VentureBeat

Logitech has acquired Slim Devices, the Mountain View maker of open source home networked music systems, for $20 million in cash plus a performance-based payment that will amount to “several multiples” of that.

This is a hit for the 20-something founder Sean Adams. He founded the company in 2001, and got by on almost nothing — by relying on a community of developers for the company’s main products, the Squeezebox and the Transporter.

He reached profitability on a mere $330,000 in angel backing (see comment from VC backer Bill Tai at bottom of our last piece), and then raised another angel round not long ago. Assuming the total funding was $1 million, this is a great accomplishment.

Here is Sean’s note to his users.

We wrote about the latest Squeezebox here, about how it lets you play your music anywhere in the house, and how its Web-based platform hooks it up with all kinds of services, from Pandora to Rhapsody.

Tai, who is a venture capitalist at Charles River Ventures, said Logitech has a friendly structure for retaining employees it acquires, and that if performance objectives are met, in several years there is payment that is several multiples of the $20M.

The success of Slim Devices is one more sign that any consumer entertainment device going forward must have a Web-based platform.

Meanwhile, Tai gives his late-evening two cents on what the deal says about the venture capital model:

On the venture front, it’s another indication that the huge wave of infrastructure investing that occurred during the build up of the Bubble has laid the groundwork for extremely low cost “company creation” — the web and open source have allowed pure web-based companies AS WELL AS companies like Slim Devices, which ships its value in a “hardware connected form factor,” to deploy their services for nil, and acquire customers through the web at extremely low cost. The high IRR (internal rate of return) part of our business in now expressing itself in more granular, horizontal bets than big vertical ones.

(Our emphasis added.)

SlimDevices to release latest Squeezebox — The come-out-of-nowhere Mountain View start-up sells a device that lets you play your music anywhere in the house, and hooks up with all kinds of services, from Pandora to Rhapsody. Its latest one will sell for $2,000 device; the NYT has the scoop. This scrappy company is run by 20-somthing Sean Adams, and to our knowledge he has made do with a mere $330,000 from angels (though he may have raised more without us knowing).

ChaCha a new search engine, with guides — That’s right. This company is just like Google, only it pays its employees or contractors to help you refine your search. On the good side, this a really useful service, and we hope ChaCha will stay in business. But that is the mind-boggling part for us. Read the story in the Mercury News. Maybe we’re missing something, but if this service is really for free, how is the company going to make money? Yes, there may be search result advertising (including vidoes while you wait), but we don’t see how that will cover the costs. We tried it out, but got tired waiting for a response (ChaCha is supposed to average about a minute, but we gave up after five minutes waiting for answer we posed about how much venture money start-up Rojo had raised; it was listed on both VentureBeat and Gigaom, but ChaCha didn’t find it). And we were annoyed by the site, which made regular “swooshing” sounds, though don’t understand why (was it the ads?). Don’t want to be quick to criticize; we’re just raising these questions given the prominent coverage in media articles where the cost question isn’t really dealt with.

Band of Angels for India — The Band of Angels in Silicon Valley, a network of individuals who band together to invest in start-ups, has been fixture for years. They told us a few years ago they had no plans to go international. So now there is a Band of Angels in India, led by the same guy Alok Mittal, who also happens to run the new office in India for Silicon Valley venture firm Canaan Partners. See more at Gigaom.

Digg to respond to criticism about clique influence — Responding to criticism that a small group of influential “Diggers” are controlling what news gets to the site’s home page, Digg chief exec Kevin Rose says he’s found a way to counterbalance their influence. He said a new algorithm will “look at the unique digging diversity of the individuals digging the story. Users that follow a gaming pattern will have less promotion weight. This doesn’t mean that the story won’t be promoted, it just means that a more diverse pool of individuals will be [needed] to deem the story homepage-worthy.”

