Sony buys video start-up Grouper for $65 million

Grouper, the Mill Valley (near San Francisco) video sharing start-up that for a while skirted dangerously near also-ran status, has been acquired by Sony.

This is one of the more impressive management turnaround stories in Silicon Valley's short Web 2.0 history. We've followed the team and its strategy since it was founded in 2004, as a peer-to-peer company that offered a software where small groups of people could share things like photos and videos. But finding that its traffic wasn't growing, co-founder chief executive Josh Felser made a really tough decision in December of last year:

He reoriented the company toward online video sharing, even though he'd hired all these engineers with the promise he was doing peer-to-peer. We remember meeting him at a dinner part at the time, and noting his determination: Even as YouTube's lead was already quite substantial, even humiliating, Josh kept fighting. It was the title on one of our posts. He created funny videos, of Grouper beating up YouTube (scroll down). He pushed new features hard, like video comments.

We talked with Josh and co-founder David Samuel this afternoon. They said Sony Pictures Entertainment, headquartered in Los Angeles made the acquisition of the 26-employee team after partnership talks transformed into an acquisition offer.

This is a great return, considering the company only swallowed $5.25 million in venture capital.

Also, this is the first Web 2.0 company this year, apparently, where the acquisition amount has been made public -- perhaps because it is not embarrassingly small, like most other acquisitions.