Thanks to the Instagram sale there’s another frenzy of articles and people who want to talk about how VC/Seed funded startups “work”. They want to tell you that startups come up with a good idea, prototype, get funded, create massive growth, and then sell… just like that. This worked for Instagram just as it has for dozens of startups (not all of them with the kind of valuation Facebook gave Instagram). VCs love this model, it gets them good money quickly without the risks of a long-term company. The model doesn’t work for every company though, not even close.
A great recent example of this is Vivisimo. The local Pittsburgh company sold last week to IBM for an undisclosed amount. I have no insider information about the deal, but I’m going to take the optimist point of view and guess it was a favorable deal for Vivisimo. The company was founded in 2000 when Enterprise Search was a somewhat fringe market. As recently as 2008 (actually as an IBM employee) I was consulting with clients about how they could benefit from enterprise search, but most of them were trying to come up with more structured ways of looking at all their data. Vivisimo had a loyal, satisfied group of customers and a reputation as one of the best Enterprise Search companies in the business. The market just hadn’t popped yet.
This year, people started to realize that one of the values that the cloud drives is that much of your companies data (even the unstructured bits) will exist in central repositories where it can be indexed and searched. Most enterprises have realized that they won’t be able to manually tag and organize these huge messes of data and have come to the realization that they’ll need to be able to search through it. It lead Amazon to deploy CloudSearch a couple weeks ago. It’s a main driver behind GDrive that was announced last week. And, much to Vivisimo’s advantage… IBM realized it was a capability that they lacked. The moons came in to alignment and after 12 years of working hard Vivisimo’s well deserved reputation and highly tuned technology was something IBM needed.
Sure, the investors that put in millions in 2008 and the early investors who funded it even earlier had to be patient, but they got far more last week then they would have if they’d followed the Instagram model and sold in 2 years.