After negotiating over the past few weeks with Microsoft and signing a letter of intent to be acquired, e-mail startup Xobni has walked from the deal, according to a source close to the negotiations. The deal would have been a natural for Microsoft, which was offering to buy the two-year old startup for somewhere in the $20-million range. (The company has raised less than $5 million so far in venture capital from Khosla Ventures, Atomico, First Round Capital, Ron Conway, and Y Combinator).
But the deeper that Xobni got into the discussions, the less comfortable it felt about its eventual fate inside the Microsoft machine. The fear was that Xobni would end up nothing more than a feature of Outlook. Microsoft wanted the entire team to move up to Redmond, and was vague in its answers about what it had planned for that team, or the product. In the end, the body language just wasn’t there.
Xobni offers a plug-in for Outlook that makes it smarter and easier to use by giving you handy stats in a sidebar and showing you how your contacts are connected to each other. But the company has greater aspirations than to become a feature of Outlook, as its internal integration with Yahoo Mail suggests. The service is still in private beta, and is approaching 50,000 registered users.
Was Xobni crazy to walk away, or did it make the right move in the long run?
- Hell, yes! Are they crazy?
- No, they will be worth a lot more a year from now.
Total Votes: 4313
Started: April 30, 2008
Now Microsoft will go on its own and make it’s own version of the whatever Xobni was doing. You either go the Redmond way or the highway.
Microsoft is not doing so hot in the market of acquiring companies right now. First Yahoo!, now this?
Yes pretty dumb. Microsoft can always copy all their features. And hey they could have worked at microsoft for a few years, taken their money and went on to start something else
Countdown till Microsoft sends them a cease and desist based on some obscure clause in the Outlook EULA?
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I hate Microsoft and as much as it would suck to sell out to them I think that this might have been the best bet for Xobni. Only because I don’t see other mail services needing what they provide much more than Outlook needed them…
life is too short to move to Redmond and work for MSFT. No amount of lucre is worth that fate.
Good job on being dumb.
“The body language wasn’t there”?
WTF? Another Y Combinator failure.
It’s called Liquidity Preference. They raised $5 MM and probably had a 2-3x liquidity preference + dividends to be paid on the investor’s preferred meaning they didn’t have much left for the founders. Still, a bad move.
Brave, brave men all,
and fearless to heed the call
When they shove you against the wall
Give them nothing but your gall.
Well, done boys, well done. Fairly in the end won.
It’s just a matter of time before Xobni integrates to any webmail. Gmail, Yahoomail, etc. Even an integration to Squirrelmail and Horde can be very popular and useful to users.
I think that being said, it’s a lot more open that being inside Outlook.
It’s a good move.
if microsoft buy xobni, they will make a big goal.
I agree. I’m betting that they have a few other integrations in the pipeline and I won’t be surprised in a year, there will be others looking to acquire.
20 million is chicken scratch…I spent that much filling up my hummer last year.
Xobni: You’ve got to know when to hold them. Know when to fold them. Know when to walk away. Known when to run.
Don’t count your money. When you’re sitting at the Outlook. There’ll be plenty of time for counting. When the Blue Screen comes!
Xobni will have to come up with an integration to other mail products quickly because Microsoft could easily send a cease and desist order and/or change the code within Outlook that would not allow the product to work any longer. Or worse, the next version contains a product similar as part of the base application install. Since Xobni walked away from this deal they are most likely certain to become more aggressive towards new integrations. It might have been a good move for Xobni since much of the talent might not have made the move to Redmond and really the company would be worth far less.
I just got my invite for Xobni the other day, so far Im not quite sure if its worth keeping. I guess its kinda cool, but it’s just not that useful to me
Next stop, Deadpool.
These are not rhetorical questions:
If this company doesn’t get acquired by Microsoft, who will acquire them?
If nobody acquires them, how will they make money?
I think the true question is:
What’s harder, walking away from $20M… or explaining that to your spouse?
