Venture capital and angel money is coveted in Silicon Valley. Everyone wants it, not everyone should be excited to get it. Case in point: Odeo, the audioblogging/podcasting startup that Ev Williams, Biz Stone and others bought from the previous investors today for an undisclosed amount.
Odeo was stuck trying to deliver a return to investors Good to see Ev and team sticking to what they dreamed up two years ago!long before it was ready. A number of venture firms put money in last year and with YouTube cashing in, the audio side of the podcasting/rich media world was looking a little ragged, so the investors wanted out.
The company had been shopping itself for months, the price tag changing as the company ran shorter on cash. Last I heard, in July Odeo could be had for $4.5 million. That's a fire sale price.
My best guess is the Ev and execs paid somewhere in the $3.0 million range, a further third off the selling price in June and July. About what they should have paid to relieve the investors of the assets. That means the investors recovered between 50 percent and 60 percent of their investment. Everyone's happy, given the bloom seems to be off podcasting as a liquidity event.
Problem is, podcasting is still so immature as a medium--not the content of podcasting, but as a business platform--and so much experimentation is needed to discover how to package a show, what to do about advertising and sponsorship messages, when to think in terms of subscriptions, etc., etc. It takes patience, something that folks looking for a multiple on their investment in the next 18 months.
You can take money too early. It costs you in terms of your strategic flexibility, because the money guys start steering toward their goals, not just yours. Find investors who understand the amount of runway you need, especially when doing something evolutionary like podcasting. It takes time and you have to establish a new medium.
Odeo's investors got impatient. It's good to see Ev and team sticking to what they dreamed up two years ago!
[Disclosure: I have worked with Audible as a consultant since its business plan was in draft form and worked closely on its subscription podcasting platform.]
UPDATE: Mark Evans has a good analysis of this transaction and what it bodes for Web 2.0 startups, as well:
The unwillingness to concede defeat is another thing that separates today's Web landscape from the dot-com days when many companies had little choice but to close their doors when the investors checked out.