October 25, 2006

Odeo Bought Back From Investors

Michael Arrington

34 comments »

Odeo as we know it is gone. After announcing itself in February 2005, the company raised a $5 million venture financing with Charles River Ventures and a bevy of angel investors. After a private beta period, the company launched in July 2005.

It’s now a little over a year later and Odeo now faces dozens of competitors, including iTunes. Founder Evan Williams has spoken publicly about the company’s mistakes, has shut down one service and has launched another. If anything, Odeo gives every indication of going sideways.

Instead of a dramatic business change along with a new round of financing, Odeo has kicked out its investors and is going it alone. Evan Williams along with Biz Stone and all other current Odeo employees have created a new company called Obvious Corp. This new company has purchased the assets of Odeo, Inc. (including Odeo and Twitter) from the investors and other shareholders. Evan told me “I decided to buy the assets myself and make Odeo and Twitter part of a new entity with a new structure and new model.”

The buyout price is undisclosed, but is presumably a little more than the $5 million in capital the company raised - Evan says it is “enough for the VCs and angel investors to be made whole (i.e., they get their money back), and the common shareholders (including co-founder Noah Glass) to make a modest gain.”

What’s the new Model? Evan says this:

Everyone I know in the web world either works for one of the Internet giants and wants to be in a startup or is in a startup that wants to be bought by an Internet giant. The grass is always greener, of course, but I believe there’s room for a different model for building and running web properties. Obvious will be a kind of product lab, which is something I’ve wanted to do for a long time. There are many details to be figured out, but the general idea is to simply build and launch things that we want to exist in the world, with a high degree of freedom. And to do so cheaply and quickly, with self-organized teams that can leverage each other’s technology, talents, and traffic. Rather than looking to be acquired, we plan to make money from the services and share it with the people who contribute. Occasionally, it may make sense to spin things out into their own entities, which get outside investment, but the company is not an incubator.

Trackbacks/Pings (Trackback URL)

Odeo Acquired by Obvious Corp, Itself - rev2.org

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Comments

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Startups.in/India

October 25th, 2006 at 10:25 pm

“…has purchased purchased the assets of Odeo, Inc.” - looks like he purchased twice

“Occasionally, it may make sense to spin things out into their own entities, which get outside investment, but the company is not an incubator.”

What??? This new model that he described is still kind of hazy. But that apart, Odeo was a neat service.
Kevin Burton

October 25th, 2006 at 10:32 pm

This is interesting…. this is either really good or really bad.

I’ll def be paying attention here.
Obvious ?

October 25th, 2006 at 11:06 pm

Obvious Corp … obviously trying to be 37signals?

From Evan’s blog [regarding the Obvious model]:
“Build things cheaply and rapidly by keeping teams small and self-organized.

Leverage technology, know-how, and infrastructure across products (but brand them separately, so they’re focused and easy to understand)

Use the aggregate attention and user base of the network to gain traction for new services faster than they could gain awareness independently”

Hmmm…
Eric Willis

October 25th, 2006 at 11:13 pm

@poster above:

When did 37signals monopolize those principles? Those were here and implemented before 37 signals and have been done well by numerous companies.
Chris Heuer

October 25th, 2006 at 11:21 pm

This is an awesome move. So glad to see people willing to take the risk of being independent without dreaming of being googled up by the big guys… (I mean gobbled up)
Tom Churm

October 26th, 2006 at 12:03 am

I think there are two strategies to seeking success with new sites and services:

either you pick what you hope is one great idea and run with it…

or you keep throwing a variety of ideas against the wall to find out which ones stick

option two makes more sense to me and is apparently the way Obvious Corp wants to go now.
Wolfgang Kinkel

October 26th, 2006 at 2:10 am

A great approach. I hope he will succeed.
Ben

October 26th, 2006 at 4:41 am

I did at one point use Odeo but then they stopped working, and it became a pain. It was a good concept, and really let anyone have a podcast.
Bosko

October 26th, 2006 at 6:04 am

Why did you tag this DEADPOOL? Odeo is still up and running and I think that Evan Williams’ plan makes a whole lot of sense. 37Signals seems to have been doing something similar, and it appears to be working quite well for them so far. It’s nice to see people building businesses with a willingness and philosophy that extends beyond an exit strategy.
james23

October 26th, 2006 at 6:07 am

I agree with this approach. Although risky, I worry about the web being controlled by a few really rich groups.
Phil Sellers

October 26th, 2006 at 6:33 am

Early funding from outside can be the kiss of death to any start-up. Wise move to keep it internal. There is a real market gap existing between Broadcasting and Podcasting. Now, if only Evan can figure how to digitally simulcast to small groups without radio bandwidth, he’ll really be in the chips.
Hashim

October 26th, 2006 at 8:26 am

Bah. Let Odeo die, and move on to something else.

