 12, 2008
Matthew, excellent rebuttals!
K, here is whats going on.
Capazoo fired most of their staff before Christmas (accurate).
What you didn’t know is that one of the employees that he fired was a darling french canadian woman that was his mother!!!
They rent 3 offices, with sf in the 6000 range. (value space, nothing ridiculous)
Luc Verville is an amazing salesman !
Capazoo is going to close, 110% maximum 5 months.
The way the deal was structured makes it possible for money to dissapear. Seasoned scumbag Luc Verville knows how to steal.
I think he will proboably have some problems with “collections”. Some people don’t let good money get stolen. Some collection specialists don’t care about how you structure your BS. Stealing is stealing. Refund.
Michelle Verville a party king and coke head knocked up a waitress that is 19 years old and will have the baby…
____
What happened is they had big dreams and when they saw the reality of this long shot… they figured their time was worth millions (when it clearly isn’t) 7000 members?!?!.
When an thief and a coke head open a company 100% of the time there will be lies and stealing :)
5 million for hosting!!!
You would think that there would be a board of directors that would not allow such retarded spending…. lol
Take the check book from this animal!!!
Alex January 12, 2008
Karma
matthew January 12, 2008
These are the factual comments I can speak to. The reduction one department was made for strategic purposes and it was not done right before Christmas as has been mentioned, that is why I did not speak to it earlier, because I had to understand what the poster was alluding to.
Still, no negative mentions of the site, or by our current partners, and that speaks volumes to our product and potential.
intouch January 13, 2008
Here is the web 2.0 magic Formula:
First of all, you have to live the JET SET LIFE. Façade seems to comfort people about your potential and future successes. Verville brothers know how to spent money!!!! Believe me (Party animal, real jetset life style, flying all the time, coke, cars….).
Second: To make money you need money! Verville brothers have money. They actually made a lot of cash as plane brokers.
Classic line to hook stupid rich people: “Hey dude you want some more champagne and coke…come on body it’s on me! Hey, let me introduce you ‘my man Dennis Rodman’, he’s such a funny guy! Oh by the way, I’ve invested 1m$ of my own money in a CO, it’s going to be THE next big thing. You know why I can spend money like this??? I’ve the magic touch…Come on dude, join us it’s just 2M$ entry ticket to be the next Google”.
You just have to do that 5 to 10 times and that’s it.
Three: How to make sure you won’t get suit by your investors?
First thing to do: when the CO is well set, FEED THE PAYROLL with the investors money and make sure you have the biggest salary ever and you get paid more than your personal investment. Hey hey hey!!! To maintain the show and give the CO enough credibility you need a team. So make sure they get paid enough to lie the right way.
Four: during the all process, make sure you have the shares control at any time….a must if you want to make the real money at the end…Keep this in mind.
Five: Burn most of the investor’s money in the payroll, hire developpers, software architects…tech guys as much as you can.
Six: accounting wise and tax wise play by the book! Bankruptcy is not an option.Don’t be stupid as a Canadian citizen you’re supposed to know the law.
Seven: Try to generate some revenue with your product…most of the time nothing will happen.
Height: communicate the right way with your investors (Hire Matthews is such a good communication directors)…tell them it was an accident, the market changed, the technology is not efficient enough, tell them you’re so close to success…conclusion: force them to re invest some other M$!!!!!
Nine: When the show is almost over, stay low profile, apologize and then propose an offer to your investors to buy them back. 1$ for exemple. Most will agree this.WHY????
- Most of them are rich…so they can afford to lose 1m$.
- They are exhausted…they just want to run away
- It’s a shame!!!!!!! How can it be? I’m rich, I’m beautiful, I’m a part of the jetset! They will agree just to make sure people will forget they were a part of that mess. That’s a way for them to get back their reputation. I’m no more involved!
Ten: Here we go! Now you’re rich. How is it possible????
You’re now the one and only owner of a CO full of assets. What kind of assets???
- Tax loss (15M$ investment….believe me you won’t pay any tax before a decade!)
- Most of the money spent was the payroll. Do you remember? Now you’re claiming your R&D subsidies & grants….If you’re by the book, you will get it. It’s just a question of time.
- You own rights, intellectual properties, contact list,…
- Within 18 months you should get you grants and subsidies from the government. With 10 million spent in the payroll you should get around 3-4 million. BINGO!!!!
That’s the phase 1.
Phase 2:
- Cash out the fresh money in the Co. If you’re smart enough you’ve CO’s around the world to send invoices…
- When it’s done: SELL! Remember you’re a very good sales man. So use your natural skills.
- Your members list (even if you’re not suppose to): probably 0,5M$
- Your technology….You’ve spent so much in it!!!!
- Furniture…Pocket change but it helps to pay restaurant bills
- Last but not least you’re selling the shell for Tax loss purposes (15M$ investment) there’s plenty of Corporations outside looking for such opportunities, you could have easily 2M$ for that.
That’s it! It’s all clean now and you’re rich! Take your time to spend the money you’ve made (no problem you’re a jetsetter!), minimum 2-3 years. Time goes by and people will forget who you’re & what you’ve done. Then DO IT AGAIN!!!!!!!!!!!!! (do you remember the FOREX Platform???)
Imagine: Salary (3 years 150K$ per year= 450k$), tax loss benefits, subsidies & grants (at least 3-4M$), cash from the different transactions (2-3M$).
THIS IS WHAT I CALL A GOOD DEAL!!!!!!!!!!!!!!!!!!!
PLEASE GUYS DON’T DO THAT. NEVER! AS A HUMAN BEEING YOU’RE NOT SUPPOSE TO SCREW PEOPLE ALL THE TIME. IT’S REALLY BAD FOR THE KARMA! WE’RE ONLY LIVE ONCE, SO STUPID TO WASTE LIFE TIME LIVING SO MISERABLY.
IT’S A SHAME BUT I KNOW AT LEAST 10 EXEMPLE LIKE THIS IN MONTREAL…
Here’s an ending to Drama2.0 | Montreal Tech Watch January 13, 2008
[...] just disabled comments for the post about Capazoo’s “problems”, and the one about Bell Canada’s unlimited plan for the HTC [...]
L’heure finale de capazoo | Montreal Tech Watch February 11, 2008
[...] considère que ceci clôt l’affaire capazoo. On en a parlé longuement ici il y a quelques mois de cela, on sait qu’ils ont un modèle d’affaires bancal (ils ont été nommés dans les [...]
As The Web Turns - The death of Capazoo | StartupNorth February 12, 2008
[...] has been covering this at Montreal Tech Watch and his last post on the subject stirred up quite a cat fight in the comments. You just can’t make this stuff up [...]
Montreal Gazette March 18, 2008
[...] has been heavily criticized ever since it launched. You can read about its turbulent history here, here, and here.I’m hesitant to declare the site officially dead, since there’s a change money may start [...]
Blah Blah Blacksheep at Gypsy Bandito May 17, 2008
[...] community. It’s probably because I’ve done things like trash-talked peers, worked for Montreal’s most unpopular start-up, and post videos of my drunken and disorderly [...]
Income Access Affiliate Marketing Blog » Blog Archive » New Social Network for Online Casino/Poker Players May 28, 2008
[...] was recently branded as the blacksheep of social networking when Capazoo.com ran amok with about $25M in VC [Disclaimer: I worked there, and was there when the poop hit the fan.] The whole shenanigan may [...]