The strange saga of Omnidrive continues. On Friday we reported that online storage service Omnidrive, once a market leader, had joined the deadpool after the site's domain name expired. Further evidence was posted during the weekend by Omnidrive angel investor Clay Cook, who had invested $100,000 into the company. In a scathing post, Cook wrote that "I am 99% sure I will not receive a cent." However, Omnidrive founder and CEO Nik Cubrilovic is - once again - claiming his company is not dead.
There has been a lot of unease about the Omnidrive situation, especially amongst a number of Australian startup people - who have been calling for someone to investigate Nik's actions. It's an awkward situation, because many of us know Nik personally (myself included). What's more, the story hasn't gotten the coverage that other deadpooled companies have. One reason is that TechCrunch's Michael Arrington is an Omnidrive investor, something he has been very open about and which prevents him from commenting. So it is really up to the rest of us to do some digging.
As a start, I decided to send Nik an email and ask for his response - because Clay's post had some serious allegations. Here is Nik's response:
"The domain is up but it is taking a while for the DNS change to propagate. It all started when I tried to change registrars in time before the domain expiration, and I put the transfer request through (to godaddy) and even though there was a confirmation it was never completed. The renewal went through last night, and from here I can see the site again but I can understand if it will take another 24 hours or so.
As for Clay's comments - it is unfortunate that he posted what he did in a public forum, as it doesn't help my efforts or his efforts. I think Clay was well aware of the risks of angel investing and was more than willing to ride the situation to a sucessful outcome, but now that he feels that we aren't doing so well looks to make a quick exit. You can't have an angel investment where you can take all the positives, but as soon as there is a negative decide to take a risk-less way out and pull your money back. You either ride up or ride down. I did contact clay and respond to his email enquiry, and was hoping to convince him to help me through, but I didn't hear anything back. He specifically asked me not to call him, which I didn't. I don't think it is particularly constructive for him to vent publically, or for there to be knee-jerk reactions to any and every error experienced on the site.
At the moment I am in the process of (along with 2 part-time developers who are helping out) of testing and rolling out a new version of the app. We ripped out our own backend and are utilizing third-party storage services, as our biggest cost has been the hardware we have had to opperate (and bandwidth bills). We first talked about this a year ago, and it has taken since around December to get the development to this point. Atm parts of it are live, and we are utilizing S3, google and a few other services for the storage-end (the users decide which services to use)."
What to make of all this? While I give credit to Nik for responding to RWW's enquiries, I would guess that Clay Cook and others who have been burned by Omnidrive's fate will not be satisfied by it. What's more, there are a lot of unhappy users, judging by what I saw of the Omnidrive forums before the domain issue.
Perhaps we are beginning to see some of the downsides to web 2.0 here. I've met Nik several times and found him to be an intelligent, likeable guy. I can certainly understand why people invested in Omnidrive, as it was a promising company.
Yet it's ended up a sad story. The online storage market, as we've pointed out before, became very tough once Amazon, Google and Microsoft all entered it. This story in many ways represents the 'other side' of the web 2.0 era - promising startup, the market didn't quite pan out, yikes the angels and early employees lose out big time. No bigco buyout, more like a bigco bury.
Normally that'd be the end of the story - deadpool is the phrase that has become common in describing such a mess. The strange thing here is that the Omnidrive story isn't over yet. Clay Cook and others have money owing to them, and have been loudly claiming that Omnidrive has done them wrong. Nik Cubrilovic indicated in his email that he's done nothing wrong, and what's more claimed that he is still desperately trying to make the company work. Which do you believe?
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Wow, I'm surprised.
Nik, you're obviously watching this talk on Omnidrive, so how about a straight answer to a few questions.
1. Do you owe anybody any money?
2. If yes, do you intend to pay them back?
3. If no, do you think that you have misrepresented at any stage that you had money to pay people. i.e. by hiring people on a monthly salary and saying they'll be paid.
Richard, I have an idea. How about you host a call with Phil, Clay and Nik and you can moderate. Then we could really have the full story out and Nik can rectify any misunderstandings in a transparent way. Seems like he trusts you Richard, and I think all of just want to get the full and honest story. If he's done the right thing all the way through, then he shouldn't have anything to be afraid of?
On the other side, letting your domain lapse isn't very clever, and from what Clay said, asking Nik not to call him again when he's invested money and apparently 'wants a quick exit' doesn't make much sense.
