Venture capital

Center City’s CloudMine, $6M in debt, files for bankruptcy

The venture-backed company laid off 11 staffers last Wednesday after defaulting on a $1.8 million loan from Comerica Bank. Here's why the shutdown has a ripple effect beyond Philly.

Inside CloudMine's Center City office. (Photo by Juliana Reyes)
Last Wednesday, the saga of health IT startup CloudMine — founded in 2011 and backed by a long list of local investors — came to a disappointing finale as its remaining 11 staffers were laid off.

Earlier this year, the company had let go of a third of its workforce citing a shift in market demands, but this time the news was really bad: After defaulting on a $1.8 million loan from Comerica Bank, the venture-backed company saw its operating accounts wiped clean by the Dallas-based bank.

On Monday afternoon, it filed for bankruptcy.

“The company’s Board of Directors reached this decision following recent actions taken by the company’s senior secured lender and the inability of the company to close funding through alternative sources,” read an official statement from the company, signed by its attorney Jeff Kurtzman.

Kurtzman told that employees were given severance “in accordance with company policy,” and that the company’s total debt was approximately $6.2 million.

To date, the company — makers of a HIPAA-compliant data platform for the healthcare sector — had raised over $16.5 million in venture capital from a who’s who in Philly investors, starting with selloff-mode VC firm Safeguard Scientifics, which owned about a third of the company.

Other local backers include MentorTech Ventures, DreamIt Ventures, DeSimone Group Investments, Ben Franklin Technology Partners, Mid-Atlantic Angel Group and Robin Hood Ventures.

Former CEO Steve Wray, who was appointed in June of last year, said he also departed the company as part of the bankruptcy proceedings. He declined to comment as a representative of the company.

“On a personal note, I can speak about my respect for the level of this team,” Wray said. “[They’re] truly talented individuals.”

Statement from CloudMine regarding its Chapter 7 filing. (Screenshot) screenshot of statement: loudMine, a Philadelphia-based provider of cloud platform services, has initiated a Chapter 7bankruptcy filing

Statement from CloudMine regarding its Chapter 7 filing. (Screenshot)

Wray, who oversaw CloudMine’s decision to shrink the workforce last April, cited shifts in the healthcare ecosystem as one of the determining factors.

“Despite the difficulty of today’s decision in terms of implementing the layoffs, our mission is rock solid,” he said then. “We believe healthcare is dysfunctional and disconnected. We’re committed to a future state where healthcare is digitally driven.”

When it was founded seven years ago, CloudMine was part of a cadre of rising startups based out of now-shuttered coworking space Venturef0rth in Callowhill. In 2012, it shifted its focus from mobile app backend solution to target enterprise businesses. In 2016, it narrowed the scope again to more closely target companies in healthcare.

Founder Brendan McCorkle, now onto his second startup TrekIT Health, did not immediately respond to a request for comment.

Because of its swiftness, CloudMine’s shutdown will have ripples beyond Philly.

In an email sent to customers on Monday, the company gave users “a limited period of time” to migrate their applications from the CloudMine infrastructure to a new provider. After that, the data will be wiped clean.

“We recognize that this notification will require planning and migration activities on the part of the company’s customers,” the email read. “Customers should initiate these activities as soon as possible.”

Behrad Bagheri, a machine learning engineer based out of Berkeley, Calif. who builds apps for the healthcare sector, told that migrating apps from cloud vendors is no simple task.

“Anybody who wants to start now is gonna [require] a lot of work to refactor all their code toward a new vendor,” the engineer said. “It’s not easy to find a new vendor overnight. It takes days or weeks to evaluate other vendors and find one that is more suitable. Then starts all the price negotiations and contracting.”

As part of the Chapter 7 filing, oversight of the company will transfer to a trustee, who will be appointed over the next three days.

Companies: CloudMine

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