Now the service is beinig kept alive artificially, with money shuffling back and forth.
Kyle

October 26th, 2006 at 8:27 am

Very cool, how do I apply for a job?
Chris Yeh

October 26th, 2006 at 8:47 am

As someone who has accepted VC funding a number of times, I can tell you from personal experience that taking money makes it much harder to experiment and try different things.

Once you’ve convinced people to hand over millions of dollars to fund one idea, don’t expect them to react well when you tell them that, er, you were wrong about its potential, and that now you want to try something completely different.

The one problem with the self-funded approach is the absence of an outside perspective–we entrepreneurs are overly optimistic by definition and that’s not a good recipe for wise investments.
Patricia

October 26th, 2006 at 10:09 am

I like his idea, how he wants this new company he’s formed to work. It feels kind of Google-esque in the sense that innovation is going to take place under a single house, and it’s nice to hear somebody with a web property that isn’t looking for acquisition as its long term strategy.

I think self funded businesses can do well if you’re somebody who knows the game well. Evan sounds like he’ll do alright, but of course it’s his tail, his cash (not anybody else’s) if he doesn’t and that probably feels pretty good.

Your writing style is great, Michael (”If anything, Odeo gives every indication of going sideways”). Great article.
Vaibhav Domkundwar - Better Labs

October 26th, 2006 at 11:07 am

This is awesome for Evan, and I totally believe in the model and everything he outlined on his blog post about Obvious.

Its funny how I thought, I was reading my own thoughts as I read through his justification, as we have build exactly the same model at Better Labs (http://www.betterlabs.net) since Dec 2005. Most importantly, we have build this completely out of our Pune, India office which bring a lot more scalability for the experiments - what we call as the 12-24 month web service, beyond which the successful ones will thrive as independent companies. dealplumber (http://www.dealplumber.com), indiagoes (http://www.indiagoes.com), iNods (http://www.inods.com) are already in their 1.0 versions.

However, there is a BIG CHALLENGE of how do you follow through after your 1.0 version to drive traffic and customer acquisition, which will make or break this model for everyone who attempts it.

Its re-assuring though, to think someone else who is a lot more accomplished thinks the same.

All the very best to Evan, and his team.
Nick Dynice

October 26th, 2006 at 11:21 am

Hey Evan, you should get with Jaons and David at 37 Signals to write the expanded version of Getting Real. I sure you have a great story to tell regarding how all of this went down, and what lessons can be learned.
Sridhar Vembu

October 26th, 2006 at 11:30 am

This is how we work at Zoho/AdventNet. We have been operating under a similar model, and being private without venture capital has given us tremendous flexibility and operating freedom. That is how a little company that started out with one small product 10 years ago has now evolved to a mid-sized company operating profitably in many different areas. This structure optimizes freedom, speed and flexibility at the expense of “getting rich quick” in a lottery.
Eric Rice

October 26th, 2006 at 11:41 am

(blank look)

I’m turning off the internet this afternoon. Kthx.
Vaibhav Domkundwar - Better Labs

October 26th, 2006 at 11:58 am

Sridhar, what you folks have done with Zoho/AdventNet is really awesome and just the model Evan has talked about.
Alex Williams

October 26th, 2006 at 2:35 pm

I liked the service, send me an odeo. But how do you run with a product like that and make it something that will bring in the revenue required to pay back the investors? Odeo is a company to remember when you look at the podcasting networks trying to make a play. How many others will face such a demise?

Hats off to Evan and his group for being pioneers and playing a part in the development of the podcasting world. I wish them the best as they move into what sounds like an “obvious,” widget lab. :-).
Drama 2.0

October 27th, 2006 at 12:14 am

Smart move. What’s kind of funny is that the Odeo team obviously had the money to finance the business themselves but decided instead to take outside investment. Perhaps to reduce their personal risk? There are a lot of startups that need some sort of outside financing because the founders don’t have a large bank account, but those that can go it alone should, even if the risks to the founders are greater. The control, flexibility and greater level of ownership is worth it. If you’re not willing to take some risk of your own, it probably means you shouldn’t be taking that risk with somebody else’s money.

I don’t know that Odeo has any reasonable shot at success, but kudos to the founders for making this decision instead of taking more money when they recognized the angels and VCs weren’t going to get what they wanted out of their investment. They were very lucky that they were made whole.