Has eBay become the investment bank for Web 2.0? — With Web calendar company Kiko being bought on eBay for $250,000 by another company Tucows, this is a question being posed lately about eBay being posed lately. Om first joked about eBay setting a new floor on investment banking fees about a few days ago. Now Techcrunch is talking about it as a serious way for Web 2.0 companies to be bought. There are more showing up. Indeed, why don’t companies place a permanent listing at eBay, disclosing the lowest price they’d agree to be sold for — even if they aren’t desperate for a sale yet? They can keep changing the offer price, depending on their own assessment of their promise. In Kiko’s case, of course, the company had run out of steam, and wanted to make whatever it could from a sale of its assets. And Tucows, which wanted a basic calendar company for its own use, made the move. Tucows probably wouldn’t have found out about Kiko without eBay. Conclusion: The risks associated with starting a Web company, already reduced because of the very low costs involved, have just gotten even lower. Maybe that’s why you see even more Web calendars still launching (the company hassome differentiating features such as voice-enabled entries, and new ways of synching.)

Woz’s book, and Steve Jobs’ change of heart — Valleyway runs with some news that it concedes might be a tad old; but we hadn’t seen it. It is about Woz’s book, and why the Apple co-founder couldn’t get his former colleague, Apple chief executive Steve Jobs, to write a foreward. Perhaps no one saw news about the book until now because the latest, from the DailyNews, has a much more colorful quote from Wozniak:

“We wanted him to do a foreword, but he declined,” Wozniak tells Jacob Bernstein this week in WWDScoop, the new magazine from Women’s Wear Daily. “He felt the book sort of portrayed me as a good guy and him as an a-hole.”

Among other anti-Jobs anecdotes, Wozniak recalls in the book that when he invented a universal remote control and sent it to Jobs, he threw it against a wall, stuck it in a box, and mailed it back. “Steve had a fit about it,” Wozniak tells Bernstein. “He was under the impression that I’d left Apple in a very negative mode.”

The NYTs’ Pogue runs a story singing the high praises of the Squeezebox, a product from Slim Devices which lets you play your computer’s music anywhere in the house.

This is an intriguing company, based in Mountain View.

Beginning next week, the Squeezebox will do something no other hi-fi component can do: it will hook into Pandora… a sophisticated music-recommendation site. You name a band, singer or song that you like. Immediately, you hear a new “radio station” that plays…only musicologically similar songs. If you type “Billy Joel,” Pandora plays songs with “mild rhythmic syncopation, mixed minor and major tonality, a dynamic male vocalist and vocal harmonies.”

…But in the case of Slim Devices, you get a real taste of the creators’ personalities. The company bends over backward to make itself an open, transparent, right-minded outfit. The server software is open source, meaning free and open to the public to modify; as a result, you can download Squeezebox plug-ins that give it even more abilities…

We say intriguing, because the company is not a product of today’s hyped-filled moment. Two years ago, it was already focused on this area. The founder is Sean Adams, who now can’t be more than 26, and who started an Internet service provider in high school. Backers are Charles River Ventures’ Bill Tai and former Xoom.com CTO Vijay Vaidyanathan, who contributed $330,000 in an angel round.

Other cool tidbits here about the company:

Sean Adams aims to find out just how much traction a small design team can get leveraging the open-source movement. With the assistance of hobbyist code developers, the 25-year-old engineering-school dropout has secured a small foothold in the market for music-streaming systems. Now he’s courting investors to help take his 12-person startup, Slim Devices Inc., to the next level….A couple of employees working in a small back room handle final assembly and test of Squeezeboxes in batches of a few dozen units. Another room serves as a workbench, piled high with prototype circuit boards, where Adams sometimes tinkers well into the night.

And like some of the PC industry’s forebears, Adams never got an engineering degree but has had a lifelong passion for discovery and invention…”Without spending any money on marketing, we got the word out about the product,” he said. “The first 80 systems I soldered by hand, with parts I ordered on my credit card and pre-orders I logged myself.”