Is The Eclipse Coming for SunRocket?

While I may be in France planning my wedding parties and enjoying the wine of the Languedoc, as well as the great fellowship of friends, I have not been ignoring the story that pal Om ignited over the weekend about SunRocket. Usually stories like this tend to get put out by outreach from the company in question, but instead I’ve been hearing almost non-stop from their employees (or former employees), some folks who have seen the pitch deck, partners, corporate development professionals and others all of whom are not painting a pretty picture. In some cases, this is only affirming things that others in the media and blogosphere have been pursuing for some time in the way of a story.

The problem it seems surrounds some key issues.

1) Leadership–most express little confidence in the current leadership that’s now left. Since I have never spoken to the current CEO, nor do I know much about her, I won’t comment one way of the other.

2) The way the balance sheet is built. It seems the model of selling services in advance and collecting all the money upfront creates a liability, much like a gift card does for a retailer. The cash paid is on the liability side of the ledger until it has been delivered. This creates a very tough funding option as the customer is only meaningful to the company if they renew. Fortunately most Sun Rocket customers who have commented to me and elsewhere seem happy so renewals could be strong, but one never knows as the cable guys are cleaning up and most middle Americans don’t see the cable company going out of business. This sounds like a big problem to me.

3) They are/were burning cash very fast, which is why they cut so many high level staff members, including a very strong product team in San Diego. This is raising concerns that if the business cannot remain a going concern that the liability created by the advance purchase may become a board liability. Maybe a lawyer can tell us if this is fraud or negligence if SR crashes and burns and service is never delivered.

4) They may only have enough cash to make it through the month.

5) They have shopped the business to VC’s and other players in the VoIP space hoping to find a suitor. Apparently they hit a speed bump with a big investor they had been wooing. Others have likely passed with the balance sheet being the first, but not the only issue.

6) The very qualified Rob Chandhok and his San Diego product team got short end in the deal. A guy like him had a lot of choices where to go after leaving Qualcomm. He’s very talented say my Q friends and what’s more other mutual folks we both know give him high marks. Comments sent to me about him and the reasons cited internally when he was cut are likely management led comments to justify things, but since management is not talking, what’s to know.

I’ll continue to monitor this as time permits…and of course will keep you posted.