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Summary:

Odeo, a San Francisco-based podcasting start-up has decided to call it a day. The company started by Pyra Labs (Blogger) co-founder Evan Williams has completed a management buyout. Evan Williams, Biz Stone and other Odeo employees have started a new company called Obvious Corp., which has […]

Odeo, a San Francisco-based podcasting start-up has decided to call it a day. The company started by Pyra Labs (Blogger) co-founder Evan Williams has completed a management buyout. Evan Williams, Biz Stone and other Odeo employees have started a new company called Obvious Corp., which has acquired Odeo assets from podcasting company’s venture capital backers. The news was first reported by Valleywag. (Update: Ev outlines his plans and vision on his blog. George Zachary of Charles River writes about the deal on his blog.)

Odeo had raised millions in funding from Charles River Ventures, Mitch Capor, Josh Kopelman and Ron Conway amongst others in August 2005. Obvious Corp is full funded by Williams, and now owns the assets of Odeo and Twitter.com. It was a move that should not come as a surprise to readers of GigaOM.

Sources familiar with the transaction say the VCs and angels investors were made whole (they made their money back) and some common shareholders such as Odeo co-founder Noah Glass have made a modest gain on the transaction. Obvious will continue to operate Odeo.com and Twitter.com.

Our sources say that the parting was very amicable. The reasons for this management buyout, according to sources on both sides of the transaction was Williams desire to run a less structured and more experimental startup. Despite starting out as a podcasting startup, recent blog posts on Evan Williams blog hinted his disillusionment with the opportunity in the podcasting space, and if it really justified a VC investment. The company apparently tried to shop itself, though, we have not been able to identify and confirm their dance partners. In the end Williams put his money where his heart was is.
Williams’ very public mea culpa at the Web Apps conference was an example of his willingness to zig, when everyone zagged. In private conversations, he had expressed doubts about the current model – where everyone wants to sell to an Internet giant. He wanted a model that was different – small, experimental and almost lab like. Future plans, according to those close to the company, include charging for all new things they come-up with. Given that a handful of engineers came up with Twitter in a few days, Williams might be onto something.

There will be some debate about if this is yet another example of a broken VC model. My personal belief is that is not the case. Williams had the means (Google dollars) to do the right thing by him. For others the in-fashion “flip it” equation of selling to large players will still be the preferred exit ramp. For some, building a profitable operation will be the ultimate goal. As far as Odeo is concerned, the reasons are Obvious.

  1. Holy crap, Om — you filed all that from a handheld? Man, your thumbs must be sore.

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  2. Odeo is a typical example of

    Second System Effect

    First we saw it with Sabeer bhatia and Arzoo , than with Riya and Munjal and now its William and
    Odeo .
    I admire the candor and honesty of the guy . it is very rare in this PR Driven world . I am sure
    twitter will be a hit .

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  3. That’s funny – I was all set to say in my comment “Congrats on such a bold move in following the heart!”, and then I too fell victim to Om’s handheld line and started to wonder what was the bigger feat. In all seriousness, congrats to Evan and the team!

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  4. Congrats to Ev, et al. Nice move.

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  5. funny, i was telling my son about twittr and he didn’t get it – why would you post an sms to an online log if the real utility is sms via phone without a pc requirement? personally, i kinda like it if they could do more in the way of dodgeball…

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  6. 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.

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  7. 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.

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  8. [...] Dom points out overtime, much of the original team from Odeo was let go including Glass. Odeo became Obvious Corp., and well rest is history. Now the company is rumored to be valued at $250 million and on its way [...]

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  9. [...] often. The one example that springs to mind is podcasting startup Odeo, where CEO Evan Williams gave his investors their money back to have the freedom to change strategy and corporate structure into what would eventually become [...]

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