Xobni Walks Away From A Microsoft Deal

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1. Azhar
   

   April 30th, 2008 at 3:38 pm

   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.

2. Daniel Brusilovsky
   

   April 30th, 2008 at 3:39 pm

   Microsoft is not doing so hot in the market of acquiring companies right now. First Yahoo!, now this?

3. Andrew
   

   April 30th, 2008 at 3:40 pm

   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

4. Chris
   

   April 30th, 2008 at 3:42 pm

   Countdown till Microsoft sends them a cease and desist based on some obscure clause in the Outlook EULA?

   5
   4
   3
   2
   …..

5. Ryan
   

   April 30th, 2008 at 3:42 pm

   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…

6. SteveR
   

   April 30th, 2008 at 3:43 pm

   life is too short to move to Redmond and work for MSFT. No amount of lucre is worth that fate.

7. Lame
   

   April 30th, 2008 at 3:45 pm

   Good job on being dumb.

   “The body language wasn’t there”?

   WTF? Another Y Combinator failure.

8. VC
   

   April 30th, 2008 at 3:48 pm

   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.

9. Alan Wilensky
   

   April 30th, 2008 at 3:49 pm

   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.

10. aj
    

    April 30th, 2008 at 3:52 pm

    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.

11. petnos
    

    April 30th, 2008 at 3:57 pm

    if microsoft buy xobni, they will make a big goal.

12. Troy
    

    April 30th, 2008 at 4:00 pm

    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.

13. Tim
    

    April 30th, 2008 at 4:16 pm

    20 million is chicken scratch…I spent that much filling up my hummer last year.

14. Kenny Rogers
    

    April 30th, 2008 at 4:18 pm

    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!

15. Jon
    

    April 30th, 2008 at 4:19 pm

    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.

16. bob cobb
    

    April 30th, 2008 at 4:29 pm

    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

17. beava
    

    April 30th, 2008 at 4:32 pm

    Next stop, Deadpool.

18. Michael
    

    April 30th, 2008 at 4:41 pm

    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?

19. Jason Rodriguez
    

    April 30th, 2008 at 4:46 pm

    I think the true question is:

    What’s harder, walking away from $20M… or explaining that to your spouse?

20. Sol
    

    April 30th, 2008 at 4:47 pm

    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.

21. un.valley
    

    April 30th, 2008 at 4:47 pm

    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.

22. Stephen Reinken
    

    April 30th, 2008 at 4:49 pm

    sdrater <–its ‘retards’ backward. get it?!?!

23. Mogilny
    

    April 30th, 2008 at 5:24 pm

    Forget the $$$, how can they turn down the opportunity to work for Microsoft?

24. pkg
    

    April 30th, 2008 at 5:24 pm

    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 !

25. Meh
    

    April 30th, 2008 at 5:28 pm

    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.

26. DaveS
    

    April 30th, 2008 at 5:34 pm

    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.

27. AW
    

    April 30th, 2008 at 5:44 pm

    No surprise there.

    Founders were probably imaging every other awesome product they’ve seen Microsoft buy and then completely abuse by letting it rot.

28. dan
    

    April 30th, 2008 at 5:46 pm

    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

29. no gphone
    

    April 30th, 2008 at 5:53 pm

    “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

30. lawrence
    

    April 30th, 2008 at 6:15 pm

    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.

31. Ethan
    

    April 30th, 2008 at 6:16 pm

    I think this is the right thing to do - a $100 million decision. Bravo to Matt, Adam, and crew for their giant nuts.

32. Andy Amiri
    

    April 30th, 2008 at 6:17 pm

    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.

33. Daniel R
    

    April 30th, 2008 at 6:18 pm

    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.

34. Nostromo
    

    April 30th, 2008 at 6:27 pm

    We need another option on the poll.

    Money isn’t everything. Every year, fewer and fewer Americans seem to understand that.

35. Bob
    

    April 30th, 2008 at 7:03 pm

    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.

36. a
    

    April 30th, 2008 at 7:05 pm

    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.

37. WTL
    

    April 30th, 2008 at 7:05 pm

    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.

38. Patricia
    

    April 30th, 2008 at 7:06 pm

    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.

39. WTL
    

    April 30th, 2008 at 7:09 pm

    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.

40. sd
    

    April 30th, 2008 at 7:14 pm

    stupid ppl. they kill their ONLY possible exit. MS can hire each of their employee 4x pay with the 20 mil.

