Spare me your Blinkx- Redux
Great post from Max on AIM and it’s unlikely success stories, in this case Blinkx. How AIM continues to provide incredibly off-market price to immature businesses puzzles and worries me. Is anyone asking the question of why a Bay Area based business (the most overbanked VC market on the planet) comes back to the UK’s lightly regulated market to raise finance ? Why would an early stage speculative company with a shifting business model decide to go public if it had a decent alternative in its natural funding market ? Unsustainable, overpriced, and distracting. As VentureBeat puts it, it strikes all the hype buttons at the right time. This is not the way to build a credible local public equity market, and AIM underwriters are in my view not acting reponsibly.
<— Max had sand in his shoes so he got upset
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From what I can tell, Blinkx was founded by x-Autonomy guys, three years ago. They started out making a web-search toolbar, and then Google came out with one. So they looked around and decided to do video search.
They told everyone they had $10 million in angel funding. But it turns out that Autonomy had a 90% ownership share in the company for the licensing of the technology that runs the Blinkx video search.
So Autonomy calls the 90% back into Autonomy, and they go back to the UK (where most of the company is anyway.. only their CEO and biz dev guy were in San Francisco) and are wrapped up with the rest of Autonomy’s consumer plays (all small) and spun out on the AIM penny stock market. All to raise money for Autonomy, because it appears, the technology and angel funding came from them.
If you were a VC in SF, would you every fund that deal?
How would you price something with 10m in angel funding? And 90% ownership by a UK search company?
The other thing that is interesting is, after this happened, I know a lot of Sand Hill Road VC’s and no less than 5 of them have said things to me about Blinkx that it was fuzzy technology that didn’t impress them, that the people weren’t really in SF, they were UK and that there was no way it was worth say, $100m as a post money funding thing, so that they could buy 40% of the company as they typically do when the do a series A, and then put in say, 30 million. To make the numbers work, the whole thing was a disaster. Basically, they all saw right through Blinkx and were a little disgusted.
There is no way a California VC would ever touch that deal in terms of the numbers.
And then you have to look at the search.
It’s just a reverse chron result set, and most of the video disappears after 7-10 days because of the deals Blinkx has with video publishers.
They don’t really have 12 m hours of video search able right now. It’s more like 3.5 million videos at any given moment.
VC’s in SF just run from things like this.
But Blinkx is a great hype machine. They put out a weekly press release, no matter what is going on, and keep the hype coming.
Going public on AIM, they appear to have snowed a lot of people into thinking they have something interesting.
In fact, my opinion is that they did the AIM thing to pay Autonomy back because they really don’t have much to show other than hype.
AB