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Groove Networks lays off 20% of staff

Longtime Joel readers will remember when El Presidente gave Ray Ozzie, the mastermind behind Groove Networks, quite a bit of stick regarding his whole business and technology model.  Well, well, well ... this article:

http://news.com.com/2100-1012-991209.html?tag=fd_top

says the Groove boys just laid off a significant portion of their staff _and_ their current fundraising to date has netted them $155 megabucks.  $155 million to develop a product most people (even tech people) have never heard of.  It goes almost without saying that Groove is not yet profitable.

I can't quite come to terms with what portion of this equation is more outrageous - the guys spending $155 million or the guys investing $155 million.

Mitch & Murray (from downtown)
Wednesday, March 05, 2003

"Groove has not disclosed a target date for profitability."

I can't help but think anyone who allows themselves and partners to  sink a total of $155 million into a company that apparently doesn't have a business plan really needs to up the dose on their medication. *sigh*

Robert Moir
Wednesday, March 05, 2003

I visited the Groove forums months back and noticed sloppiness.  For example, the Groove server would be down for a weekend, and ordinary customers weren't contacted nor was the webpage (which still worked fine) updated.  In fact, the message was a polite version of, "Most of you are not paying an enterprise license, so we don't have the money to post, email or update our webpage."  Um, ok.

Someone (Larry McVoy?) explained that individual licenses in Bitkeeper were sort of discouraged since they cost the company disproportionately in support and overhead.  But I doubt he'd be so cavalier about defects and alienation as Groove was.

I don't think Joel's recommendation was quite right (would Groove be successful emulating Macromedia?  or is that a naive understanding of Joel's point?), but this doesn't have to be about Joel vs. Ray.  Joel expressed demand for a service, and maybe Groove could have met halfway.  I hope Groove has learned self-improvement.

Tj
Wednesday, March 05, 2003

How does a pure software company need so much cash? Groove's only hope is to get purchased by Microsoft in which case I don't think investors will get much return. Groove is not another Lotus Notes (which wasn't that great anyhow). I just don't get it. I've looked at the product several times and can't for the life of me figure out any realistic value it provides. Even conceptually it's a stretch.

pb
Wednesday, March 05, 2003

Tell me about it! At least my Segway investment still looks promising... doh!

jd
Wednesday, March 05, 2003

What are they selling?  There must be some other cash source.  $1.55E+8 isn't enough to pay for 290 people + overhead for 5 years even if all they are doing is software development.

z
Wednesday, March 05, 2003

To be fair though, if the severance packages were really generous and included job replacement help, cutting down on the burn is not a bad idea.  Maybe they established a beachhead and are now winding down costs.  And maybe things are not so clean.

Tj
Wednesday, March 05, 2003

Any software company that needs this much money just to get off the ground doesn't have a future ahead of it. It's run by people who don't know how to manage a business. Almost every tech giant today, was started with either a limited amount of venture capital or was self funded. And the ones that did get VC funding, became profitable super-fast.

John Rosenberg
Wednesday, March 05, 2003

i think this was predictable.

remember marc andreessen of netscape. huge success. then loudcloud(opsware) which is a big failure (as I see it).

similary with ozzie. memorable past but 2nd try (groove) is not that fantastic.

for most of the vc investors it was enough if you have a big reputation. sometimes it turnes out that fame is mostly luck. or the expectations were too high.

na
Thursday, March 06, 2003

but the defense dept loves it and that alone justifies the investment. Groove is also very quiet about their other wins.

not a groove user
Thursday, March 06, 2003

groove was initially self-funded by ozzie who made a substantial fortune from notes. but he's smart enough not to put all of his own cash at risk.

not a groove user
Thursday, March 06, 2003

z, $155m is *plenty* of cash!! Even if they averaged 100 FTEs for those 5 years, that's only $100m *max* for salaries. I wouldn't be surprised if they now have at least $50m in the bank.

pb
Thursday, March 06, 2003

I find if curious that Microsoft is dumping so much money into Groove while simultaneously working on their own P2P products. Microsoft recently released betas of their Real-time Communications Server ("Greenwich"), threedegrees (multimedia IM), and the P2P/IPv6 SDK for WinXP. Well, I guess Microsoft can afford to places lots of bets, hoping for one home run.

runtime
Thursday, March 06, 2003

I noticed this, too.  The SharePoint development alone could become a competitor to Groove, if a lot more development was done on it.  Maybe Microsoft and Groove are trying to create a market, but I don't really see the use for Groove (or SharePoint) at this point.  It seems to me that groupware/conferencing is nice, but not necessary.

Tim
Friday, March 07, 2003

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