These guys don’t need MSFT. They have an excellent product and an incredible team. MSFT will come sniffing back 6 months from now with an offer 3 times the size.
genius.
always walk away from $20M when you spent all of 2 years building a feature.
note to ycombitards – when ur 19-23 and someone puts $20M in your hand – close your hand.
sdrater <–its ‘retards’ backward. get it?!?!
Forget the $$$, how can they turn down the opportunity to work for Microsoft?
Bunch of morons. What are they thinking – they think MS can’t do this crap? It is ofcourse a feature of outlook.
But one thing, these guys have balls – Khosla must be squeezing it !
Xobni are nuts if they think that MS will up their offer in 6 months. If MS is most likely shooting to put Xobni into Office 14. If they delay and wait 6 months, both may have shot themselves in the foot as the window to put it in will likely be closing by the second.
I would predict that either MS buys them now and starts with the integration immediately or walks away entirely.
What’s their exit target now?! Hah… who else wants to buy an Outlook plugin? A plugin for an email system that’s dying out.
No surprise there.
Founders were probably imaging every other awesome product they’ve seen Microsoft buy and then completely abuse by letting it rot.
Xobni must not have gotten the memo.
It is 2008. You are an email “plugin”. This is your exit. This is how it works now son.
RIP
“the fear was that Xobni would end up nothing more than a feature of Outlook. ”
uh, thats what xobni is… xboni isnt a company, its a feature, thats it.
cocky startups, xobnis done, hopefully MS copies it and makes it better by being natively supported and killing xobni
If all of them have ‘made it’ already, and this means nothing – then no, don’t take MS’s offer.
But if they are first-time startups -then YES;
take the money and run -
a bird in the hand is worth two in the bush.
I think this is the right thing to do – a $100 million decision. Bravo to Matt, Adam, and crew for their giant nuts.
Smooth Move Xobni… don’t let Microsoft jerk you around.
The plugin that Xobni provides for Outlook represents functionality that Outlook should ALREADY have. This move for them was simply a way for them to make sure people don’t realize that. Microsoft has GOT to change the way they approach software.
Good for them. If Microsoft is trying to buy you, you are probably going somewhere and flipping the company too soon means you are just ripping yourself off on future earnings and increased value.
We need another option on the poll.
Money isn’t everything. Every year, fewer and fewer Americans seem to understand that.
Crazy! They guys probably sealed their fate. Microsoft will develop their own or acquire a start-up for $5M that will devleop the same thing in less than 6 months.
p.s. What Microsoft just did is called the brain suck.
Let me make sure I understand the business case:
1) Private Beta product
2) ZERO revenues
3) Widget – Plug In
4) Barrier to entry is ZILCH (just a few months)
You guys at Xobni are nutz. Of course assuming you got and offer for $20M.
pss @8VC – If they had this liquidation preference they should sue their attorneys for criminal activity. Times were favorable when they raised cash.
Xobni is great technology, with a stellar team. It’s worth mountains more than $20M.
To say that MS can just copy all of the features is asinine. They could copy all of the features of Facebook, but no one would use it.
They could copy all of the features of Yahoo, or Google but they would get it wrong.
MS is turning into IBM, they’ll always be big, and always be around, but they will not be relevant.
Fantastic move Xobni. You are smart guys.
28. Dan…. spot on. The only thing I would add is that these twits at Xobni (not personal, just a business evaluation) deserve to now be crushed by MS. If I were management involved in this generous offer to an email plug-in “company” and were rebuffed in this fashion, I would immediately spend $40M (not that it would take a fraction of that) to duplicate the feature. The ponzi scheme economics in the Valley must stop. This “company” is not worth $20M. They should have been smart and taken the cash and the job offer.
Dear Xobniers, you were very serious in playing backwards: “rednauqS!” Not accepting the MS offer was illogical, an atrophied move, a bad step in a dance that was flowing beautifully up to now.
Oh, one more thing. My two developers could build 90% of the companies featured on Techcrunch in less than 6 months — including Xobni. Why don’t we? 1. We aren’t located in the Valley, thus can’t participate in the west coast ponzi scheme. 2. There are no real profits to be had in 90% of these companies.
stupid ppl. they kill their ONLY possible exit. MS can hire each of their employee 4x pay with the 20 mil.
