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The End of Innovation UPDATED JULY 8

Written on
Jul 6, 2010 
Author
Gavin Dunaway  |
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The End of Innovation UPDATED JULY 8

funreal_small.jpgADOTAS – UPDATED JULY 8, 10:08 A.M. – A source who worked with University of Maryland University College was told that Seaport Capital LLC, the majority owners of Innovation Ads, had not paid back a loan from CapitalSource Finance, its funding institution. Thus CapitalSource froze all of Seaport’s assets, forcing Innovation to shut down.

Another former employee contacted me and said that the employees had no warning and discovered on d-day — Thursday, July 1 — that they were not going to be paid for their last two weeks of work.

“My question is,” she writes, “that since they knew all this time what was going on, why did they let us work two weeks without pay instead of letting us go on June 20, 2010, instead? We are all looking to see what to do to get paid.”

A commenter on Lead Confidential discovered employees will have to wait 15 days from July 1 to file a complaint with the U.S. Department of Labor.

Not a peep from Seaport.

There was no announcement, no press release. The website is still up and running. But emails to clients reported that Innovation Ads ceased operations the previous week, most likely leaving unpayable invoices.

A internal letter from ex-CEO Dr. Sanjaya Addanki reposted in the comments section of Lead Confidential describes a convoluted case in which investor Capital Source Finance of Chicago ceased paying for operations — including employee salary — and began sweeping all accounts to recover its loan.

“Given there is no intent on the part of our Bank to return monies it has swept from our accounts to fund payroll, and given no one can be asked to work for free, at this point we must all conclude that we no longer employed with Innovation Ads,” wrote Addanki. “That applies to everyone in the company, myself included.”

He then asked employees to collect their personal belongings and vacate as CapitalSource would no longer pay the rent either. Addanki, who served as vice president and general manager of IBM between 1996 and 2000, took over as CEO in September 2009.

It gets stranger because Seaport Capital, which acquired Innovation in 2006 and Addanki maintained was the majority owner of the company, was not the majority owner, according to sources close to Lead Confidential. I’ve reached out for comment… Stay tuned.

Since 2002, the lead-gen operation had been serving brands as well as colleges and universities through a multichannel direct response network of more than 600 proprietary and affiliate portals. Innovation also boasted the second largest media-buying capacities in the direct response television.

Lead Confidential comments that in the past Innovation didn’t have the greatest rep with schools, but recently had turned the “quality corner” and was beginning to be seen as a preferred vendor. Notably it was the agency of record for the University of Maryland University College.

(Yes, I thought that sounded redundant too, but we are talking about Maryland — Oh snap! Virginia RULEZ!)





Reader Comments.

Why did their investors pull out funds? Either the investor completely screwed over innovation or innovation was doing something shady and their investors found out. Interesting article, but it would be more interesting if we knew why the IB pulled out… anyone know?

Posted by AN | 2:50 pm on July 7, 2010.

It was the investor. I used to work there and I was let go on July 1st. There were deals on the table to buy innovation ads from seaport, but they were all dropped for one reason or another. When the sister company of IA went under, DRM, the bank did the same thing to them that they did to IA. Sanjaya repeatedly expressed his disdain for the bank, siting that not only were they the most unprofessional and unreasonable bunch he’d ever dealt with, but that what they’re doing borders on a crime. I don’t know if that was a show or not, but he was very steadfast in his opinion of the situation.

Posted by withheld | 2:42 pm on September 22, 2010.

There were deals on the table? All those deals fell apart because the Innovation Ads management team was not being forthright about their actual situation. As for DRM, it was not the bank that hurt them but the taking of money by IA executives, see here http://www.bizjournals.com/twincities/stories/2010/04/05/story8.html?b=1270440000^3132181&s=industry&i=bankruptcies.

It was sure sad to see what was once a powerful company collapse so quickly and leave nearly $2mm in accounts payable to publishers. First they stopped paying their LEC publishers, then co-reg and finally all edu.

Posted by unknown | 5:11 pm on October 10, 2010.

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