Israeli startup Qlipso Buys Almost-Bankrupt Veoh for its 14 Million Unique Users

Qlipso, an Israeli startup funded by JVP (see previous VC Cafe post), has announced the acquisition of  the assets of Veoh, a user generated video site, on the virge of its declaration of bankruptcy. According to the Wall Street Journal, the company was about to file for chapter 11 on March 19th at 5pm. On 3pm in the afternoon the Jon Goldman, 2Peer’s CEO (Qlipso’s parent company) made an offer after learning from a friend close to Veoh’s investors of the imminent plans to shut down the company two days earlier. The terms of the deal were not disclosed but WSJ estimates the deal to be below $20 million.

The acquisition is a bitter-sweet end to the story of Veoh, which has raised $70 million since getting funded in 2005 from institutional investors (Goldman Sachs, Intel Capital, Shelter Capital and Spark Capital among others) and big media companies such as ABC, CBS and Warner Brothers. As a result of the deal, Veoh will remain open to continue attracting its 14 million unique users who post and watch videos on the site (according to Comscore).

This is an excellent deal for Qlipso and JVP as they managed to almost instantly grow from an early stage starup to a revenue producing business (estimates say 7 figures by the end of 2010) with significant distribution for Qlipso’s 3D  interactive platform. Qlipso’s product enables users to simultaneously watch flash-nased contents including video and casual games. The platform can also be used for remote meetings (a-la-Webex and Adobe Connectnow). Several other Israeli startups operate in the same space, inclduing Oovoo, Seetoo and Watchitoo.

In an interview to Techcrunch, Jon Goldman explained the synergies that come out of the merger:

“This is an exotic venture strategy,” he admits, “Qlipso is an early-stage R&D company transforming into an business with scale and audience.” Qlipso gains an instant audience, a better-known brand, and relationships with advertisers. Goldman thinks the deal will help to establish Qlipso faster than he could have done on his own. “I think we have accelerated this by years,” he says. “We have a 5-person sales team in NY, a large audience, it is completely transformational.” If Veoh had gone ahead and shut down the site, he notes, there would have been no deal.