HotU files for bankruptcy
By Andrew Gomes
Advertiser Staff Writer
The core operating unit of Hawai'i-based online recruiting software business HotU has filed for bankruptcy protection, citing the downturn in the national job market.
HotU Inc., which provides career fair management software to universities, said it submitted the Chapter 11 filing Thursday to reposition operations that allow students at about 40 schools to explore job prospects through on-campus career centers using the company's software.
"As fewer and fewer employers came on campus to recruit, our revenues got smaller," said HotU President Cathy Owen, who added that the company — one of three businesses under the HotU name — will continue operating and servicing clients while restructuring.
The two separate but affiliated HotU operating units — HotU Development Co. LLC and HotU Technology Co. LLC — are not part of the bankruptcy, Owen said.
The two affiliates were created in December 2001 to license HotU online chat technology to universities and to sell online, or virtual, career fair products and recruiting software to companies.
In the bankruptcy petition, HotU Inc. estimated its debt at $100,000 to $500,000 in contrast with $1 million to $10 million in assets.
Owen declined to disclose HotU Inc. revenues, but said the business should be generating positive cash flow by the end of the year after some product and strategy changes, including possible international expansion.
"We're getting momentum now and our future overall looks bright," she said. "We do view this in a positive light."
HotU Inc.'s financial difficulty is the latest in a series of dramatic ups and downs for the company as well as the state's high-tech industry.
The company was formed at the peak of the high-tech investment bubble in early 2000 by Walter Roth, a Punahou School graduate who created the software for HotU while attending the University of Wisconsin at Madison.
The company over two years grew from three employees to 34, and moved from the state-run Manoa Innovation Center incubator to the downtown high-rise Harbor Court using $10.8 million in investment from venture capitalists led by Ron Higgins, a fellow Punahou alumnus who founded local high-tech startup success Digital Island.
But over the past two years, HotU reduced its staff from 34 to 12 as it largely subsisted on its seed money.
Roth left the company as a director and chief executive officer early last year shortly before the resignation of Laurie Foster, another Punahou graduate who had been HotU president.
Owen, who has been with HotU since early 2001 and has 21 years of experience at IBM, said HotU is no longer a development-stage startup, and is relying on operating income to sustain growth.
"It's not that we need a significant infusion of working capital," she said.
Bill Richardson, a general partner of HMS Hawai'i, a venture-capital firm that has invested in several local startups including HotU, said HotU's stumbling is part of what has happened globally with many inherently risky technology development ventures.
"It entered at the market peak when Internet hype was as high as you can get," he said. "It's unfortunate that the company has gotten into this situation ... but as a testament of the strength of management, it's still around."
Other Hawai'i high-tech startups have faltered over the past two years, but Richardson said investments continue to flow into local technology firms.
Companies recently receiving venture-capital money include wireless Internet equipment maker Landmark Technologies, and AssistGuide, an Internet service provider for long-term healthcare companies.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
