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Word around the Valley is that Xobni, a San Francisco-based startup that has made a software add-on for Microsoft Outlook, is getting a thorough look-over by Microsoft. This isn’t the first time the company has been the object of Microsoft’s affection. Apparently, the company had previously been offered about $20 million but chose to raise VC money and do it alone.
Who knows, this time the price may be right. Bill Gates is one high-profile Xobni beta tester, making it easy for M&A drones to pay up for this company. Xobni’s software uses features of social networking to better analyze your inbox and formulates relationships and other relevant points that help you conquer the chaos called email. I have written about Xobni in the context of email as a social environment.
Given that Xobni will have to go after corporate users to make money from its product, selling out to Microsoft may not be such a bad option. It won’t have to raise gobs of additional money to fine-tune its product, which is still in beta and has some issues (read: bugs) to work through. More importantly, it won’t have to deal with the intricacies of managing sales to large enterprises. On Microsoft’s dime, it can continue to finesse its offering, and Microsoft can help find Xobni an eager audience in its 400 million-odd Microsoft Outlook users.
Xobni’s dilemma is going to be the same one that will be faced by many new age software (or Web 2.0) startups that want to sell to corporations: While many Web 2.0 startups might cut their teeth with consumers, they will ultimately have to knock on corporate doors in order to make money, especially if the online advertising windfall turns into a drought.
At a recent conference organized by Accenture, I moderated a panel on the “New Disruptors,” discussing this very issue with panelists that included Xobni co-founder Matt Breznia, Box.net‘s Aaron Levie, Automattic’s Matt Mullenweg and Peanut Labs‘ Murtaza Hussain. The big question is that of trust, and whether large companies will buy from a tiny startup. It will be a tough sell!
Meanwhile, here’s something to think about: Email remains broken, and it continues to confound and overwhelm us. Most of the problems are of our own making, but then solving them remains an opportunity, as Xobni has shown.