Small Demons, the Los Angeles-based start-up, has told publishers that it will close later this month unless a buyer comes in for the business.
The company, founded in 2009, had been close to securing a sale to an international tech firm, but said this process had stalled.
Small Demons, headed by chief executive Valla Vakili, cross-references people, places, songs, books, films, food, drink and gadgets mentioned in books, allowing users to make connections between texts, and buy related goods. Last year Random House UK became the first UK publisher to place books onto the service. This year Small Demons embedded links to iTunes and Spotify, meaning readers could download related songs. The company was also looking into how it could integrate with an e-reading and e-commerce service, a development that would have facilitated a sale.
However, in a letter sent to publishers over the past 24 hours, Small Demons said that this acquisition had fallen through. It revealed that it will cease operations on 25th November, unless it can find an alternative buyer. The company had raised more than $2m in funding since its founding, but indicated that the ongoing sale negotiations left it without alternative funding sources.
The news will be a blow to the lively start-up scene that has grown up around publishing in the past half-decade. Both Vakili and vice-president of Content & Community Richard Nash were regulars on the conference circuit and strong advocates for using the content of books as a discovery engine for other books. Nash will speak at FutureBook 2013 on 21st November specifically on the issue of how start-ups can pivot and grow.
In a statement released to The Bookseller, Vakili said: "We started Small Demons believing the worst words a reader can ever hear are, "The End," and we wanted to create a place where stories can never end. While this may be the end for Small Demons, we believe it's only the beginning for this vision of a fully connected universe of books and the worlds they contain."