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Microsoft Spins Off Wallop

Microsoft has taken Wallop, its social networking experiment site, and spun it off as a seperate, venture capital funded startup. The new Wallop is led by CEO Karl Jacob, a veteran of both Microsoft and startups, according to Michael Arrington. The startup begins having already received a first round of funding, with Microsoft retaining a minority stake.

The new Wallop, located at (till now, the site has been at is expected to launch this summer.

I think it is great that something Microsoft Research created is being spun off into a new company, but what confuses the hell out of me is why Microsoft has a minority stake. Shouldn’t MS have been considered the first round of funding, given that they built the company? Maybe I’m not understanding the financials involved, but all I want to know is: If Wallop is successful down the road and has an IPO, how much does Microsoft benefit?

It could be a whole new strategy for Microsoft: Let small teams create interesting and risky small websites within the company. If they create something with promise, but of no use to Microsoft as a company, then MS gives them a first round of funding and spins them off as a new company, with the employees who built it running the new firm. If the company goes public, Microsoft cashes in, big time, making the whole thing a very successful venture.

Microsoft’s stock isn’t going anywhere. Maybe it could have a lot of success (with minimal investment) as the next Idealabs? Consider this: In due time, an IPO of could be worth twenty billion dollars.

April 26th, 2006 Posted by Nathan Weinberg | General, Windows, Corporate, Live | no comments
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