No Happy Ending at Cloud 9 Interactive

Cloud 9 Interactive, the Marina del Rey-based maker of children’s entertainment software, has shut down operations and is going on the block, the company will announce today.

Cloud 9 President and Chief Executive Debra Streicker-Fine said the firm’s 35 employees were let go last Monday after venture capitalists who had pumped $12 million into the 4-year-old start-up decided to exit the CD-ROM industry. Four larger software developers, including one in Southern California, have expressed interest in buying Cloud 9’s assets for between $2 million and $5 million, Streicker-Fine said.

When investment bankers said a final round of financing for Cloud 9 was taking longer than expected, the venture capital firms decided to cut their losses, she said. Streicker-Fine herself will lose $250,000 in seed capital.

“They lost their faith in the industry,” she said of Cloud 9’s investors--Technology Partners, Innocal, Phoenix Partners, Gabelli Multimedia and SegaSoft.

Cloud 9 released five CD-ROM titles, including “I Can Be an Animal Doctor” and “Marvel Super Heroes Creativity Center,” and five additional titles are ready for market, Streicker-Fine said. The company sold 100,000 units to bring in about $5 million in revenue in the last six months, but profit was still at least a year away, she said.