Prominent Greater Hartford business, political, and athletic leaders collectively wagered millions of dollars on Back9Network, bets that are now in jeopardy as executives of the golf lifestyle media startup, which abruptly shuttered operations last month, make last-ditch attempts to salvage the business.
While certain high-profile Back9 investors have already been made public — most notably UConn women’s basketball Coach Geno Auriemma, NBA and UConn basketball legend Ray Allen, and The Phoenix Cos. CEO Jim Wehr — dozens of other Connecticut residents are among the 140 or so investors that pumped upwards of $40 million into the company since its founding.
According to a list of company shareholders obtained by Hartford Business Journal, from a source who asked not to be identified, other local investors include: former State Treasurer Francisco Borges, who is currently chairman and managing partner of Simsbury investment firm Landmark Partners; former interim UConn athletic director and former St. Francis Hospital senior vice president Paul Pendergast; Michael Cantor, co-managing partner of Hartford intellectual property law firm Cantor Colburn; Hartford lawyer and UConn Foundation Chairman Coleman Levy; former Phoenix Cos. Chairman and CEO Robert Fiondella; Karlos Boghosian, owner of Hartford-based Capitol Chiropractic Center; and Mark Shenkman, founder of New York/Stamford investment firm Shenkman Capital, among others.
Waterbury lender Webster Financial Corp. also invested in the company, as did Connecticut taxpayers, who pledged $5 million through state loans and grants.
The high-caliber investor pool underscores the excitement, faith and promise many local leaders placed in the golf lifestyle media company. Trying to make those investors whole, or at least return some of their individual bets, which ranged from tens of thousands of dollars to over $1 million, is the chief reason current and former Back9Network executives say they are scrambling to raise more money, with the hopes of re-hiring workers and eventually getting back on TV.
Current Back9Network executives — CEO Charles Cox, Carlos Silva, and Reid Gorman — declined to comment about or reveal investors. They are the company’s only remaining employees and have been working since October without a salary, they said.
Cash crunch
Back9, which has its corporate headquarters in Hartford’s famed Phoenix Boat Building and a TV studio on Constitution Plaza, suspended operations in February after running out of cash. At its peak — in the fourth quarter of 2014 — the company was burning through as much as $2.5 million per month, sources said, which included $540,000 monthly payments to be on DirecTV.
In January, the company announced its first major job cuts, laying off 35 people. A month later the company suspended operations and pulled itself off DirecTV, where it had been airing since Sept. 29.
Since then, Cox, Silva, and Gorman have been weighing go-forward strategies, including jockeying for another large cash infusion — up to $30 million — to restart the company, first online and eventually back on TV.
For a fraction of that amount, the trio say the company could at least get its online presence up and running again.
Cox said he has been in talks with a number of investors in the golf and media industry and remains optimistic about a deal. It’s not clear, however, what type of deal it would be and how it would impact shareholders.
Meantime, former Back9Network CEO James Bosworth, who was pushed out of his chief executive role last year, said he’s also working with some existing investors to raise capital and save the network.
Bosworth, who remains the company’s largest shareholder, said Back9 could be revived with the right management team in place. He said he is wooing New York investors for another $40 million-$60 million, a sum he predicts would fully fund the company and allow it to successfully get back on TV.
Bosworth wants back on Back9’s board of directors and is not opposed to the idea of returning as CEO, but he said his main concern right now is trying to protect shareholders, many of whom he personally convinced to invest in the company.
“As the founder, I want to see this succeed,” said Bosworth, who wagered his own money in the company. “Great content that engages the lifestyle audience is what Back9 needs to be successful. I am very confident that I can deliver that type of programming.”
If neither Bosworth nor Cox successfully raise funds, and do it quickly, Back9 has few alternatives. Bankruptcy and liquidation — each likely to wipe out shareholders — are on the table.
Even if they do woo new capital partners, current investors will likely see their stake in the company diluted.
Most Connecticut investors named in this story and contacted by Hartford Business Journal failed or declined to comment. Their individual investments ranged from $25,000-$50,000 to over $1 million, documents show.
In a written statement, Webster Financial spokesman Bob Guenther confirmed the Waterbury lender’s investment in Back9, but declined to say how much. “We felt it was a promising startup,” Guenther said.
Even though Bosworth and the current management trio say they are raising capital, they aren’t doing it jointly. In fact, both sides have been sparring for months.
Back9 sued Bosworth in December, alleging he had violated his separation agreement by making disparaging comments against the company. Bosworth responded in court documents that the suit was a tactic by then Board Chairman Sandy Cloud Jr. to divert attention away from the company’s financial issues. The case is now in arbitration.
Back9’s stumbling block was failing to raise the money it needed to not only launch on DirecTV, but also stay on air long enough to generate advertising revenue. That requires upwards of $100 million, Bosworth said. Back9 only raised about $40 million.
After announcing its DirecTV deal last June, the company hoped to raise an additional $30 million, but fell well short of that mark, sources said. The money was supposed to fund operations until TV ad revenue started flowing in.
Bosworth said current management made a mistake launching the network with debt and only about two months of cash on hand.
In a statement Back9Network said: “The decision to pursue the DirecTV deal and launch the network in late September while simultaneously raising the required capital to run the network long-term was made in late April by Jamie Bosworth and the Board of Directors. Launching a 24-7 cable television network is a major undertaking and everyone involved was aware of the challenges.”
As Back9 hit the airwaves and ramped up hiring in the fourth quarter of 2014, it was burning through $2 million to $2.5 million in cash per month, sources said. A big part of that spend included the $540,000 monthly DirecTV payments, sources said.
To get on air, Back9 agreed to pay DirecTV almost $24 million over three years, sources said. Back9 executives declined to disclose terms of its DirecTV contract.
The company wasn’t expecting significant TV advertising revenues early on, but was hoping additional capital would get them through a ramp-up period. When those funds didn’t come the company largely relied on digital media revenues that couldn’t cover operating costs.
HBJ’s Brad Kane, Matt Pilon and Gregory Seay contributed to this story.
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