An investor who backed Quibi, a startup that raised $1.75 billion and failed 6 months after launch, explains why he bet on its leaders and wishes they tried to 'fight more'

  • Jeffrey Katzenberg's $1.75 billion-backed mobile-video startup is shutting down, six months after its subscription service went live.
  • Anis Uzzaman, whose firm Pegasus Tech Ventures is an investor in Quibi, said he wished Quibi would've stuck it out for longer: "I would've wanted them fight more rather than giving up so quickly."
  • Quibi has said it will return $350 million in capital to shareholders, or about 20% of the funding it raised, but that it's also trying to sell its content and tech in hopes of giving back more.
  • Uzzaman said he'd be happy to get 50% of his investment back. 
  • Visit Business Insider's homepage for more stories.

Jeffrey Katzenberg's $1.75 billion-backed mobile-video startup Quibi shut down as spectacularly as it started.

The startup splashed onto the media scene in 2017 when Katzenberg, who is well-known in Hollywood circles, began peddling his concept of a video platform made for mobile phones and featuring content with "chapters" under 10 minutes in length.

Quibi secured funding from seasoned investors including Alibaba Group, JPMorgan Chase, and The Walt Disney Co.; hired former Hewlett Packard Enterprise chief Meg Whitman as CEO; and landed $150 million in up-front commitments from advertisers including PepsiCo and Walmart.

But on Wednesday, six months after its subscription platform went live, Quibi told investors it was calling it quits. It said it would return $350 million of its remaining capital to shareholders, or about 20% of the funding raised.

"As entrepreneurs our instinct is to always pivot, to leave no stone unturned — especially when there is some cash runway left — but we feel that we've exhausted all our options," Katzenberg and Whitman said in a statement.

But one investor, who bought into Quibi as part of its additional $750 million fundraising round this year, said he wished management would have stuck it out for longer.

"I would've wanted them fight more rather than giving up so quickly," Anis Uzzaman, the CEO and general partner of Pegasus Tech Ventures, told Business Insider. "Or if they were going to give up so quickly, then I would've wanted to give up with more money in the bank."

Uzzaman first learned that Quibi would be shutting down during Wednesday's investor call but had a hint of what might be going on from speaking with other investors.

He bought into Quibi mainly because of what he viewed as a powerful pairing in Katzenberg, who helped build DreamWorks Animation into a $3.8 billion business, and Whitman, who ran eBay for a decade earlier in her career.

"This was a company where Hollywood met Silicon Valley," he said. In hindsight, Uzzaman said he realized reputation wasn't enough.

"Now I realize how important it is to have startup experience," he said.

Still, Uzzaman, who said losses are part of the game, is hopeful he will recoup some of his investment.

Quibi told investors during the call on Wednesday that it planned to sell its content and technology and use the money or savings from the sales to give back more to shareholders.

"We'll see what the marketplace will bear," Whitman said on Thursday during an interview with CNBC's "Squawk Alley." "But we think there will be much more to return to shareholders than just the cash that has been reported."

Quibi, which The Wall Street Journal reported explored a sale before throwing in the towel, has been a tough sell because it licenses, rather than owns, the content on its platform. Its technology, the crux of which changes the orientation of the video as a user rotates their smartphones, is also the subject of a patent-infringement lawsuit backed by the hedge fund Elliott Management.  

Katzenberg said in the same CNBC interview that there was "real interest" in Quibi's content library, which is "very valuable in the marketplace right now." Whitman also said she thought Quibi would win the patent dispute over the technology, which Quibi calls "turnstyle."

Uzzaman estimated Quibi had about 200 library titles that it could try to sell. He said he thought Quibi had a good chance at unloading most of that library because platforms are desperate for content amid the pandemic.

He estimated most Quibi investors would get 20 to 50% of their investments back and said he'd be quite happy with 50%. How much each investor gets back will depend on the terms of their deals. He also said he didn't know how long the wind-down period would take.

"This is a very big failure for sure," Uzzaman said of Quibi. "I hope there is some good news."

If you have a tip about Quibi, contact the author at arodriguez@businessinsider.com or ashrodriguez@protonmail.com.

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