There's something adorable about Nick Grouf, the babyfaced, waggle-eared cofounder of Spot Runner. Who would think he'd be capable of bilking investors out of tens of millions of dollars, as one shareholder charges?

You know when a layoff's really bad? When the CEO calls Valleywag to spin it. Spot Runner's Nick Grouf rang us up to let us know he was laying off 115 of the 385 or so employees at his online-advertising concern, which helps small businesses manage the complicated process of buying TV ads. The cuts follow a round of 50 layoffs in August. Grouf is also moving some key employees from an office in Fremont, Calif., which Spot Runner picked up when it acquired local-search startup Weblistic, to L.A. Grouf says Spot Runner is getting out of the search-ads market and "exploring strategic alternatives" for Weblistic, which is corporatespeak for trying to find a buyer. When he wasn't sounding like a get-out-the-vote robocall, Grouf did a decent job of feigning optimism."I feel really bullish about the business," Grouf tells us. But he was not bullish enough to reveal any numbers — like how much of the $51 million in venture capital Spot Runner raised earlier this year still remains in its bank account, and to what extent he reduced the company's monthly cash burn through these layoffs. He was more forthcoming about Joanne Bradford, the Microsoft executive he hired, briefly, as an executive vice president. She left Spot Runner after less than six months to join Yahoo, which had long been courting her. "Tell me about it," Grouf groused when we brought up Bradford's rapid departure. "After the Yahoo-Microsoft dance was over, they needed to move quickly on their ad sales group, and they made her an offer she couldn't refuse. The shame is we reorganized the business the way she wanted it to run, and she left midstream."

Nick Grouf once told me he started his online-advertising agency, Spot Runner, in Los Angeles, not Silicon Valley, for one reason: The video-production talent he needed to customize television ads en masse was down south. Now, a laid-off employee tells us Spot Runner has axed 100 employees, and is abandoning its original business of helping small businesses buy locally targeted TV ads. (Update: Rosabel Tao, a Spot Runner spokeswoman, says the actual number is 50, about 10 percent of the company's employees.) The startup, which recently made a high-profile hire in Joanne Bradford, a Microsoft media executive, is now focusing on reselling online ads to small businesses, and competing with established agencies to manage TV buys for large brands. Despite the layoffs, the company is hiring — but mostly for search-engine marketing jobs. That leaves Grouf competing in two crowded fields, from the wrong city, with little to distinguish his company. Save, that is, for the inflated expectations of his investors, who have piled $111 million into a vision which has proven wrong. (When asked to explain why he raised $51 million in May, Grouf specifically denied that his company was running short on cash.) Here's the layoff tip:

Having walked away from Yahoo, Microsoft is supposedly eager to buy a passel of online-advertising startups. Los Angeles-based Spot Runner is a natural target; it uses Microsoft technologies, has hired Microsoft executives, and was founded by Nick Grouf, who sold a startup to Microsoft a decade ago. Spot Runner's business, creating and placing ads on hard-to-buy, hard-to-sell cable-TV spots, is an area where Google is not at all entrenched. But we now hear a rumor that Microsoft's board has nixed a $550 million deal for Microsoft to buy Spot Runner. Spot Runner just raised $51 million in venture capital, which makes the price tag seem plausible, if hard for Microsoft to swallow. Why the deal fell apart at such a late stage, and in such an embarrassing way — it's rare for boards to oppose management on deals of this size — are unknown. Heard anything more? Spot us a tip.

Has Nick Grouf, the CEO of advertising startup Spot Runner, spent too much time in Los Angeles? That's the only reason I can think of for his company's investment in 60Frames, an online-video product and distribution startup. It's especially odd that Spot Runner, which only recently raised some venture capital itself, is putting its own investors' dollars into the deal. Grouf recently told me that he missed the Bay Area, that he only located in Spot Runner to make use of the area's video talent to produce his company's library of commercials. But now I'm wondering if he hasn't gone Hollywood for good.