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Failed start-ups should return funding, says local investor

Thursday, 20 December 2012 | By Michelle Hammond

A failed Canadian start-up has turned heads after promising to return all remaining funding to its investors, but a local investor has applauded the move, saying it’s “the right thing to do”.

 

Based in Toronto, Verelo allows users to track their website’s performance and eliminate downtime with its Selenium-based solution.

 

Once website monitoring is enabled, Verelo begins to check the user’s site from multiple locations around the world. If it detects downtime, database connection errors or other problems, the user is notified by SMS, phone or email. Once a site is down, Verelo helps the user get it back online.

 

Andrew McGrath and Michael Curry founded the company at the start of the year – although Curry left Verelo several months ago. It graduated from Toronto’s Extreme Startups incubator program and publicly launch in June.

 

Less than six months after its launch, it’s been confirmed Verelo will be closed down, with all remaining funding to be returned to investors. The funding amount is unknown.

 

In an email sent out to users, McGrath said it is “with great sadness” to announce the decision to close down the company.

 

“We’ve been struggling to grow at a sufficient rate to become long-term profitable,” he said.

 

“I personally feel that the most responsible thing we can do as a company is to conserve our remaining funding and return it to our investors.

 

“While Mike made the decision to leave the company a few months ago, I decided to give it my best and push on.”

 

McGrath said despite bringing on several key people during this time, it became clear the company is “still playing a big game of catch-up” and does not have the financial backing required to “truly fulfil our one big goal of making the internet a better place”.

 

Domenic Carosa, executive chairman of Future Capital Development Fund, told StartupSmart he saw a similar thing happen when a company called Ohki folded.

 

“Rather than burning through the rest of the money, it did a capital return, as opposed to burning for the sake of burning,” Carosa says.

 

“If the model can’t be successful, and not all models can be successful, the investor would like to see the return of some of their capital. I think it’s a really difficult thing to do for the entrepreneur, but in some cases it’s the right thing to do.”