41. JB
    

    April 30th, 2008 at 7:31 pm

    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!

42. Bob
    

    April 30th, 2008 at 7:37 pm

    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.

43. Nat
    

    April 30th, 2008 at 7:37 pm

    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

44. Afraid of the Dark
    

    April 30th, 2008 at 7:59 pm

    Roses are red, violets are blue, if brains were shit, xobni would have two.

45. Gleb
    

    April 30th, 2008 at 8:02 pm

    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.

46. magixman
    

    April 30th, 2008 at 8:08 pm

    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”?

47. kevin gao
    

    April 30th, 2008 at 8:10 pm

    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

48. Jimmy Dell
    

    April 30th, 2008 at 9:23 pm

    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?

49. phil
    

    April 30th, 2008 at 9:26 pm

    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).

50. Joe T
    

    April 30th, 2008 at 9:46 pm

    Does Max Knobny use Xobni?

51. kuldeep
    

    April 30th, 2008 at 10:42 pm

    Great decision! I believe it would suck to work in Redmond

52. Simon
    

    April 30th, 2008 at 11:00 pm

    I installed this, thought it was neat for a day, thought maybe I wasn’t getting it the second and third days, and uninstalled the 4th day - it was nothing but a bunch of stats that helped my email experience in almost no tangible way and consumed valuable UI real estate. Horrible decision for Xobni.

53. srini kumar
    

    April 30th, 2008 at 11:13 pm

    right on jeff and xobni. you’re just getting started ! there’s a chasm to cross that ms doesn’t even see.

54. Peter
    

    April 30th, 2008 at 11:35 pm

    TC - why don’t your voting “show results” links ever work?

55. Humphrey Bogus
    

    May 1st, 2008 at 12:42 am

    As Eugene Kleiner (co-founder of Kleiner Perkins) once said, “The time to eat appetizers is when they’re being passed around.”

    In other words, waiting to sell to the highest bidder sometimes means never selling at all. See, for example, Pointcast. $400M offer declined. Eventual exit? $0.

    Would MSFT probably turn this into a feature of Outlook? Yes. But that’s because it is already basically a feature addition to Outlook. Would they be absorbed into a giant, non-startup-like organization? Yes. But that’s the reality of selling your company.

    This is a make-or-buy decision for Microsoft. No matter how much revenue Xobni generates–even if it were a ludicrously unimaginable number like $200M next year–they would be nothing more than a pimple on MSFT’s hide, considering MSFT did $15 BILLION in revenue this quarter alone. MSFT isn’t buying revenue, they’re hiring engineers and buying faster development of a product enhancement. If they think MSFT will come back with a $50 or $100M offer, they’re wrong. By then they’ve passed the point at which it’s cheaper for MSFT just to build it themselves.

    Take the money and fight another day. They’re young and could have many successful years ahead of them in the Valley. There will be other ideas.

56. denny.do
    

    May 1st, 2008 at 1:32 am

    I think decision makers in this case must be investors. It’s to strange they are supporting this.

57. Lars Fischer
    

    May 1st, 2008 at 2:23 am

    IMHO this is a good move. They can do better than that, but they need to break out from the Outlook plugin vendor image.

58. headless
    

    May 1st, 2008 at 2:41 am

    IMO a good move by xobni. Hell, even B Gates was bigging them up recently. $20M is too little to sell out for, certainly in a better negotiating position for when MS come back to the table, which I bet they will.

    Xobni is a clever little piece of software with some pretty clever guys/gals writing it.

    Even if the incredibly unlikely event they end up in the deadpool, you can bet they’ll do something equally great next time around and maybe have the experience under their belt to boot.

    Unfortunately, several of the nay-sayers commenting on this post are talking sh1t… No argument to back up their ridiculous comments. But hey, what’s new?

59. Sebastian
    

    May 1st, 2008 at 3:19 am

    If this is the real explanation I wonder why they didn’t know that earlier. It was forseeable that Microsoft wouldn’t invest in an open product that could help its competition… (Thunderbird plus Lightning calendar extension plus Xobni plug-in would be a pretty awesome thing…)

60. Sam B
    

    May 1st, 2008 at 4:23 am

    @34: Once a VC invests in your business, you don’t get to say “money isn’t everything” anymore. So long as you own your own business you can slack off all day or give all your profits to orphans if you feel like it - it’s only yourself you’re hurting - but not once you’ve asked someone to buy part of your business on the condition that you’ll grow the business and increase the value of their investment.

