In a highly unusual transaction, Zivity, a venture funded adult content startup, has spun off the majority of its assets, employees and venture funding into a new company called Top Fans. Zivity first launched at TechCrunch40 in 2007 and has raised a total of $8 million in venture capital.
Cofounder Cyan Banister takes the CEO spot at Zivity, which will continue to publish adult content. She also keeps Zivity -related software and other assets, two other employees and a portion of the $4 million or so that the company still has in bank.
Former Zivity CEO Jon Elvekrog will now become the CEO of Top Fans, and the remaining 7 employees will join him.
The original founding team of Zivity and the angel investors in their first round of financing are now the sole shareholders of Zivity. Venture funds BlueRun Ventures and The Founders Fund, who invested $7 million in Zivity in March 2008, will transfer their ownership to Top Fans.
The net effect of the transaction is to split assets, people and ownership between the two entities, with no overlap. The companies will now pursue separate strategies.
Earlier this year Zivity launched the Top Fans product as a separate strategy for growth. The product lets fans create celebrity “fan pages,” and then add content, such as images, video, and news, to those pages.
It’s been clear that the exec team and investors started to have diverging opinions on the future of the company since that launch. The founding team still believe strongly in the original vision. The newer execs and investors were pushing for the fan pages. The exodus of the founders was the likely outcome, but investors and senior employees worked to split the companies to pursue their separate destinies instead.
Frankly, I’m amazed they pulled this off without litigation. Hats off to everyone, particularly the investors who consented to this. They likely could have killed the deal, retained all the remaining venture capital in Top Fans and forced the founders out. That didn’t happen.