"As costs rise and the advertising market for newspapers generally tightens, keeping the Sun alive and moving it toward self-sufficiency will require broadening the base of investors beyond the original group," Lipsky's letter said.
The small paper's investors are willing to infuse more capital, he said, and talks with other newspaper owners and investors about "possible combinations or investment relationships" will continue.
Lipsky said in an interview Wednesday night he was hopeful, but there's no guarantee of rescue for the paper, whose losses he called "substantial." He declined to be more specific.
"I wouldn't interpret this as doom, yet, for the paper," he said. "We're all working very hard to make it a success, but I felt it was time to let people know that we're in a challenging moment here."
The paper's investors included Canadian newspaper baron Conrad Black and several prominent New Yorkers with deep pockets.
Estimates of the initial investment ran from $20 million to $25 million.
Black is serving a 6½-year prison sentence for swindling shareholders of the former Hollinger International media empire.
Lipsky said the Sun was losing money despite increases in print advertising revenues the last three years.
The Sun was founded in October 2001 and began publishing daily in April 2002, with the goal of adding what Lipsky has called a "center-right" voice to the crowded media market in the nation's biggest city.
It adopted the name of a paper that began publishing in September 1833 and went out of business in January 1950.
The original New York Sun was perhaps best known for its "Yes, Virginia, there is a Santa Claus" editorial - its response to an 1897 letter from an 8-year-old girl asking if Santa was real.
When the current Sun launched with an initial press run of 75,000, industry analyst John Morton, of the Maryland-based Morton Research Co., called its chances of survival "pretty grim."
The paper currently distributes about 70,000 copies per day, Lipsky said. It has about 110 full-time staffers.
