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In March 2010, I wrote about Six Apart. I said that “This is a blog publishing software. If your company is using them you are getting ripped off BIG TIME. You can get practically everything Typepad or MoveableType provides for free with WordPress. This is another VC backed company looking to sign up customers, bill them and eventually sellout.”
Well, customers got tired of getting ripped off big time and stopped using the service and eventually, Six Apart had to sell – not on their terms. They sold for $3 million and change to VideoEgg, which is another company backed by the same venture capitalist – August Capital.
Six Apart got $22 million in venture capital and used the money to fool everyone that if you were not using their product, your company is on its way to major failure – much like Twitter is doing today. In fact, they made it to the cover of Fortune magazine with that message.
Before the sale, Six Apart had pennies left in the bank despite milking their customers for years. In fact, they begged for a $2 million loan from the acquirer, Video Egg, to stay afloat until the deal closed. The same venture capitalist is behind both companies, so you do the math.
Lucky for Six Apart, the deal closed recently, otherwise its value would have been reduced by $200,000 a day until it did close.
Disclosure: In April 2004, Six Apart spoke at the WebGuild and shortly afterwards they raised $10 million.
Channels: begging, six apart
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Pingback by Tweets that mention Six Apart – From Cover Of Fortune To Beggers -- Topsy.com — November 17, 2010 @ 2:24 PM
The real story here is of a company that couldn't evolve, not of one that was looking for a quick flip. If the founders were motivated to a "flip" as the author implies, they would have found their exit early on when SixApart was an industry darling. What happened instead is that they lost momentum, relevancy and ultimately a the value they had built as an innovative business many years ago.
Comment by Jeff — November 17, 2010 @ 2:49 PM
Jeff: As an entrepreneur I definitely agree with your assessment. Web Guild has a tendency to try to make companies evil and everything black and white to create emotion and scandalous situations. Well, you know what, if companies don't make money they go out of business.
By the way, the word 'beggar' (in the headline) is spelled with an 'a' rather than an 'e', so the journalist should work on their spelling skills
.
Comment by Jorden — November 17, 2010 @ 4:33 PM
The real story here is the relevancy of venture capital in the Internet, and the global business environment, as practiced in California. Spin-hype-bubbles and expectations of returns in the hundreds of percent, which are essential to support bankers who expect minimum $500,000 annual pickings, are the fabric of which this disaster is spun. The total ignorance of the real opportunities in this market, and the dangers presented by competition, are the markers of hype merchants who sell these kinds of investments. The way to make money in this market is to watch the high flyers, look at their structure and prospects. If there is no fundamental strength, wait for the bubble to implode and sell short all the way down.
Comment by richardhg — November 18, 2010 @ 7:23 AM
Richardhg: not sure what you are talking about here. VCs are not bankers and the companies they fund are not public so you can't 'sell them short all the way down'. Also, as these companies are private, until they go public or are acquired by a public company (when the VCs usually get out), they are not being sold as an investment to anyone.
Maybe you were referring to a different article?
Comment by Jorden — November 18, 2010 @ 3:55 PM