These People Sold Twitter For Just $5 Million Back In 2006

barbara poggiali

Photo: Flickr

How would you feel if a company you sold for $5 million less than five years ago was now reportedly fetching offers as high as $10 billion?That’s almost exactly what’s happening to the dozen or so original owners of Twitter.

Twitter started as a project at another startup, Odeo

Twitter actually started out as a side-project at another startup called Odeo. Back in 2005, Odeo was supposed to become a platform for podcasters. The problem was that Apple announced podcast subscriptions in iTunes that same year.

After Apple made its announcement, Odeo CEO Evan Williams told the startup's 14 or so employees to start imagining new directions in which the company could go.

In February 2006, three Odeo employees -- Jack Dorsey, Florian Weber, and Noah Glass -- came up with something called Twttr, what's now known as Twitter.

By the summer of 2006, Twitter had a few thousand users but Odeo still going nowhere.

Williams, already pretty rich from having sold a company to Google years before, decided to do something drastic. He offered to buy Odeo and all its assets, including Twitter, back from from investors.

Here's what Williams wrote about Twitter in his letter to shareholders:

By the way, Twitter (http://twitter.com), which you may have read about, is one of the pieces of value that I see in Odeo, but it's much too early to tell what's there. Almost two months after launch, Twitter has less than 5,000 registered users. I will continue to invest in Twitter, but it's hard to say it justifies the venture investment Odeo certainly holds -- especially since that investment was for a different market altogether.

Buying back shares from Odeo's investors was an unprecedented move and, at the time, it was widely lauded as a generous act on William's part. Startup founders fail all the time, and they basically never pay back the investors who gave them a chance to succeed.

Five years later, of course, Williams looks like a genius and the people who sold him Odeo -- and Twitter -- look like they missed out.

Within a year of buying back Odeo, Williams spun Twitter out as its own company -- a company now supposedly fetching billion dollar offers from Google and Facebook.

Our question is: How do Odeo's original investors feel about this twist of fate?

Depressed?

Happy for Ev?

Conned by how much he downplayed Twitter in that letter?

We asked them.

James Hong was an Odeo angel investor. He's most famous for being the cofounder of HotOrNot.com. He's a close friend of Evan Williams.

Hong told us, 'Obviously, I wish what happened hadn't happened. There was a dark period where I didn't want to hear about Twitter.'

Hong says Williams later approached him about investing in Twitter as a spun-off company, but that he decided not to because he worried it might be competitive with another project.

The lesson he learned, he says, is that 'if you're an investor and you have a friend who wants to work on an idea that you want to do, let them do it and invest.'

Hong says, 'net-net, I'm happy my friend did well.'

Lotus Development

Josh Kopelman, now a partner at First Round Capital, is most famous for founding Half.com, which he sold to eBay.

Asked if he ever thinks about the way Williams handled buying back Odeo, he told us: 'My answer is something that I do not want published.'

Tim O'Reilly is the founder and CEO of O'Reilly Media, which publishes books on tech and hosts the famous Web 2.0 conferences.

Evan Williams actually worked for O'Reilly before he founded Blogger, the company he sold to Google.

'When he started Odeo, I was an investor because I knew Evan and believed he was going to be successful,' says O'Reilly.

When Williams contacted O'Reilly about buying back his Odeo stake, O'Reilly says he agreed to it without thinking much about it.

'I didn't pay attention at the time. I was very busy. I'm not really a professional investor. I have my own life to live and my own work.'

Does he think Williams pulled a fast one on investors?

'It's certainly possible that Ev is more Machiavellian than he appears. I don't know. I take it at face value that he was doing what he thought was best.'

'It's very easy to look back and say, 'Wow, I'd like to have a bigger piece of that.' It's very easy to say that.'

Dave Pell

Dave Pell is a startup investor, 'early adopter,' and early blogger.

Asked about Odeo and Twitter, he told us: 'I think I'll hold off on this.'

Blogger cofounder Meg Hourihan tells us, 'I used to read his site in the late nineties/early 00s and that at that time I thought he was someone super-connected and important in the SF/tech world.'

Joe Kraus: Declined to comment

Odeo angel investor Joe Kraus is now a VC for Google Ventures. He didn't want to talk to us.

Ron Conway: Re-invested in Twitter

Ron Conway is probably the most prolific angel investor in Silicon Valley. It's scored him a number of wins, including Google.

He says he invests in people, not companies. So when Evan Williams started a new company, Twitter, Conway re-invested.

Our understanding is that only Conway, Mike Maples, James Hong, and perhaps Ariel Poler were given a chance to re-invest into Twitter.

Mike Maples: Re-invested in Twitter

We were unable to reach Mike Maples, a profilic and successful Silicon Valley angel investor.

Other Odeo investors we couldn't reach…

Investors we were unable to reach include:

Barbara Poggiali, telecom executive.

Ed Zschau, a former congressman.

Emanuele Angelidis, telecom executive.

Francesco Caio, the former vice chairman of Lehman Brothers.

The most interesting thing about Twitter's founding is how it leaves out a cofounder…

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