The Convex Group Acquires HowStuffWorks Inc.

The Convex Group Acquires HowStuffWorks Inc.

HowStuffWorks Inc. can add another installment to its Web-based library of lessons – how struggling companies with good ideas are sold off quietly.

The Cary-based media company was sold roughly six months ago, sans fanfare. The Convex Group, an Atlanta-based investment company and vulture fund, bought the business for a little more than $1 million, say sources close to the deal. The original investors of HowStuffWorks got a promissory note that could be cashed in if Convex sells HowStuffWorks to another party.

Convex was created by Jeff Arnold, the founder and former chief executive of WebMD, with backing from New York investors. Convex also includes Thomas Tull, who left Durham’s Southeast Interactive Technology Funds last year.

Southeast, it so happens, was an early and major investor in HowStuffWorks, leading a $5.1 million funding round that officially launched HowStuffWorks in January 2000.

Entrepreneur, professor and author Marshall Brain envisioned a media company built around explanations of how various gadgets and scenarios work.

Brain, a former computer science professor at North Carolina State University and co-founder of Raleigh-based Interface Technologies, began in 1998 posting short articles written in the how-to style. The site became a media darling and drew millions of Web surfers.
With venture dollars fueling expansion, the company grew to employ as many as 38 people. The company moved from Centennial Campus to roomier digs in Cary. Venture Partners III, part of the affiliated venture capital arm of Corp., invested.

But the advertising Brain had hoped to attract to the site didn’t pan out. In June 2001, the company filed plans with state securities regulators to raise $2 million through a private stock offering. Brain was serving as chairman and head content developer for the site after stepping down from the CEO’s position. Co-founder and President Marco Fregenal ran the company for a few months before he left early in 2001.

A year ago, the 30-person company trimmed nearly half its staff.

Soon after the layoffs, Dean Jordan, the former president of the Carolina Hurricanes, took the helm. Sources close to the deal say Jordan was brought in to make the company more attractive to purchasers.

The sale surfaced out of talks with The Convex Group. “They seemed to have some things lined up for (HowStuffWorks),” says a source familiar with the transaction.

The original owners get their money only when The Convex Group sells off HowStuffWorks. Tull could not be reached for comment. Jordan has since departed. Now steering the company is Joe Kissack, who could not be reached for comment on the status of the operation, which remains in Cary. Brain, who is involved in the operation and plans a book tour this fall, did not return phone messages.

Company Type: Private Companies

Transasction Type: Buyside M&A

Industry: Consumer, Leisure / Entertainment