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Digital Newsletter Seeks Buyer Amid Online Ad Slump

Digital Newsletter Seeks Buyer Amid Online Ad Slump

By MICHAEL THURESSON

Staff Reporter

Rising Tide Studios LLC, the New York-based research and business information company that publishes the Southern California-focused Digital Coast Reporter newsletter, is seeking a buyer.

Jason McCabe Calacanis, the company’s founder, said the business had been saddled with debt after the collapse of the business-to-business advertising market and had been unable to generate enough revenues from a revised model to cover expenses.

“The B2B advertising market has been decimated. It’s the worst depression this industry has ever seen. We realized the market was not good for our product, so we switched to our database solution,” he said.

Rising Tide claims a database of more than 9,000 companies and 27,000 contacts, which it offers to subscribers for $1,000 per year. The company says there are about 200 subscribers to that service, which competes with established database firms such as Hoover’s and Dun & Bradstreet.

With the advertising decline, Rising Tide expanded its information provider model, offering industry research reports at $600 each. It claims about 2,000 customers for that service, which started five months ago and covers an array of industries, from telecom to furniture manufacturing.

In early 2000, Rising Tide was publishing two print magazines, Silicon Alley Reporter and Digital Coast Reporter, as well as four online publications: Silicon Alley Daily, Digital Coast Weekly, iHealthcare Weekly and Digital Music Weekly. In addition to the e-mailed Digital Coast Reporter, it now produces email newsletter Silicon Alley Reporter Daily and Venturereporter.net, which serves life sciences, mergers and wireless industries.

The business survived the bust in 2000 by cutting costs, reducing its headcount to 25 from 55 and closing its seven-employee Santa Monica office in 2001, Calacanis said. It uses freelancers for its coverage of the L.A. area.

Rising Tide’s revenues peaked at about $12 million in 2000 and is currently generating “a couple million” per year, Calacanis said.

The company is working with New York-based Recognition Group, a restructuring firm, as it prepares to sell its business. Calacanis dismissed the idea of Chapter 11 protection and said the business is healthy except for the debt problem.

“We’re talking to angels and strategic investors and are very close to a deal. We expect something to be done within the next several days,” he said last week.

A business information publishing model is generally believed viable but there are doubts about whether Rising Tide can ever match its previous aspirations.

“There isn’t a venture capitalist who doesn’t rely on this kind of information,” said David Cremin, managing director of DFJ Frontier Fund in Santa Barbara.

Calacanis became well known to L.A. venture community through a series of networking events. “He recognized Los Angeles as a technology and new media center and sought out the venture community here and established a presence for his business,” said Cremin, formerly with L.A.-based Zone Ventures.

The Digital Coast Roundtable, an L.A.-based non-profit organization representing Southern California’s venture community, saw a boost from Calacanis’ venture, even if indirectly.

“He was instrumental in spreading the name Digital Coast because of the name of his newsletter,” said Conchetta Fabares, executive director of the Digital Coast Roundtable. “Unfortunately, many of the companies he promoted in it disappeared.”

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