61. popat
    

    May 1st, 2008 at 5:53 am

    mcsft should have made them team leader or research analyst for features for outlook. this would have kept their (xobni’s team) entrepreneur spirit alive and motivated them to work fast to keep on adding smart features to outlook.

62. Menlo Park
    

    May 1st, 2008 at 6:21 am

    I have been using Xobni for about a week and found it to have utility. I like the “recent files” and “recent emails” exchanged between email contacts. I use LookOut for email search. I don’t use the balance of the Xnobi features and don’t like the inability to turn those options off or reposition the tool relative to my Inbox. I believe the features I do like are easily developed by Microsoft or other 3rd parties and believe Xobni should have sold to Microsoft.

63. Michael
    

    May 1st, 2008 at 6:37 am

    The poll says:

    Should Xobni Have Sold Itself to Microsoft For $20 Million?

    * Hell, yes! Are they crazy?
    * No, they will be worth a lot more a year from

    Which shows the poll is only about the money. How about a third option:

    * Microsoft: Do Not Want!

64. RONLG
    

    May 1st, 2008 at 7:10 am

    This is a numbers game. I would have walked away too!

    It could open up offers from others.

65. Erik
    

    May 1st, 2008 at 7:26 am

    The raised $5 million. What was the post money on that? $18 million?

    A $20 million exit is a huge FAIL.

    VC’s don’t want 1.1X returns.

    The lesson here is don’t take too much money if you want a quick flip.

66. steve
    

    May 1st, 2008 at 8:38 am

    Bob (@42) has it exactly right in the first part of his comment. 6% (what a great deal for $12K) in the seed, maybe 10% on the angel, and, with 3 firms on the A and some indidual investors, there is no way the two founders have more than 15% each after creating an employee pool - and that is probably high.

67. Edo van Santen
    

    May 1st, 2008 at 10:50 am

    They are right! The beta version works great, when they are patient for another year, they will have more happy customers and make 10 times the money.

68. John
    

    May 1st, 2008 at 7:15 pm

    If xobni knows that Microsoft will counter with a bigger offer (like that Yahoo debacle), then they should hold out for a while.

69. Jeffrey Alexander Brathwaite
    

    May 1st, 2008 at 7:19 pm

    I love the search feature and boy does this plugin make finding phone numbers in signitures a breeze. Not sure why they won’t sell they can’t be in a better position to sell to microsoft outright and start up another company then do it again.

70. Chris
    

    May 1st, 2008 at 8:21 pm

    I liked the idea of Xobni and installed it. I uninstalled it the same day. Not enough users to really interact with, and none of my friends wanted to get a “beta” invite. Most of my IT friends are done with the beta testing.

    MS will clone it for their Office suite and own the market share for their product.

71. Randall
    

    May 2nd, 2008 at 11:48 am

    Who do they think they are? Facebook?

72. Leo Chen
    

    May 3rd, 2008 at 2:25 pm

    It’s a no brainer to sell if Xobni is still pre-VC funding, but with ~$5m in VC & angel funding and likely liquidity preferences in the 2-3x range, the founders won’t have much left and would have to move to MSFT to work for a couple of years. Of the few $Ms that the founders to get, who knows if they get all that money right away - maybe it’s a ‘get half now and another half after you work for 2yrs at MSFT’. Eitherway, probably better off taking a 6-figure salary working at Xobni and taking it the direction you want to take it.

73. Robert Miller
    

    May 4th, 2008 at 11:25 pm

    Xobni is an Outlook plug-in and not very good at that — Something like lipstick on a slow pig that wants even more resources on my system.

    Shoot, I can not even tell Xobni to not index my email junk folder with all of the “Processed Pork” email in it. You would think they would have that much of a clue, but (since the team walked away from the Microsoft deal) I guess not.

74. Jon Beattie
    

    May 5th, 2008 at 10:38 am

    So their product is free. How do they propose to make any money? There is no expiry or trial period on the software. The only option would be to one day start charging me. I think the product is useful, however, would I pay much for it? I think it is in the $20-30 price range for a one off license. The whole social network in your inbox thing is completely overplayed. It is not really social networking, they are just playing up this angle for valuation purposes, otherwise they are just another third party plug-in for Outlook, and should be valued based on install base and projected revenue….oh wait, they don’t have any. I would have taken the Microsoft deal but just bumped it up if $20 million wasn’t going to be enough. Why did they need $4m in initial funding anyway? The only costs would be staff as they don’t even need servers as this is a desktop application.