Video Sharing site Grouper.com has exited to Sony for $68 million:

Silicon Beat says:

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 Gropuer 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.

ZDNet comments:

The Sausalito, Calif.-based Grouper was founded in 2004 by a group that included Josh Felser, one of the founders of Spinner.com, the music site sold to AOL in 1999 for $350 million.

Felser, 42, has remarked recently that the market for video-sharing sites has been heating up but that Grouper's leadership was not seeking a buyer.

"We had other options including financing," Felser said. "When this started, we were pursuing an operating deal with them. We made this deal because we want to win and we think Sony will help us do that."

For the burgeoning video-sharing market, the Grouper purchase raises some important questions. Is Grouper the first fish to be netted in what analysts expect is a likely industry shakeout? If so which properties are the most attractive?

Competitors in the sector number more than 200. Among those companies that made Hitwise's top 10 in market share, few are standalone companies. Besides YouTube, some of the other video sites that have attracted attention are Revver, Metacafe, Heavy.com, dailymotion and Guba.

TG Daily speculates about possible synergies between the companies:

On the other hand, senior executives from both companies struggled to define the requisite unique synergies that make them a perfect fit for one another, in their statements this morning. Sony's Lynton said, "Many people in the Grouper community use Sony cameras to create videos and Sony VAIO computers and mobile devices to store and view them. It makes sense to complete the circle by having Grouper be a part of Sony Pictures Entertainment, which itself creates so much content for people around the world."

If you're keeping score at home, the fact that so many individuals use Sony cameras to make home videos makes Grouper a perfect fit. Is the Grouper team buying into this? Apparently. "When you pair Grouper's innovative video sharing platform on the web and the desktop with Sony's connected devices and copyrighted media," Felser wrote this morning, "you create a dynamic and exciting environment for consumers...We have an opportunity, as part of the Sony family, to bring together user-generated and copyrighted content across platforms and devices for the first time."

A great cash deal for grouper.com. A company I never heard of that fought the heavy weights and succeeded. It pays to be stubborn as entrepreneur :)