Grey-Backed I-Shop on the Brink

New YORK—KPE, an interactive agency backed by Grey, last week was looking to secure a fresh infusion of cash from investors to stay alive, sources said. If the New York-based i-shop can’t attract more funding, it could fold as early as this month, sources said.

KPE counts Grey, Clarion Capital Partners and Wasserstein Ventures as its chief investors. One source said that KPE president and CEO Marc Patricof may be tapping those resources in addition to other outside investors for another round of funding. Patricof did not return calls.

The last-ditch effort comes after the shop suffered a tough third quarter that saw some KPE clients, particularly those in the travel sector, shelve projects after Sept. 11, sources said.

After several rounds of layoffs this year, KPE’s staff has been cut 80 percent to 50 employees. Earlier this year, the i-shop employed 250 and had planned to increase that to 400 by the end of 2001. In 2000, KPE claimed $18 million in revenue.

Recent plans for the interactive agency to move out of the Los Angeles office it shares with Grey were abandoned. Its London outpost will soon be closed, sources said.

Grey, KPE’s seed investor, whose involvement has ranged from laissez-faire to hands on during KPE’s nearly six-year history, has taken a more active role as of late, according to sources. “When business started falling, they took more interest,” one executive said.

Founded in 1996 as Kaufman Patricof Enterprises, the i-shop has focused mainly on media and entertainment work. Its projects over the years have included Oprah.com, Gore 2000, Marvel.com’s X-Men site and Polo.com.