ANALYSIS UPDATE: Which way for First Tuesday?

First Tuesday CEO Reade Fahs will only confirm that talks are continuing, with the city leaders as one of the bidders: “Our city leaders have come together and said ‘gosh, we think this is a valuable entity and we want to have a shot at owning it ourselves - we put so much of our heart and soul into it', and we're having discussions with them and with other people.”

There's no deadline by which a deal must be reached, he adds: “There is no gun to the head but I'm thinking things are going to happen fairly soon - they're not going to drag on into the late Spring.”

The CEO of First Tuesday Zurich, Susan Kish, who is part of the group that has submitted the offer, which is reported to comprise an upfront sum of $1m to $2m plus a revenue share, on behalf of the city leaders, confirms that: “We're talking - and I'm an optimist.”

However, beneath the surface calm lurk tensions. Many among the regional caucuses are disgruntled, partly because they believe that their work at a local level has created the real value in the network, and also because they were not consulted about the sale last summer to Yazam. Of the four First Tuesday founders, only Julie Meyer voted against the Yazam deal.

While Yazam has a claim to the ‘First Tuesday' name, agrees Bill Daring, director of First Tuesday North, neither its acquisition of the networking group nor the current negotiations have made a great deal of difference for the regions. “As far as we're concerned the First Tuesday networks never actually sold anything to Yazam,” he says. “We've been independent, we've never had funding from them.”

A further problem, say sources close to the network, is its sheer size. There are more than 100 city groups operating under the First Tuesday umbrella, each with its own approach and priorities, with the result that trying to make it work cohesively can, says the source, be “like herding cats”.

A first offer from the city leaders has been turned down, according to sources close to First Tuesday, but they say it would be messy or unworkable if Yazam sold First Tuesday to anyone other than the regions.

Of course, while Yazam may not recoup the investment that it made when it acquired First Tuesday last July, it's unlikely that the loss will be as painful as some expect. Although it was widely reported that the Yazam acquisition valued First Tuesday at $50m, an inside source says that in fact Yazam probably spent a sum closer to $6m-$7m, with an outlay of a further $3m-$4m over the past six months in order to keep the networking group going.

However, a major problem is that, if negotiations break down, there would be little to stop the regions from doing their own thing - perhaps relaunching under a slightly different name and rebuilding their databases.

The fragility of the situation also raises questions about where the value of the First Tuesday operation lies. How can it be transformed into a successful commercial operation, rather than the cash-burn it has been for Yazam?

Kish admits: “One of the most important challenges we have going forward is to diversify our business model [and] revenue streams.”

Yazam's idea was to use First Tuesday to source investment plans from around the world, but the market has since changed dramatically - although one could argue that it had already done so by the time of the Yazam deal in July last year.

Fahs says: “Yazam is in the process of deciding the right way to morph its business model … when they bought First Tuesday it was very much about global reach and pulling in business plans from around the world [but now] they're saying ‘I don't think we need these plans pooled from all over the world'.”

The company's value lies in its “unique” ability to pull together people across the industry on a global basis, says Fahs, who said of last week's ‘Wireless Wednesday' event in central London: “Look at tonight, when Ericsson wants to reach a global audience, who do they talk to? Tonight in 20 cities around the world, 10,000 people are coming together in environments like this… No-one else can give you that sort of global physical reach on a monthly basis.

“Deep down we're a database company … there aren't many people right now who can go to a potential sponsor and say ‘who is it that you want to talk to? Who is it that you want to meet?' We have hundreds of thousands of people who will open our emails … and I think that we will become the most efficient way to get in touch with specific groups of people on both a local and a global basis. Revenues will come from helping sponsors to tap into the database in a way that provides very relevant information to individuals whom are their local constituency.”

For Daring, the key issue is how to attract audiences and create a solid commercial foundation for First Tuesday North. With this in mind the network, which has 6,000 members and typically has a turnout of about 500 at its events in Manchester, Leeds, Newcastle and Sheffield, is to relaunch in March with a new programme of events and packages for potential sponsors and partners.

Daring says: “As far as First Tuesday North is concerned we're trying to reposition ourselves - ‘dotcom' is really struggling so we're going for ‘dotcorp'.”

And the longer it takes First Tuesday 'central' to reach a deal, the more likely it must be that the network may fragment, as regions sidestep the central body and launch their own initiatives.