

Viddy returns $18M of its $30M Series B - NLPsajeeth
http://allthingsd.com/20130507/social-startup-viddy-recapitalizes-shuffles-board/

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asanwal
When Viddy raised money, it was when folks were jumping on the who will be the
"Instagram of video" bandwagon.

Socialcam and Viddy appeared to be the front-runners for that, but then
certain things got in the way

\- FB cracked down on both for being aggressive with people's feeds. This
killed growth.

\- SocialCam got acquired for $60M by Autodesk which as a comparable
transaction wasn't very favorable for Viddy (on a price/user valuation
multiple basis since there was little to no revenue)

\- Investors had control of the board and likely decided based on the above
and other factors (such as company founders departing) that this was throwing
good money after bad and so decided to take their money back

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aaronbrethorst
Can someone explain to me how this works? I've never heard of a company
returning money except in the event of a shutdown.

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ghshephard
It's usually more likely to happen when you have a board that is firmly
controlled by the people who've invested the money in the company, and, when
they see a significant change in market conditions (or makeup of the company)
- decide that their ROI will be greater if they withdraw some of that
investment.

I'd be interested in knowing, though, what the precise financial transaction
looks like. Dividend? I would think that they would try and avoid those tax
consequences.

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ef4
IANAA, but "return of capital" is non-taxable.

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ghshephard
Thanks - [http://www.investinganswers.com/financial-
dictionary/investi...](http://www.investinganswers.com/financial-
dictionary/investing/return-capital-roc-914)

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yekko
VC probably got over 50% votes and forced this on them. Valuation goes back
down.

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obviouslygreen
It's really hard to say one way or the other what this is. "Recapitalization"
is a hilarious euphemism for "gimme back my cash," but considering they're
keeping a lot of what's in the bank and still going with their investors, it
could also be a very good sign. What reasonable person would want more
liability to investors than necessary?

Granted, the ~50% staff reduction probably sets off some alarm bells, but if
it really is a matter of improving efficiency, that's actually really good
business for a startup.

Unless I'm missing something... this is either news in both directions at once
or neither. Now my head hurts.

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zmitri
Here's my semi-educated guess on what's going on. I could be off, but I have
some sense of app store ebbs and flows by now:

1) Viddy is hurting bad in terms of users -- You'll see that JJ has tens of
millions of followers but the interactions and view counts on his videos are
very, very low in comparison. It makes sense to give it back because their
growth is probably very, very, low. If they are around 40-50th in Photo and
Video they are definitely doing less than 10k downloads a day.

2) Viddy actually has quite a good app. They have a pretty solid team, and can
ship quite quickly.

3) Apple is promoting the shit out of video applications. Even though no one
is really using them* -- things like Vyclone, etc. Either they are hoping for
one of these to really take off and cause iPhone sales in the same way
Instagram did, or are about to introduce new technology which makes video-
capturing much better/easier/etc in the same way that Instagram came at the
perfect time for the iPhone 4's camera enhancement.

Since Socialcam's sale, Viddy is definitely in the best position in terms of
Instagram-like video apps, so if there are new advancements in the iPhone 5+
that do make video more appealing somehow, they will be the go to app. That
being said, video is hard, and no one like to watch shitty videos which is why
I'm bearish on video apps in general.

*Vine is up there, but it's still an unproven quantity I would argue. Is it's current success tied to it's insane distribution network? Time will tell.

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obviouslygreen
Interesting; thanks for the insight. I still can't claim to really get it, but
this definitely sheds at least some light on the subject.

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josephagoss
Do the investors remain in control of the shares they acquired when they put
the money in? If so isn't this like buying shares in a company for free?

