[Posted on April 7, 2008 - 1:15 PM]
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For the second time, a digital music company linked to Shawn Fanning has resulted in a disappointing exit for venture investors. Snocap Inc., a digital fingerprinting technology developer whose software could be used to monitor traffic on "legal peer-to-peer" networks, has been acquired by social music site operator Imeem, reportedly for less than $5 million. As with Fanning's previous company, file-sharing service Napster Inc., the deal represents a negative exit for venture investors.Snocap, which partnered with Imeem in March 2007, last fall saw Fanning depart the company and laid off more than half its employees. Founded in September 2002 by Fanning, Jordan Mendelson and noted angel investor Ron Conway, Snocap took in at least $25 million in venture funding from WaldenVC, Morgenthaler Ventures and Court Square Ventures. (Morgenthaler is also an Imeem investor, alongside Sequoia Capital.)
While Snocap had tried to reposition itself as a widget for selling music on social networks such as MySpace--in advance of that company's new music-selling initiative--Imeem implied in a statement that Snocap's core technology allowing content identification and tracking of shared files was key to the deal. The social network compensates labels and artists based on file-sharing within its network, generating revenue via advertising.
Hummer Winblad Venture Partners risked an investment in the legally dodgy Napster, leading a $15 million round in 2000. The service, which boasted tens of millions of users, was shut down following a court order in 2001, then sold in a bankruptcy auction the following year. --Paul Bonanos
See FAQ from Snocap regarding Imeem acquisition
For more see TechCrunch, The Register and Listening Post