Nik, any response?
Posted by: Mick Liubinskas | May 5, 2008 3:27 AMIt's likely that both are correct. Omnidrive burned through most of the money, Nik tries to get costs down. Clay doesn't believe they'll make it.
But Nik is right: Angel investments are highly risky investments and nobody's helped if Clay complains about the problems in public. Even if the company were bankrupt.
Posted by: Sebastian | May 5, 2008 3:58 AMI wonder how they want to use Google for storage.
Posted by: Steven | May 5, 2008 5:01 AM@Steven: probably Google Docs uploading, similar to DocSync.
Posted by: Terence Pua | May 5, 2008 5:07 AMJust a quick comment, then signing off for tonight...
It may not be obvious but I actually want Omnidrive and Nik to succeed and be able to repay all his debts. To do this Nik needs to take responsibility for his actions, and I believe public exposure is what is required to make it plainly obvious how important transparency is to investors.
I understand how risky angel funding is, and certainly was not looking for "a quick exit". What I wanted was transparency and once I believed that this was not occurring then I requested my invested money be repaid, as per the terms of the agreement.
Posted by: Clay Cook | May 5, 2008 5:31 AMClay, followed the link to your post...
Man, you said it all!
"
Why did Omnidrive fail in my opinion? Something strange can happen in the valley and I think Nik got trapped by it completely. Too many parties, too many conferences, too much working between 1-4am, not enough working normal business hours, too much socializing, not enough focus, no business development, and not enough follow up and delivery.
"
I just see all my sins and flaws listed in that list.
Posted by: max | May 5, 2008 6:04 AMThanx for that!
As an Omnidrive user, it would have been more logical to focus on fixing bugs in your service, rather than trying to change domain registers at the very last minute, if his story is true, which if it is makes very little sense.
Posted by: djacobs | May 5, 2008 6:57 AMVery interesting information about questions on where the money was spent?
"Hey Clay
Thanks for getting this out there. I think my biggest disappointment is that Nik never faced his users or the people that once put their faith in him. There has been no official end-of-Omnidrive post or message. No courage. Nik has shown himself to be an armchair commando - all words and no execution.
Even now there is a question mark on the RWW post... "Omnidrive: Officially Cooked?"... You mean it's still not clear?
Some of the blog responses I have seen today indicate that the market was tough and the money just ran out... but let me be very clear. We never saw any money. No one was paid. Money came in (Clay, I was there when you handed a cheque to Nik) but I saw no evidence of money being spent. Anyone that thinks that Nik was an innocent young entrepeneur with energy and ambition, buried by a difficult marketplace has just bought some Rolex watches from a guy in the parking lot for $20. Conned like the rest of us.
Phil Morle"
Posted by: Bill | May 5, 2008 7:38 AMOne point I will make in defence of Nik, he is right when it comes to Angel investing. 90% (perhaps more) of startups fail, and at the end of the day, people complaining about investments lost should have (or would have) been more than aware of this when investing.
Posted by: Duncan | May 5, 2008 3:02 PMJust tried the link (http://www.omnidrive.com/) and it goes to a non-working WordPress site ... not exactly what I was expecting ... :-(
Posted by: Mike Riversdale | May 5, 2008 4:05 PMWell, Nik seems to have been correct in that the domain was just having issues, despite having 24 hours of no-access, I have been able connect today, and am downloading a couple of files at over 200Kb/s.
Posted by: Nathan | May 5, 2008 4:21 PMIt's been a bit of a rocky road with OD, but the capabilities are great and I love supporting Aussie-made products/services, so if bought out by someone with reliable hosting (Google, come on Google!!!) I would really think about using it as primary storage and using WebDav access 24/7, sick of having to keep copying files between laptop, work and home machines.
Another Omnidrive user here. Sorry Nik, I'm giving up on you. I switched over to Omnidrive from Yahoo Briefcase which was awful. Omnidrive is still great when it works but for this kind of app I have to have 100% confidence that the documents I entrust to you will always be available to me. If it can't be trusted then it's useless however great the interface is. Perhaps you should try selling to Yahoo; Briefcase is still crap.
Posted by: Charlie | May 5, 2008 6:47 PMAnother thing. My dad is a travel agent. Travel agents have to have insurance to protect travellers in the event that the tour operator goes bust. Perhaps there should be a new industry code of practice that says all service providers must have some basic insurance to ensure that users have at least one month's access to their data in the event of the company collapsing.
