StumbleUpon Revs Forward After Exiting eBay; Rivals Facebook As Social Discovery Engine

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the resources to market the service or build up the advertising model. Camp says his share of StumbleUpon’s revenues, together with his stipend and his teaching-assistant wages, barely covered his rent. “When you have no cash or employees or office, it feels more like a project than a company,” he says. “We were just Alberta-numbered-company-such-and-such doing business as StumbleUpon, and that was it.” But the crucial number—the size of StumbleUpon’s user base—did continue to grow.

Phase 2 began when Camp visited Stanford for a conference in September 2005. There, he met Brad O’Neill, an individual investor and executive at data clustering software maker PolyServe who’d made money in PolyServe’s sale to Hewlett-Packard. O’Neill liked StumbleUpon—which, at that point, had about 600,000 users—and he began introducing Camp to other Silicon Valley investors, including Ron Conway, Ariel Poler, and Ram Shriram. “I’d never raised money before. I’d never even done a PowerPoint before. I was totally winging it,” says Camp. “But when they saw that we had no money, no office, they were impressed with how far we had gotten.”

In the end, StumbleUpon raised $1.2 million in seed funding on a valuation of “4-something million,” according to Camp. That enabled the company to move to an office in San Francisco’s South of Market district in February 2006. In light of the pre-money valuations that some early-stage startups like Quora are getting away with these days, Camp says, he should have held out for something higher. “If I had that traction today I would ask for a pre-money valuation five times that,” he says. “But at the time, we were a couple of kids from Canada, and it seemed like a great deal.”

But more money was on the way. 2006 was a whirlwind year: almost as soon as Camp and Smith arrived in San Francisco (Boyd and LaFrance had left the company by that time), they started taking meetings with big Internet players like Google, Yahoo, AOL, and eBay, all of whom expressed interest in a potential acquisition. By late 2006, “we started to get informal offers—not term sheets, but strong verbal interest,” says Camp. “But until eBay, it never seemed like the right fit or the right price or the right time.”

To keep growing, Camp and Smith knew they’d have to either raise venture funding or be acquired. They were engineers at heart, and they didn’t relish the idea of spending lots of time as supplicants on Sand Hill Road. “When eBay made a really good offer—which meant we could stay in our office and do our own product engineering stuff and not have to do all the fundraising—it seemed too good to be true,” Camp says. StumbleUpon accepted the offer, and the eBay acquisition closed on May 30, 2007. (The exact amount of the offer was never disclosed, but O’Neill’s LinkedIn profile states that it was “over $75 million.”)

And so began Phase 3, the eBay years. With the auction giant’s resources, StumbleUpon was able to hire enough engineers to complete a much-needed site redesign and, just as important, to introduce a Web-only version of the Stumble button, so that users wouldn’t have to download a special browser extension to use the service.

But it quickly became clear that eBay’s offer really had been too good to be true. “It’s nothing that’s their fault, it’s just that it’s a big company, and I didn’t have … Next Page »

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Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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9 responses to “StumbleUpon Revs Forward After Exiting eBay; Rivals Facebook As Social Discovery Engine”

  1. James Rose says:

    It is hard to get businesses going sometimes but once they get started going and making money they seem to straighten out just like StumbleUpon did. I know my IT consulting business needed some direction but once I got started everything worked out. Being in Boston helped because I wasn’t surrounded by huge companies like they were in the Bay Area

  2. I’ve been using StumbleUpon for a number of years and I’ve found some great sites as well as receiving some excellent boosts in traffic on ‘stumbled’ posts.

    I wish them all the best as they continue to move ahead.

    Now, if I could only work out how to get more of my posts stumbled. :)

  3. Al Shaw says:

    Agree with your analysis.

    StumbleUpon is great for “browsing” the Internet (remember when we used to do that, as opposed to “searching”).

    Also, a great source of inbound links as long as you don’t submit your own content too often.

  4. Ackthpt says:

    As far as I’m concerned, SU has always been old school. One of the biggest “secrets” on the web… I might even use it more than FB.

  5. Jerm says:

    Please! Facebook doesn’t have shit on Stumbleupon!

    The only problem is when SU really tries to capitalize on their worth by implementing ads and such, it will kill itself. In a David Carradine style.

    I love you Stumbleupon! I will shed at least 3.5 tears when you murder yourself in the effort to make money off your awesome.

    Let’s all have a moment of silence for what SU used to be. Now that it’s reached it’s apex it will undoubtedly be in the trash bin of great internet ideas, soon. Makes me sad :(

  6. megan says:

    I have loved StumbleUpon since I first Stumbled Upon it. Now, I’m hearing the saying “I Stumbled it” more and more. Keep up the great Job.