An obvious nonacquisition

About a year and a half ago the blogosphere was, shall we say, all-a-twitter, about a new startup called Odeo.  They were founded as a “podcasting company” and that was pretty much the last we ever heard from them (which could be because they seem to have annoyed Mike Arrington, which is apparently a curse worse than death in the Web 2.0 world).  Although if you’d ever had the chance to run into someone who worked there, you’d generally get lectured on end about how amazing they were and how much they were going to change the world.  I even recall a Stanford intern who visited my office and was choosing between working for them or for Google (my hunch is that he chose… poorly).

While doing a little research, I found a great article on GigaOm where the founder of the company, Evan Williams, espoused on some mistakes they made.  Notably absent from the list are things like “generating revenue” and “have a sales and marketing plan.”  That said, I do applaud anyone who takes the time to reflect as such, especially in a public forum.

Today Evan announced that he is now founding a new company, called Obvious Corp, and they have purchased Odeo’s assets (which is marketing-speak for “bought the chairs, desks, servers, logos, a little software, and the foosball table”).  So the question that comes to mind for me is: what is going to change?

From Evan’s blog:

The Obvious model goes something like this:

Build things cheaply and rapidly by keeping teams small and self-organized.

Leverage technology, know-how, and infrastructure across products (but brand them separately, so they’re focused and easy to understand)

Use the aggregate attention and user base of the network to gain traction for new services faster than they could gain awareness independentlyAs services mature, the goal is to get them to profitability with advertising and/or subscriptions, so they can add to the network (and fund more building). 

As Fred Wilson stated, this is, in fact, fairly obvious.  It’s the classic Idealab model, and it’s definitely a fun way to run a company.  But it’s also an extremely expensive model.  Roughly 9 in 10 startups completely fail, and then roughly 9 in 10 of the ones that “make it” have minor acquisitions that make a few people a nice chunk of change, but leave the majority of the teams involved unsatiated.  This leaves us with about 1% of companies that can “pull a Youtube” (although Idealab did start the company which eventually became Overture, which Yahoo bought, so that’s probably a pretty good win in the long term). UPDATE: I originally posted that Google acquired Overture, but Ryan pointed out it was Yahoo – thanks for the comment Ryan!

So the question at hand is (it’s a 2-parter): how much money does Obvious have to run (and where is it coming from) and how big is the team they are building to create all these new services.  Hopefully they can spin something out fast enough to generate enough revenue to pay for the development of the rest of the services – I do like the model of aggregating all these types of resources together.  Maintaining Google Labs is a lot easier when you have an Adsense to pay the hosting fees.