Colorado vNet Approaches Shut-Down [Update: Russound Acquires vNet]

UPDATE: Colorado vNet was acquired by Russound in October 2009, and continues to operate from its Loveland, Colo. office.

Colorado vNet seems to be going out of business. Founder and CEO Bill Beierwaltes tells CE Pro that a would-be investor failed to meet its commitment to Colorado vNet, forcing the company to close its doors.

Still, Beierwaltes says two parties are "very interested" in saving the company. He should know in a few days if one of them will come through.

In the meantime, however, manufacturers' reps are informing dealers that vNet is closing down.

"We are ramping our business down," one rep told me. He is telling dealers that the company will fill any open orders.

Meanwhile, the outgoing message on the company's main phone number in Loveland, Colo., is this:

We are in the process of discontinuing operations. Therefore, there is no longer free technical support service. If you require technical support, please leave a message and someone will be in contact to arrange for paid support.

Orders are still welcomed via the Colorado vNet Web site, the message explains.

Colorado vNet Background

Founded in 2002, Colorado vNet came to market with a new approach to hardwired lighting control. That was followed by multiroom audio, whole-house control, ZigBee wireless lighting controls and media servers.

In May of this year, Colorado vNet said it secured private funding, one month after the company had reported double digit growth for Q1 2009.

Earlier this month, vNet had several new product announcements and a sizable booth at CEDIA Expo 2009, but smaller than in previous years. The company chose instead to launch a 60-city product and training show, plus a lead-generation program for dealers.

All of that was possible despite dwindling reserves because vNet expected new funding to come through, according to Beierwaltes.

"We had a commitment for funding moving forward," he says, but that commitment fell through.

An emotional Beierwaltes says, "When you have to deliver a message like that to employees … I feel crappy."

What about the subsidies from Loveland?

vNet made headlines in February 2008, when the up-and-comer was offered $500,000 to stay in Loveland, Colo., and to relocate its manufacturing plant there. As part of the agreement, the city also waived $10,000 in taxes and fees.

vNet would get a bonus of $195,000 if it employed 350 full-time employees by the end of 2011. In 2008, at the time of the deal, Colorado vNet employed 81 people, with a payroll of about $6.2 million. Beierwaltes declined to comment on current numbers

According to the terms of the contract, vNet would be obligated to repay the city if it did not reach certain milestones. Thankful for the city's faith in vNet, Beierwaltes says he would be heartbroken if he could not repay the full amount of Loveland's contributions.

"I do not want to leave them in the lurch," he says, adding that he hopes Loveland will be able to offer similar opportunities for other organizations.

Colorado vNet Dealers

According to Beierwaltes Colorado vNet has trained and certified about 950 dealers.

During a recent CE Pro solicitation to dealers asking for input on multiroom audio systems, 22 dealers emailed us with praise for vNet's Vibe audio system. Except for SpeakerCraft, no other vendor came close to that number of responses.

The responses may be due either to vNet's sway with its dealers, or the dealers' genuine appreciation for the product -- either of which reflects well on the company.

Even so, many of these dealers will be stuck with installed systems that may become obsolete or non-functioning without a last reprieve for vNet.

Beierwaltes confirms that free tech support is no longer available, and the fees for support are "just to cover the expenses of the techs."

If they don't pull through, vNet is unlikely to file for Chapter 11. "That implies you have funds," he says. If anything, he adds, Chapter 7 would be more appropriate.

He still holds out for a last-minute savior, though: "It's not necessarily over."

UPDATE: Colorado vNet was acquired by Russound in October 2009, and continues to operate from its Loveland, Colo. office.