Six Apart’s acquisition of Rojo on September 6 was an unusual one. The privately held blogging technology startup in San Francisco said it purchased certain core technologies from Rojo and hired four of its employees but planned to sell a majority stake in Rojo’s flagship newsreader product in a few months. The cash and stock deal for an undisclosed price furthered an early but growing trend of consolidation among Web 2.0 companies.

Too much competition stemming from a flood of money injected into Web 2.0 companies is finally starting to affect the market. Rojo, which offers a feed reader that allows users to easily keep track of blogs they like from across the web, raised an undisclosed amount of venture capital from TPG Ventures and BV Capital over the course of two rounds. Since its establishment in April 2003, Six Apart has raised a total of $23.8 million in venture capital from Neoteny Co. Ltd., Focus Ventures, Intel Capital and August Capital.

Six Apart CEO Barak Berkowitz and former Rojo CEO Chris Alden answered my questions about the latest transaction below. They both declined to answer questions about the specific details of the transaction such as price and valuation but did say there was a cash and stock component to the deal. (Note: I've edited out some of the interview and since I was typing, not recording, the discussion, there may be some inaccuracies):

Q: Why did Rojo sell to Six Apart?
Barak: Rojo was at a pretty good turning point in terms of its technology having matured and its technology team having come of age… The market is moving too and scale is being more important. A number of people in the market say there are two choices in the market: you flip or you get big. And this is a way for a company to get big.

Q: What core technology does Rojo have that Six Apart wants?
Barak: Rojo has a deep understanding of reading and making that usable to people as well as a number of interesting pieces of intellectual property. For us, as Chris pointed out, one of the reasons the deal works is we see the world the same way. We don’t see blogging as media and publishing technology. We see it as communication technology. It’s assymetrical. People don’t see it as a two-way form of communication. There are more readers than writers. We’re building it into a communications tool. To do that, we need tools that people have had for a while that allows people to publish. We need tools that Rojo has to read and keep track of news sources whether they’re personal blogs or big blogs. And we need methodologies such as trackbacks and comments. That reading side of the equation is critical and Rojo has the best understanding of it than anyone we’ve seen.

Q: How will that help Six Apart’s Movable Type, TypePad, LiveJournal and Vox properties?
Barak: There are a few different ways this will happen. And you can see this. We don’t want to compete with big full blown services. But there are services that need to be integrated into products. Live journal has a reader built into it. Vox has a low end reader built into it that launched last week. Both need to grow more sophisticated without competing with stand alone reader business. At the same time there are parts of reader and RSS technologies that are not being defined for the future. The most important piece of that is secure RSS. For Vox and Live Journal, who reads what at a very fine grade level. The current reader infrastructure does not allow you to manage that. Rojo’s knowledge of that will help us promulgate a standard of secure RSS that will allow people to put out a RSS feed that is for the appropriate people they want to see it and not be read by people that they don’t want to see. In the long run, privacy in blogging will be an important feature. With the knowledge people from Rojo has, we will get a headstart on that.

Q: On a scale of 1 to 10, 10 being the most, how much of this acquisition was driven by Six Apart’s desire to hire Chris and three other Rojo employees?
Barak: There is an easier way to answer this question. Since we clearly don’t intend to own the Rojo service, it’s the people and the technology that are equally weighted in what we want to acquire and how we value it. People are clearly valuable. Having Chris lead the Movable Type team is a dream from my point of view. Having someone like Erin leading the core technology group gives me great faith that we will get more out of that and spread it across our multi branded products. Knowing more about reading is critically important. If you made me say, the people are slightly more important.

Q: Why spin out the feed reader assets?
Barak: Two reasons. There are a bunch of users using Rojo and Newz who love those products. We would hate to be a party on the Internet who took products away from people who love them. But because our code base is so different, we don’t want to run a divergent type of code base. And two, we don’t want to compete with those that are our competitors, Bloglines and NewsGator. We will be minority shareholder in Rojo and NooZ and both the users and us would be better off having minority interest in Rojo.

Q: Have you talked to VCs about that?
Barak: I can’t divulge that type of conversation

Q: Is a deal in place?
Can’t divulge that.

Q: Why would a venture capitalist or outside investor be interested in funding a news reader and weekly roundup newsletter that while receiving plenty of critical acclaim now faces tons of competition and didn’t really achieve a dramatic growth rate?
Chris: I don’t think you’ve characterized Rojo properly. It’s been a growth product since its launch. It continues to get acclaim. There is a new Rojo release of the service in the coming weeks. I don’t think anyone has a gorilla like lead in the RSS reader space. I think its early days yet in feed reading. Rojo is not simply a feed reader. It has community features and search features. TechCrunch called it a reader with web 2.0 swagger. I think the market for these types of services is just getting started.

Q: So if that is all true, did your VCs resist this sale to Six Apart?
Chris: They decided this was in the best interest to their investors.

Q: Did you try to raise a third round of VC before agreeing to the Six Apart deal?
Chris: No

Q: Was this just basically an admission by you, the angels and the VCs that the investment in Rojo wasn’t going to pay off so you would all prefer to own a smaller slice of a more promising pie than every slice of a less promising one?
Chris: You’re asking us to speak for Rojo shareholders. Rojo investors were unanimously behind this deal.

Q: Okay, don’t speak for the VCs. But, you must be a major shareholder yourself so was it an admission that you wanted to own a piece of a larger pie rather than all pieces of a smaller one?
Chris: I wouldn’t characterize it that way…

Q: What did we not discuss that we should have?
Chris: The story I don’t think people are paying attention to is the component of this that I’m coming into run Movable Type. The organization has great hopes for the future of Movable Type...
Barak: It should be notable that Andrew [Anker] was co-founding CEO of HotWired. Chris was co-founder and head of Red Herring. [Rojo CTO] Aaron Emigh was a CEO. Six Apart is clearly building a management team to build a great company. One more sign we can get from this deal is to put in place incredible talent here.

Q: That tells me you’re trying to pursue a path of an independent company rather than a quick flip. I don’t know your revenue figures but is an IPO even on the horizon?
Barak: Our investor base are investors that invest in durable companies. There’s no rush to liquidity. We have everything we need to build this company out. Decent revenues and a global team of 150 people. I’m quite happy with where we are and where we’re going.

Tags: sixapart, web2.0, rojo, m&a,vlogging, six+apart, vc, venture+capital.