During a shakeout of Internet start-ups, one of Buffalo's fledgling dot-coms has won a multimillion-dollar reprieve.
Chek.com in Buffalo has merged with a California company in a deal that gives it $10 million in new capital -- enough to fuel the business until it reaches profitability, officers said.
"Other companies are running out of money and suddenly we're very well funded," said George Chamoun, co-founder of Chek. "We've got a huge opportunity."
However, the combined company is cutting 35 jobs -- 22 of them in Buffalo -- as it focuses on revenue-generating business, Chamoun said. After the cutback, the combined company has about 70 full-time workers, 50 of them in Buffalo.
A provider of Web-based e-mail, Chek has combined with MyPersonal.com of San Francisco, a builder of Web "portals" for alumni associations and other groups. The Buffalo News reported talks between the companies in December.
The merged company -- as yet unnamed -- plans to keep both its Buffalo and West Coast locations as it sells Web-mail and other services to client companies.
"Buffalo is a great place to hire engineers and customer service (representatives)," Chamoun said, while San Francisco is the place for finding industry partners.
Two West Coast venture funds invested $8 million in the new company. The remaining $2 million in fresh capital comes from Chek's Buffalo-area backers.
The moves mark a maturing of the company that was founded by University at Buffalo graduates in their 20s.
Jordan Levy, managing partner of Seed Capital Partners in Buffalo, will join the board of directors. In addition, an experienced manager will be hired as chief executive officer for the combined company. Chamoun will become chairman of the board.
Chek will stop pushing ad-supported Web-mail services, a primary focus since it was founded in 1997. Many of the job cuts are related to the ad-supported business, Chamoun said.
Instead it will focus on fee-for-service business with Internet on-ramp companies, small businesses and other clients. Internet service providers, for example, often outsource the Web e-mail service they provide to subscribers. Such services generate sales anywhere from 25 cents to $10 a month per user, depending on the level of service, Chamoun said.
"There are companies that will pay for these (Web) services," he said. "This is a multibillion-dollar industry."
Chek and MyPersonal have a combined user base of 8 million people, according to a statement. Chek hopes to recruit existing ad-supported clients to its fee-for-service business as their contracts expire.
The announcement comes the same day as Critical Path, a top competitor in the Web-mail market, stunned Wall Street by suspending two top officers and investigating past accounting practices.
The trouble at Critical Path may help Chek gain share in the market for Web-based e-mail, calendar and contact management services, known as "messaging" services in the industry, Chamoun said.