Trutap decimates headcount, keeps skeleton staff, looks for sale

Trutap, a leading UK mobile startup, is to let go almost 80% of its staff after failing to hit its window for a second round of funding. The blow comes only a month after the launch of its latest software application for aggregating social networks on the mobile, the milestone of over 250,000 users and the launch of a revenue-raising advertising platform.

Trutap is headed-up by co-founder, CEO and Chairman Doug Richard, best known as a former Dragon on the BBC’s Dragon’s Den programme. Although the company is not commenting officially on the moves, a reliable source told TechCrunch UK that the company was “cutting back and aiming to keep the service running with a skeleton staff to reduce the burn and keep the service live”. That will mean keeping on around 4-5 staff out of the original 30 to keep the application available while the company looks for a sale or new investment.

I understand there are a couple of potential investors still interested, and one might be an acquisition. But there are of course no guarantees in the current climate.

Trutap had been doing the rounds of investment houses looking for £2-4m in a second round of funding, after securing initial investment in 2006 from private equity house Tudor Ventures, a hedge fund, believed to be in the vicinity of $5m. But it became an “orphan startup” when Tudor withdrew from the investment market after the global financial crisis.

It’s bad timing for the actual application itself (see video below). Version 2 of Trutap’s software now supports a host of IM protocols, accessible from within a pretty slick Java app which runs on hundreds of handset models, especially in emerging markets like Brazil and Russia.

Trutap, the free mobile social network – video demo from Trutap on Vimeo.

Since the new version 70% of users have updated their status and location and overall usage is on the up. Trutap also recently launched their “Hornet” content platform that allows for advertising and channel sponsorship revenues. There are also plans for a virtual currency with “digital-gifting” which were slated for mid-next year.

Currently Trutap – a TechCrunch40 finalist from 2007 – is the only mobile social networking app on the Sony Ericsson download store, and it had other handset distribution deals about to go live; a distribution deal with a “major” mobile content aggregator; and it was one of first apps on the Eplus German mobile network which does not charge for data use.

Yup, it’s bad timing.

However, Trutap may also be a victim of the perfect storm of a down market, a competitive mobile environment and mobile operators’ slowness to embrace social networks out of fear it will impact their business. Competitors to Trutap include Fring, which recently launched an iPhone app and opened an API to developers, but Trutap also competes on different levels with startups like Mig33, Nimbuzz and MXit in South Africa. There is also Google of course, which is increasing it’s hegemony to the mobile world.

UPDATE: If you are a former Trutap employee, put yourself on CrunchBase and I’ll add your profile to this post. It may help you find more work…