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Blinkx video search is a start-up founded by ex-Autonomy guys with no revenues to-date. The company first started out making a web-search toolbar and then Google came out with one. So they licked their wounds and decided to do video search instead. They told everyone they had $10 million in angel funding but in reality, Autonomy (their former parent company) had a 90% ownership share in the company for the licensing of the technology that runs the Blinkx video search. So far so bad.

Later, Autonomy’s demerger filing shows that its “consumer unit” (Blinkx) had $3.8m revenues in 2006, all of which was “generated by Autonomy salespeople who are not transferring to the Blinkx business”. The proposed revenue model of the demerged company is primarily advertising-based, but “no significant “advertising” revenues have been earned to date.” The document is full of promises of potential future revenue streams as one might see in any (perfectly valid) start-up business plan. As a consumer I’m delighted to benefit from the service but as a fund manager I should be shot for buying this stock. (Investors beware!)

Here’s my take: Autonomy has managed to unload its loss-making consumer division ($5.1m in costs in 2006) to cash in on the Internet video hype. Autonomy founder Mike Lynch and his execs wanted to cash out on this opportunity.

So Autonomy calls the 90% back into Autonomy, and they go back to the UK and are wrapped up with the rest of Autonomy’s consumer plays (all small) and spun out prematurely on the AIM penny stock market (because Blinkx wouldn’t of made it on any US market). All to raise money for Autonomy, because it appears, the technology and angel funding came from them.

If you were a VC in SF, would you every fund that deal? How would you price something with 10m in angel funding? And 90% ownership by a UK search company?

The other thing that is interesting is, after this happened, I know a lot of Sand Hill Road VC’s and no less than 5 of them have said things to me about Blinkx that it was fuzzy technology that didn’t impress them, that the people weren’t really in SF, they were UK and that there was no way it was worth say, $100m as a post money funding thing, so that they could buy 40% of the company as they typically do when the do a series A, and then put in say, 30 million. To make the numbers work, the whole thing was a disaster. Basically, they all saw right through Blinkx and were a little disgusted.

Most of the videos they “host” disappear after 7-10 days because of the deals Blinkx has with video publishers. Only a very small percentage of the 14 million hours of video they claim to have indexed are actually available on the Blinkx web site which is very misleading. It’s more like 1 million videos at any given moment.

The only thing Blinkx is relatively good at is PR. They put out a weekly press release, no matter what is going on, and keep the hype coming. Their CMO used to work at a PR firm called Outcast so that explains that.

Going public on AIM, they appear to have snowed a lot of people into thinking they have something interesting.

In fact, my opinion is that they did the AIM thing to pay Autonomy back because they really don’t have much to show other than hype.

I’ve also heard the Blinkx executive team is very rough around the edges with poor leadership skills. All decisions apparently go through Mike Lynch so these guys are puppets. Makes sense considering Lynch has the largest share of ownership in the company. And what’s with the abandoning ship? According to this post, 10% of the company left because they weren’t happy. That’s gotta hurt employee morale and the bottom line with such high turnover rates.

So let’s get the facts straight

• Blinkx doesn’t own its own technology.
• It’s only achievement to date is having spent $20m of Autonomy shareholders’ money indexing 14 million hours of video from 200 content partners
• No VCs would consider funding them
• Their stock has plunged almost 25% in the last few days
• Only a very small percentage of videos are actually available
• 10% of their workforce quit in only a few months time

Hmmm…well, if I was to rank this stock overall, it would a big SELL and ASAP. I predict the company will be quietly brought back into Autonomy or will be sold off within the next year. Their website looks like it was built by a toddler and where is the AdHoc advertising platform they’ve announced? Time to step up your Marketing efforts gentlemen…but it might already be too late.

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