Realtime Worlds was a promising game studio that probably got its hands on too much money. The Dundee, Scotland-based  company filed for administration, or bankruptcy protection, after raising more than $100 million. It’s a sad end to a nine-year journey for one of the video game industry’s pioneering creators, David Jones, the creator of Grand Theft Auto.

The company’s backers included New Enterprise Associates, CIM Fund, Maverick Capital, and WPP. The lesson for those companies is the old saying that it’s hard to pick the hits. This is a big smoking crater. VCs will probably point to this example the next time a game developer comes to them and asks for funding for a traditional online game studio.

The nail in the company’s coffin was All Points Bulletin, a Grand Theft Auto-style massively multiplayer online game published on June 29 by Electronic Arts. The game sold a reported 10,000 copies after two months and was universally panned by critics. It got an average 58 out of 100 review score on Metacritic, which aggregates reviews. In concept, it wasn’t such a bad idea from the mind of Jones.

Realtime Worlds had previously created Crackdown, a futuristic cops-and-robbers game that took place in an open world urban environment. It was like Grand Theft Auto, but with more of a comic-book style artistry. Propelled by that success, the company built its staff to more than 250 employees and created a publishing alliance with Electronic Arts. It’s scary to think that the company worked on All Points Bulletin for more than five years and only found out now that nobody wanted to play it.

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Because that game was so ambitious, Realtime Worlds had all its eggs in one basket. By contrast, it’s a lot less risky to pour money into mobile game companies or social game companies that launch games on Facebook. Part of the problem was that the game took so long to develop that the game industry had changed in the meantime. Lots of gamers are enjoying free-to-play games, where they play for free but pay real money for virtual goods. Only a few big games, such as World of Warcraft, are healthy enough to command regular subscription fees.

Still, the failure is surprising because of the company’s pedigree. Jones founded the company in 2002 and recruited many of the employees from Rage Software. They raised $30 million from NEA in 2006 and published Crackdown (via Microsoft) in 2007. Crackdown drew lots of accolades and was a commercial success. Work then began on All Points Bulletin. The company raised another $50 million in February, 2008.

But trouble signs appeared. The game’s launch date never materialized. Gary Dale, former chief operating officer at Take-Two Interactive, became CEO of Realtime Worlds in April, 2009. He replaced Jones, who became creative director. The company raised a last $21 million round in January, 2010, bringing the total raised to $101 million. All the while, Realtime Worlds was working on an interesting virtual world platform that was like a mirror of the real world. After All Points Bulletin bombed, Realtime Worlds cut its work force. This week, just six weeks after the release of All Points Bulletin, the company filed for bankruptcy, laid off much of its work force, and closed its office in Boulder, Colo.

While the company makes its way through bankruptcy proceedings, it plans to maintain All Points Bulletin. Meanwhile, a bunch of game companies are now recruiting Realtime Worlds’ employees.