Sources say a deal is not final, but a real possibility.
Flipagram may have found a buyer.
The once-popular LA startup, which publishes an app that lets users stitch together photos and videos into montages, is in talks to be acquired by Toutiao, a Chinese news aggregator known in English as “Headlines Today,” according to multiple sources close to the company.
A deal is not yet done, and the two sides are still discussing financial terms, these sources say. The standard boilerplate in these situations: A deal could ultimately fall through.
There may still be other suitors. Two sources tell Recode that Snapchat maker Snap Inc. has been in discussions with Flipagram in the past, though it is unclear if those conversations are still happening. Flipagram’s photo/video montages are similar to Snapchat’s Stories feature, which was the crux of Snap’s interest, according to a source.
A Flipagram spokesperson declined to comment. A Snap spokesperson also declined to comment.
Flipagram hired a banker this fall to try and solicit acquisition offers, but many sources on the receiving end of those calls told us at the time they weren’t giving Flipagram a serious look.
But Toutiao, which offers users customized news stories based on their interests, is serious. It’s worth noting that Flipagram investor Sequoia Capital is also an investor in Toutiao, though through its Chinese investment fund. If a deal goes through, you could argue that Sequoia is simply folding one of its portfolio investments into another.
Morale has not been high internally at Flipagram, according to multiple former employees. Many employees are hunting for new jobs or leaving the company, sources say, and Flipagram’s music division has been dismantled.
The sale process was driven by Flipagram’s struggles to transform its app from a creative tool into a social network. Flipagram CEO Farhad Mohit told Recode in March that the company was hoping to build a social component to its app so that people wouldn’t just create video montages, called flips, and share them on other networks like Facebook.
That plan hasn’t been very successful, sources say, and Flipagram started looking for a buyer.
It’s unclear how much Flipagram will be able to command in a deal. One source says that investors are unsure if they’ll get all of their money back. Flipagram raised $70 million from investors in the summer of 2015, including firms like Sequoia, Kleiner Perkins Caufield & Byers and Index Ventures. Silicon Valley bigwigs Mike Moritz (Sequoia) and John Doerr (KPCB) are both on Flipagram’s board.