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VCs flip Flip to Cisco in nick of time?

March 19, 2009 6:28pm
by Chris Nuttall

The Flip video camera became a best-seller in the US last Christmas as a cheap, dead simple device for capturing video and uploading it to a computer or the web.

Its maker Pure Digital was also capturing the market for a moment in time and has sold more than 2m units to date.

But Pure Digital’s sale today to Cisco may also be a perfectly timed exit for its VC backers - much bigger competitors are bearing down on the startup, looking to copy its success.

At the Consumer Electronics Show in January, Sony unveiled a new line of “Webbie HD” cameras, on sale from next month, which were a clear response to the Flip business model and undercut its cameras by as much as $50. Others are also releasing similar-style cameras, such as Creative with its Vado range.

Cisco is paying $590m in stock for Pure Digital and up to another $15m in retention bonuses for employees of the private San Francisco company.

Pure Digital is understood to be currently profitable and has raised at least $80m across five rounds of fund raising, from investors that include Benchmark Capital, Crescendo Ventures, Sequoia Capital and Steamboat Ventures, according to Venturebeat.

They may all have ended up with healthy multiples on their investments.

Cisco seems as interested in Pure Digital’s software as its hardware - its Flipshare allows users to organise, edit and upload easily their movies.

That means lots more high-bandwidth data being loaded onto the internet and more need for Cisco’s routers to take care of it.

Cisco has been hooked on connecting directly with consumers since its acquisition of the Linksys home router business in 2003. Pure Digital will become part of that Consumer Business Group, which also includes audio and media-storage products.

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March 19, 2009 6:28pm in Consumer Electronics, Digital media, Tech | Comment

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