Twitvid buys AngelPad-incubated start-up Frugalo

Mike Cieri: Access to easy seed funding means more consolidation of start-ups to come

Frugalo, part of the AngelPad class of spring 2011, is now part of Twitvid, a video-sharing service founded in 2009. The acquisition price was not disclosed.

The young San Francisco-based company, which launched in June 2011 with $120,000 in seed funding from AngelPad, InterWest, Sierra Ventures, Gokul Rajaram and Keval Desai, had been focused on helping people get personalized recommendations for daily deals. The service will shut down in 30 days as the two-person Frugalo team set its sights on helping the 15-person team at Twitvid build out a video network.

"We had met the founders [of Twitvid] and developed a casual relationship and realized that a lot of what we were doing applied well [to what they were doing]," said Michael Cieri, co-founder and CEO of Twitvid, in an interview with me while he was sitting in Twitvid's San Francisco offices. Cieri will now be head of product at Twitvid.  "Twitvid is about helping people find interesting videos through their social networks," he added. "We have similar tastes toward personalization."

To that end, both Cieri and his co-founder and CTO Scott Reynolds took the Twitvid offer. Reynolds will now be head of backend engineering at Twitvid, which recently received $6.5 million in funding from DFJ Frontier and Azure Capital.

Part of the rationale for taking the Twitvid offer was the fact that the daily-deal marketplace and opportunity seemed to be disappearing. Earlier this year, Daily Deal Media, a site all about daily deals and news about daily deals, released a report saying that nearly 800 daily deal sites had folded. It's almost not surprising, given the number of daily deal sites that emerged last year.

"The deals market has changed pretty considerably from when we had our idea to launch," Cieri explained. "We were off to a good start with decent traction in our follow-up round with investors." But essentially, the space was consolidating, companies in the daily deal space were going under, and "our service was no longer viable for a big market... Frankly we thought we'd be more successful in joiing Twitvid and their mission."

Now Cieri and Reynolds will be helping Twitvid build out a social video network for users to discover video.

Cieri believes that we'll likely see a lot of consolidation among seed-stage start-ups since so many had "easy access to seed funding."

Here's his take from his blog:

When Scott and I started Frugalo last June, we set out to change the way that people discover and share ways to save money. Initially focused on the daily deals space, our first product helped people manage all of their purchased deals (a problem Scott and I faced) and find awesome deals with their friends. Since our December launch we've had a great response, nearly 3,500 signed up users and 20k monthly visitors, and we have been really excited about our direction.

While growing the business over the last few months, we've been in casual talks with Mo and Adil, the founders of Twitvid. After getting to know the founders and the company a bit better, we realized that we both shared a passion for creating great social experiences that help users discover and share. Twitvid is looking to build something truly revolutionary in the video space, an area Scott and I are both passionate about. We were all excited about the idea of working together and started talking about ways that could work.

Sometimes in life you have to make really tough decisions. After many conversations and much consideration, we realized that joining Twitvid was the right choice for us as founders and for our investors. Two main factors contributed to this decision. The first was that the deals market has significantly changed over the months while we went from idea to launch. The number of major deal sites is shrinking, the ability to share purchase information through Facebook and Twitter got easier, and many consumers are buying fewer deals. With a consumer internet product, mass adoption is required to be successful, and while our solution worked well for a niche of hardcore deal buyers, we questioned if the market was big enough to get us where we needed to be without a major pivot. The second reason was our excitement for Twitvid. Twitvid continues to grow rapidly in the social video space and has built a very strong team, and the founders have a big, yet focused vision for the company.  In addition, Scott and I have always been deeply interested in media and video based businesses. In the end, joining and helping to fuel Twitvid’s growth was something we were more excited about, as well as something that offers the best chance at producing a strong return for our investors.

As part of the acquisition, we will unfortunately be shutting down the service in 30 days. Luckily, Groupon and LivingSocial now offer excellent deal expiration notification services, and services such as CityPockets and DealRadar offer deal wallet functionality for tracking all your purchased deals.

Lastly, we want to thank our users for all the help and feedback, our families and friends, and our investors and advisor - especially AngelPad, InterWest, Sierra Ventures, Thomas Korte, Gokul Rajaram and Keval Desai.