Qlipso

Qlipso's CEO Explains Why He Bought Veoh

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The long, sad tale of video site Veoh seemed to be in its final chapter when founder Dmitry Shapiro declared the company was filing for bankruptcy back in February. The copyright litigation with Universal Music Group proved to be too costly and too distracting, even though Veoh won a summary judgement in its favor. But hours before Veoh was actually about to file the bankruptcy papers, an unlikely suitor appeared: a seed-stage startup in Los Angeles called Qlipso.

Qlipso ended up buying the assets of Veoh, including its Website, filtering, recommendation, and backend technology, video library, advertising deals, and still-substantial audience. ComScore estimates that 14 million people a month still visit Veoh. Qlipso, on the other hand, is a startup developing a virtual room platform where people can share videos and other Flash media, while chatting via text, video chat or avatars. I spoke with Qlipso CEO Jon Goldman by phone today to ask what possessed him to do the deal.

“This is an exotic venture strategy,” he admits, “Qlipso is an early-stage R&D company transforming into an business with scale and audience.” Qlipso gains an instant audience, a better-known brand, and relationships with advertisers. Goldman thinks the deal will help to establish Qlipso faster than he could have done on his own. “I think we have accelerated this by years,” he says. “We have a 5-person sales team in NY, a large audience, it is completely transformational.” If Veoh had gone ahead and shut down the site, he notes, there would have been no deal.

Goldman would not disclose the price, but the asset sale was funded by Qlipso’s main investor Jerusalem Venture Partners. “This is a significant bet for an early stage venture capital fund,” is all Goldman will say. Over the years, they’ve put a few million dollars into Qlipso, and injected multiple times their previous investment to finance the acquisition. Part of the cash infusion will also go towards the capital required to keep operating the site. Whatever the acquisition price, it was a fraction of the $70 million investors as varied as Michael Eisner, Goldman Sachs, Time Warner, Intel, and Spark Capital put into Veoh over the years. The proceeds will now be split up among creditors and, if anything is left, the investors.

The Qlipso virtual rooms will become incorporated into the Veoh site, which will also be used to distribute more individual downloads of the Qlipso software. Watching videos on Veoh will become more social. You will be able to invite your friends to watch videos in a virtual room, or join existing rooms. Whether or note people actually want to watch videos this way remains to be seen, but now Qlipso has a large audience to test its technology on. Veoh’s demographics are also skewed towards young males who like sci-fi and anime, a group Qlipso is targeting. Also reached by phone Veoh founder Shapiro says, “I am pleased to see that Veoh wil be in operation.”

How much do you think Veoh was worth?

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