Why did Poptent go broke?

Poptent new office space in Pjiladelphia
Poptent’s Philadelphia office

Poptent owes a lot of people a lot of money.  One former employee told me that the company has failed to pay filmmakers more than half a million dollars in prize money.  On top of that, Poptent also owes many of their employees some back pay and commissions.  So where did all the money go?  The employee I talked to said that Poptent’s management blew it on pointless and frivolous things.  He said that the company expanded way too fast, hired way too many people and then in 2014 they made an unnecessary move from the suburbs to downtown Philadelphia.  The company didn’t have enough money to actually pay for all this stuff so the bosses started spending the money they were getting from their clients.  But a lot of that cash was supposed to be earmarked for  filmmakers.  So the prize money from Contest A went to payroll and then the money from Contest B went to pay the winners of Contest A.  Then the money from Contest C went to pay the rent on their office space and the money from Contest D went to pay the winners of Contest B.  (Sounds a little like a Ponzi scheme, doesn’t it?)  The whole ugly system fell apart once the team at Poptent started planning their merger with Vizy.  The sales team stopped booking new commercial contests which means the flow of cash dried up.  From what I’ve heard, Poptent was supposed to get a big infusion from some investors but that deal fell through.  And that’s one reason why Userfarm decided to kill their merger with Poptent and dissolve Vizy.  Poptent wasn’t really able to bring anything to the table except their employees and their debt so I’m not really surprised that the Userfarm team ran from Poptent as fast as they could.

I used to be a big fan of Poptent so it’s been incredibly disappointing to watch the company fall apart over the last 5 years.  I agree 100% with the ex-employee I talked to; Poptent went broke because of bad management.  Since 2010 I have watched the bosses over there make one dumb decision after another.

Poptent's ex-CEO Nick Pahade
Poptent’s ex-CEO Nick Pahade

But things really started to go downhill in 2013 when the founder and CEO of Poptent, Rick Parhill retired and a so-called “digital guru” named Nick Pahade joined the company and became CEO.  Under Pahade’s reign, the Poptent staff spent money like they were a white hot tech firm.  But a website that runs two or three public commercial contests a month shouldn’t have a huge staff and offices around the country.  To me it seemed like Poptent could have been run out of somebody’s living room.  (I’m picturing Erlich’s Incubator house from Silicon Valley.)  The company also changed their business model and started focusing on private commercial contests rather than public ones.  This caused a massive brain drain because a lot of filmmakers quit the site in frustration once they realized there was no room for them in these new VIP-only contests.  But I guess Poptent’s biggest mistake off all was the merger with Userfarm.  And it sounds like that decision was Pahade’s too.  If Poptent had just scaled back their staff and their facilities and kept running the types of contests they had always run, they probably would have survived long enough to get a new round of funding from a new venture capital firm.  But instead the bosses went for a ridiculous hail mary merger and so now the company is essentially dead.

But don’t worry about Nick Pahade.  He’ll be just fine.  He was the Chairman and CEO of Vizy until the merger fell apart.  Once that happened Pahade was able to just walk away.  Sure, dozens of filmmakers are probably going to get screwed out of hundreds of thousands of dollars because of his actions as CEO but he’s not with Poptent or Vizy anymore so he’s not responsible for any of the company’s debts.