Posted by: Charlie | May 5, 2008 6:54 PM@Duncan - I think you are missing the entire point, and again ignoring/defending Nik's actions.
From my original blog... "I understand that Angel Investing is a risky business. I am cool with businesses going under and losing 100% of my investment if they have had a hard honest crack at it. I have at least one other in our angel portfolio that I suspect will be in the deadpool within 6 months."
The issue is TRANSPARENCY. Nik is yet to admit he owes some serious amounts of money to past employees etc. There was no disclosure of this when I invested the second time around, and there is still no disclosure of it (well at least from Nik/Omnidrive).
Posted by: Clay Cook | May 5, 2008 7:58 PMDuncan, I have to agree with Clay. Yes Angel investing is high risk and I don't think there is a doubt that Clay was aware of those risks.
You invest in a management team and you trust them to do a good job and to communicate to you on how the business is progressing. Part of Clay's investment was after Nik had hired a CTO and a head of engineering - which sounds like progress. When they both resign due to not being paid, you start to wonder where your money has gone.
Do you think Nik has operated openly and with full disclosure?
When the business appears to be falling apart and someone offers you a buyout, I think it is good business practice to consider it fully. I don't think that is 'quick exit'.
Do you disagree?
Duncan, how about you get Nik on a podcast with Clay and Phil and we can work it out?
Posted by: Mick Liubinskas | May 5, 2008 8:24 PMIt's amazing how quickly this discussion has spun around, away from the accountability of an entrepreneur, to the investor's intention.
Speaking from an entrepreneur's point of view, if my investor has ANY concerns I'd be straight on the phone to work through the problems with them. Investor's aren't only there for the money, but also the advice. I find it strange that Nik wouldn't involve Clay, and just as strange that he would use RWW as a platform for a response (no offense Richard). I'd expect him to contact Clay as soon as there was any concern.
As for Clay, I've spent a good deal of time with him, and want to say that he is a very astute business man. He is also VERY approachable. This issue with Omnidrive has not come about because of him.
I think Mick's idea is a great one. Lets get this whole thing out in the open, so the Aussie web community can clear the air over this one.
Posted by: Richard Giles | May 5, 2008 8:34 PMLet's be very clear. This issue is not about risk - which Clay clearly understands. It's about being profoundly misleading. Its about lying to employees and investors. It's about insolvent trading for months and months. Nik did not innocently fail as a hardworking enterpeneur. He knowingly failed to be honest.
So when will a journalist or blogger do some digging? This whole issue (except for rww) is an embarrasment to the blogging community.
Posted by: phil morle | May 5, 2008 9:02 PMLet me add that I don't think there's much more RWW can do, short of launching a full-scale investigation - and that is beyond the remit of this site (which is after all focused on products, not business). We've reported what we know of the facts, and part of that was getting a response from Nik to Clay's post.
However, I am open to RWW hosting a podcast involving all the main players, if that helps. Sad as this situation is, it could be helpful for other entrepreneurs to know the full story, from both sides.
Posted by: Richard MacManusDuring that podcast, Richard, can you bring up the customers? During this whole conversation, those people that paid for a service seem to have been ignored.
Posted by: Jeremy Pepper | May 6, 2008 12:46 PMDuncan,
Are you as stupid as you just sounded in that comment or are you so conflicted you cant see straight?
Sounds like Nik stole (a portion of?) money from investors for his personal expenses. (infered from the fact that no company expense was ever paid through the VC investment . . . ie no salary was paid out to employees) Furthremore, revenue from paying customers did not go toward paying company expenses either (again salary).
Posted by: will hsu | May 6, 2008 11:42 PMThis seems remarkably similar to how Nik's last virtual drive venture ended up, and I see alot of the same reasons as last time too. ALOT of the same reasons in fact. Read back through Nik's blog from 2003-2004 if you're interested.
Posted by: Robert | May 7, 2008 11:24 PMI have to say to those supporting aussie-made startups, Omnidrive wasn't made in Australia. 90% of the work was done by a team in India that weren't even an employee of Omnidrive.
Again and again Nik talks about releasing a "rolling out a new version of the app", cut the crap mate.
Posted by: Rex | May 8, 2008 12:12 AM