Founder dead set on reviving Red Herring

BY DAVID SPEAKMAN

Red Herring may be officially dead, but its founder has no intention of letting the defunct magazine rest in peace.

The last of the Bay Area-based national business technology magazines ceased publication after its parent company, Red Herring Communications Inc., filed for bankruptcy as its last issue hit newsstands in late February.

San Mateo-born Tony Perkins founded the San Fransico-based magazine with his brother Michael a decade ago.

Named after the red-lettered prospectus sheets for young companies planning an initial public offering, the magazine was profitable for its first seven years. Then it slowly withered as technology ad dollars dried up.

“Ultimately we’re going to revive it,” Perkins says.

He may have some hard bargaining ahead to regain control of the magazine, which is tied up in bankruptcy.

“He washed out his Red Herring venture investors,” says media consultant Mitch Ratcliffe, CEO of Tacoma, Wash.-based Internet/Media Strategies Inc. “Whatever decision is made about the purchase of the name ‘Red Herring’ and the archives of the old publication would probably have to go through the bankruptcy court.”

Ratcliffe speculates that since Perkins left investors sitting on the losses, the court would ask him to negotiate directly with the largest investors for the name.

In the 10 years Red Herring was published, it raised about $40 million in venture funding, with Foster City-based venture firm Broadview Capital Partners LLC emerging as the largest stockholder in the publication.

“Unless they did something really egregious, I can’t think of a reason not to sell a closed company’s assets back to its founders,” says Sharon Wienbar, a director at BA Venture Partners in Foster City.

BA Venture also has had companies in its portfolio fail and sell assets back to the founders at a loss.

“It’s good karma if nothing else,” she says, explaining that a VC has an added incentive to get a failed startup out of bankruptcy so it can write off the losses on its taxes.

Perkins didn’t explain how he plans to finance a Red Herring buy back or ressurection. Broadview would not comment.

“[Perkins] is going to pay pennies on the dollar in any case,” says Internet/Media’s Ratcliffe.

Still, in a year challenging all advertising-dependent media, 2003 may not be the best year to resurrect a dead magazine.

“The advertising market has been terrible for the last 28 to 32 months, depending on which publication you are at,” Ratcliffe says.

Acknowledging that, Perkins says he plans to wait until after the war in Iraq winds down and the tech economy show signs of life before relaunching Red Herring.

“When? I really can’t say at this point, but over the next couple of weeks, you may hear some announcements about the revival,” he says.

Ratcliffe says the dusted-off magazine better not look much like the old Red Herring.

“Upside, Red Herring, The Industry Standard and all the other business magazines that came out of the Bay Area were a product of not just the Internet bubble, but the tech explosion of the late 1980s,” Ratcliffe says. “It’s not surprising that we should hit a time when the advertising market is severely depressed.”

According to figures from New York-based Magazine Publishers of America, the economy already is perking up for most magazines. Total magazine advertising revenue for March 2003 was up 11.6 percent from last year to $1.6 billion, the MPA says.

But tech advertising was an exception. It fell 6.7 percent to $92.2 million in March, according to MPA figures. That fall hurt magazines like Red Herring, which saw year-on-year advertising billing fall 19.6 percent to slightly more than $1 million for its last issue.

But Ratcliffe says there is still a market for a national technology business magazine and that Red Herring should learn a lesson from the publications that have withstood the test of time.

“Forbes and Fortune are not in trouble,” he says. “The reason they survived is that they are about building and running a business over the long term. Red Herring and Upside, on the other hand, were about getting rich as fast as you possibly could.”

Regardless, Tony Perkins remains a cheerleader for Silicon Valley’s entrepreneurs.

“I think this is the Athens of the Information age,” he says. “I think it is a good process to take pride in exporting entrepreneurial capitalism around the world.”

Perkins says although he is committed to bringing Red Herring back, he doesn’t plan to be as hands-on as he was 10 years ago.

“Will I spend most of my time this year planning another magazine? Probably not,” he says. “I will be involved in the relaunch of Red Herring and will enjoy that, but I will spend most of my time further exploring the Internet and the Web because I think this is an incredibly exciting time to be focused on that.”