The white knight who pulled European e-tailer Letsbuyit.com from the brink of bankruptcy at the last minute this week is a convicted hacker turned venture capitalist, a UK newspaper reported Thursday.
The Manchester Guardian reported that a German venture fund that supplied US$2.3 million to Letsbuyit.com this week is led by Kim Schmitz, 27, who was sentenced to four years in prison on computer hacking charges in 1996.
Schmitz had been convicted of breaking into the computer network of AT&T and of using a computer to reduce then-German Chancellor Helmut Kohl’s credit rating, the Guardian said. After turning himself in to authorities, Schmitz served three months probation.
From Hacker to Protector
Like several other former hackers, Schmitz turned his criminal experience into security expertise. He then made millions when he sold his stake in a security company.
He used the proceeds from that sale to found his venture fund, Kimvestor, and also runs an incubator in Germany. Schmitz has committed to participating in future funding for Letsbuyit.com, assuming other investors are willing to chip in as well.
Schmitz said he is now a legitimate businessman “with a white coat,” according to the Guardian.
“I would not invest in something I was not absolutely sure of because I don’t gamble my money,” Schmitz said. “With new management, Letsbuyit can be great again.”
Earlier this month, Letsbuyit took refuge from creditors in a preliminary bankruptcy move that also required the company to suspend activity on its sites, which operate across most of the UK and northern Europe.
Then, earlier this week, Letsbuyit.com said it had found an investor to provide some of the money it needed to stave off further proceedings.
The funds from Schmitz are unlikely to solve all of Letsbuyit’s problems, however. The company’s management has come under fire from its board of directors and continues to burn cash rapidly, according to analysts.
“We are clearly in a tough phase of our business,” newly installed Letsbuyit.com chief executive officer John Palmer said. “But based on last year’s strong results and ongoing investor support, the new management is confident to be able to resume operations with a refreshed and strengthened company.”
Formula Tried in U.S.
Letsbuyit.com is based on similar technology and the same business model as U.S.-based Mercata.com.
Mercata, cited as the next Internet “revolution” when it was founded with the backing of Microsoft co-founder Paul Allen, pulled the plug on a $100 million IPO in early January and said it would go out of business at the end of the month.
Letsbuyit.com was founded in Sweden in 1999 and quickly opened sites in multiple languages in Italy, Spain, France, Ireland, Finland, Switzerland and other countries. The company says that it now has 1.17 million members across Europe and that the number of members buying during the second half of 2000 was double that of a year earlier.