Wednesday, June 06, 2007

Lessons from the Amp'd bankruptcy

The blogosphere's been abuzz about Amp'd Mobile's Chapter 11 filing in the wake of a 'liquidity crisis'. GigaOM cited a company statement blaming inadequate systems:

"As a result of our rapid growth, our back-end infrastructure was unable to keep up with customer demand."

But Om and others rightly note the more critical factor here is that Amp'd has had a devil of a time collecting from its customers, with 40% of its 200,000 subscribers owing Amp'd money -- cash it desperately needed to fund marketing and operations.

There's a lesson here for managers suffering from a tunnel-vision obsession with top-line revenue growth: while inadequate infrastructure can hobble a business; an inadequate balance sheet can bring it to its knees (and crawling into bankruptcy court). It's nearly impossible to grow your way out of that kind of trouble.

It's also important to note that privately-held Amp'd has filed for Chapter 11 (reorganization), not Chapter 7 (liquidation), meaning that (at least for now) they ostensibly intend to eventually re-emerge as a viable business. But as the Business Week story points out, another potential outcome is that one of its major creditors (Verizon seems a likely suitor) will end up getting the whole company on the cheap. That's a high price to pay for growth.
O'Reilly Radar > Lessons from the Amp'd bankruptcy

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