My Best Deal was hailed only three months ago as a fast-growing success story on track to serve thousands of buyers and suppliers by the end of this year following its launch eight months ago.
But its website says the service is now "unavailable", though no hint of the strategic change was given in an announcement earlier this week of a new £10 million funding package for Castle View, the Stirlingshire-based mini-conglomerate with sales last year of £77m and profits of £1.5m.
The group, which did not respond to phone calls placed by The Herald, is understood to be now using the system internally to reduce its own procurement costs, after Mr Paterson demonstrated in a presentation that it was about to save the group up to £90,000 on a two-year office contract worth £600,000.
A week later, while on paternity leave, the My Best Deal managing director received a text message inviting him to meet Castle View chief executive Martin Bell at a McDonald's fast food restaurant, where he was told he was no longer required.
Mr Paterson told The Herald: "I was off, enjoying the birth of my new baby boy, and had just proved how fantastic the system was in making massive savings. He told me they were winding up the business and putting me on paid leave, but I wasn't to return to the offices.
"I can honestly say I felt as if I was going to be physically sick."
Mr Paterson, who developed the idea while working in car brokerage, took the My Best Deal name and concept to Castle View in January 2011 and was appointed a director.
He said: "I went in on the basis that they intended to fund the development and invest in the concept over a two to three-year period."
The site used customised software to match buyers with suppliers, which bid against each other for the contract on offer.
In March this year, only four months after launch, My Best Deal reported that it already had a client base of about 250 buyers and several hundred suppliers, and said suppliers were flocking to the service because any squeeze on their margins was being offset by new business opportunities.
It said the reverse auction process was being deployed in business sectors including car leasing, printing, catering and the supply of office furniture and computers.
The biggest opportunity was seen as the business energy market, where the firm was promising to dramatically slash bills across all sectors.
Mr Paterson at the time said energy costs were a constant source of concern for companies, web-based procurement could compete with established energy brokers, and that by using Castle View's firepower the site had already signed up 18 energy suppliers. He went on: "Business needs all the help it can get, but for too long, brokerage fees have been unnecessarily high."
Castle View had estimated earning £200,000 in revenues in the site's first year, from the fees paid by suppliers on completed transactions.
Mr Paterson said yesterday that the business had not been expected to move into profit before three to five years.
He believed Castle View planned to develop the system in its businesses such as Sports & Leisure Management, where it could potentially tap a big customer base in a future development of the service.
He added: "I am looking to start a couple of businesses, and to develop something similar to My Best Deal, though it will be more niche and focused, rather than on the large scale that I was hoping Castle View was going to create."