InkSpin1 : Spinning Through Taxpayer Money

InkSpin1 : Spinning Through Taxpayer Money

Think back to the year 2007, 6 years ago. The world was a lot different then. Apple had just introduced their first iPhone, George W. Bush was still the US president, and being a hipster wasn't yet hip.

It's also the year that InkSpin1 (now Vispel -- more on that later) was founded, with the goal to provide video calling through your TV set.

InkSpin1was founded as an incubator company from ASI (Ambient Sound Investments). ASI is a private equity fund financed primarily through the success of Skype. Skype, a company registered in Luxembourg and founded by a Dane and a Swede, is heralded as an Estonian success story. This point was hotly debated in a previous post on this blog (see comments). In the end, we just flipped a coin to reach a conclusion on the matter.

Regardless, one thing everyone seems to agree on is the 4 Estonians who founded ASI played key roles in the early development of Skype, and they used some of the wealth they gained from Skype's sale to eBay and later Microsoft to build ASI.

This is how it's supposed to work, right? ASI is a private firm, funded with private money, investing in new technology firms. Can't complain about that, can we? Well, let's take a closer look at things.

Enter the Taxpayer

In 2008, shortly after InkSpin1's founding (and still a time when being a hipster was not hip yet), there was an interview with the CEO of the company at the time, Martin Villig. According to the article:

"InkSpin1 will conduct preliminary studies in a number of countries; monetary support for this will be applied for with Enterprise Estonia."

Wait a minute. Isn't this an ASI portfolio company? What do they need government money for?

Maybe it was just a few thousand euros. Let's have a look:

Sadly, it wasn't. InkSpin1 has received 542,663 euros in taxpayer money!

What's worse is this wasn't just a one-time thing. The money started flowing to them in 2009, and continued to flow through 6 different projects. They even received new funding last month!

But maybe we're being too critical. Sure, this company was originally funded from ASI, but maybe those Skype guys funding ASI simply ran out of money. Maybe they went on a week-long party binge and wasted all their money on hookers and blow. Perhaps they woke up with Mike Tyson's tiger in their hotel suite?

As much fun as that sounds, we doubt that happened. First, the Skype guys seem like cool and sensible fellows. One of them, Jaan Tallinn, recently did an AMA on Reddit so you can see what makes him tick. Second, we know they still have money because Aripäev reported that ASI's balance sheet at the end of 2011 was over 87 million euros.

The Product : So Call Me, Maybe?

Let's have a look at the product. Perhaps it's a real winner, and thoroughly deserving of all this investment.

As far as we can tell, it's a solution that can be integrated into a set-top box (STB) that hooks up to your television. So you can sit on your couch and make video calls with your TV set.

Actually, that doesn't sound so bad, assuming you remember to sweep the Doritos crumbs off your pants and change out of your sweat-stained shirt first. Video calling is growing in popularity, and people use it every day with their smartphone, tablet or computer, and it works well.

Ahh, but there's the catch! People do it already! On some other device! Will they move to doing it with a TV?

Maybe they will, but we're not convinced the call will be done via the set-top box. All TVs these days are basically just a larger version of a computer monitor, with plenty of HDMI and VGA inputs on the back. Wouldn't it be just as easy to have your existing device, like an iPad, output to the TV and bypass the set-top box altogether?

It's a tough call (pun actually intended). There are some merits in the idea, but also some significant risks. In other words, the perfect scenario for a venture capitalist. Why is the taxpayer taking the risk?

What's In a Name?

You may have noticed that one of the taxpayer-funded projects for this company was for branding. The InkSpin1 name isn't catchy, and also goes against the trend in Estonia to name all websites with "24" at the end, like Elu24 and City24. Presumably this is to make it clear that the website is available 24 hours a day, unlike all other websites, which shut down at 6pm (damn those union workers!).

So with that money, they end up with Vispel? As far as we can tell by looking at a version of their website from 2012 (when it was still InkSpin1), they adopted the Vispel name this year.

Rule number 1 when choosing a name. Google it first. We see that there is a blog by that name, and it's from an Estonian woman (Kristel) who writes about her cooking:

Kristel's Apple Blackberry Crisp

Ok, from a company branding perspective, they probably don't need to worry about Kristel, but what about this:

So it looks like HP, a major multinational corporation, has a video-based product called VISPEL. Sure, it's not the same thing, but it's video-related, and our guess is it's close enough to make HP's army of lawyers worried.

We can't find dates on when HP released their product, so it may have been fairly recently. So maybe InkSpin1 is fine then, except it appears they have not registered the Vispel trademark in the EU or the US. Anyone want to bet whose lawyers will win, HP or InkSpin1, if this goes to court?

Very effective use of taxpayer money on branding, isn't it?

Use It If You Can

So let's go over this in summary. We have a company that was funded by wealthy private investors, with no apparent success in the market for the last 6 years. Yet, they receive taxpayer money, again and again, with a sum of over half a million euros.

What is particularly troubling is it seems this company was set up from the start with the plan to suck up taxpayer money. Some claim that all this taxpayer funding is needed because there is no private equity available in Estonia, but this is a perfect example of where that's not the case. This company got investors first and then they go to the taxpayer. Is this how it's supposed to work?