1. I’ve been to Redmond, worked with the boys, and once they asked to acquire one of my company and I turned down their offer. I lived
2. I’m unconvinced that Outlook adoption or serious use is on any precipitous decline. You can Twit or Facebook all you like, but most official business communication of any meaningful content relies on Outlook.. oh, and that other company some guy named Mitch once started and sold to three initials
3. MSFT will not issue a cease and desist order or code out Xobni; the risk is high and the lawyers review every molecule moving inside Redmond today
4. Clearly, there is more here than meets the eye; 4X on capital invested is too low, but couldn’t MSFT make this work for 6X or even 8X? Probably; suggesting that something else did not sit right
5. There is a better than even chance that Xobni can improve on the MSFT offer through a combination of organic growth and a newly motivated buyer.
In summary, both companies missed a good opportunity, probably in some part due to inexperience, but the market has an unmet need that Xobni begins to address and where need exists, there are investors to be made whole. Tough luck Xobnis, but good luck!
I think this is a case where if there had been no VC money involved, the deal would have been done. If each of the founders could have gotten ~7-10 million, the “body language” would have meant jack. But with the VC money in there, it’d only be a 2-3x return for the VCs. The founders probably would have ended up with ~1-2 million. So it’s easy to hold out for more.
My question is why a company like Xobni even needed so much VC cash? It’s a plugin, so there’s not a lot of server/back-end costs. Taking 0.5 to 1.5 million probably would have gotten them this far and it wouldn’t have killed this deal. So the lesson here is be very careful that VC money is actually what you want/need. You’re definitely committing to a “make a billion or die trying” business model when you take their cash.
That’s a foolish decision, hey, maybe there is another company wanting to buy at a higher $$$, you never know.
Nat
http://www.workersinc.com
Roses are red, violets are blue, if brains were shit, xobni would have two.
Frankly i don’t understand the value of xobni…
The list of usefull features i have seen so far:
1. the ability to see all the files exchanged with a person
2. the ability to see when your contact is awake
3. fetching a phone number
This features are so worthy that i have minimised it already and would probably deinstall it soon.
As i understand the “big idea” is to show who your contacts are linked to and build a social network on that knowlege. However this concept needs a proof… Right now xobni is worth something like $100k the summ for which a simular project can be developed.
I am really fascinated by the currently launched ZenBE.
The best email client and it’s fit to compete against outlook.
Their Pages-Concept has a great social distribution effect too.
I might be wrong. Please correct me if you see a point why xobni could be worth 20mil or even more.
Since $20M is chump change to Microsoft is it not possible that they just wanted to buy XOBNI so there would not be this popular piece of software out there showing up the weaknesses in Outlook. Maybe Microsoft will implement some of what is in XOBNI in their own sweet time and in a way that suits them. So to pay $20M to make this issue go away is not a bad investment. Is it possible the XOBNI lads sensed this in the MS “body language”?
yeah, it may be a bit more complicated than xobni just walking away – perhaps microsoft got a better look inside xobni after doing some diligence and realized they could a) do it themselves or b) there were issues with xobni’s product, etc and microsoft changed the terms or simply lost interest
We don’t know all the details of the offer, but on the face of it, this is a cautionary lesson for all of you on the concept of preferred shares and VC returns on investment. Xobni probably did their last round at a $10M post-money valuation and $20M was too low an exit by that measure, the VC’s wouldn’t allow it. Now, think about the companies recently listed here that have $200M valuations (Meebo, etc.) What sort of deals do they have to get for the VC’s not to make them walk away from it?
i dunno about this one. bob hit the dot. these guys overdid the whole start-up formulaic process – raised too much money from way too many investors, grew the team out, got nice (expensive) office space overlooking union square, etc. no reason to do all this for an outlook feature. this isn’t a market changer nor a service which gathers tons of page views. just a pretty cool feature for a popular crappy email client. the founders should have kept it small and cheap. 20M is a great exit … unless you raise too much and giveaway your equity and end up in the 20 point range (i’m guessin).
Does Max Knobny use Xobni?