October 8, 2010
The latest rumor in Silicon Valley:
It’s no secret in Silicon Valley dealmaking circles that Yahoo has been looking at what insiders have called a “transformative” acquisition to jumpstart the company.
And while many think that has to mean grabbing one of the big content companies–such as AOL or Demand Media–right in Yahoo’s wheelhouse, sources said it is actually training its attention on, drum roll, commerce.
That would be local commerce, most specifically, companies such the hot start-up Groupon, which dominates social couponing.
Sources said Yahoo (YHOO) has been eyeing it for possible acquisition, which would put it smack dab in the hot space around local purchasing and consumer information.
What it means: not surprising that people are sniffing around Groupon. Their success has been phenomenal. Yahoo! has always been a fan of “local”, so no surprise there but I’m not sure Yahoo! would make a good deal (no pun intended!) buying Groupon though. Their valuation is through the roof and they’ve already started to expand in Europe (and I don’t think Yahoo! is trying to build up that continent). I suspect Yahoo! must also be looking at LivingSocial, the #2 player in the space, and will probably end up buying them.
December 10, 2009
Interesting VC/Angel roundtable this morning at LeWeb moderated by Dave McClure (who defined himself as Startup Investor & TroubleMaker!). Here’s what participants had to say about the VC/angel market in 2009 and what we can look for in the future.
Christopher Sacca, Founder, Lowercase Capital LLC
- His firm does early stage investment ($50K to 250K) and very large investment ($500M+)
- It is now cheap to start a company. Ten years ago, it would cost you $1M before your first line of code. Rent and Engineers are now the two biggest expense lines.
- Sacca revealed that they did 3 deals yesterday.
- The changes he saw recently: valuations are up again driven by larger funds probably because it was a year of low activity. Funds need to get the money out and VCs definitely have money.
Dan’l Lewin, Corporate Vice President, Strategic and Emerging Business Development, Microsoft Corporation
- Microsoft buys 10-20 small companies per year, about half of those are VC-backed.
- Those acquisitions are usually companies that are 2 to 5 year-old.
- 2009 was a good year relative for young companies.
- Microsoft buys many companies abroad, not just in the US.
- When asked if he thinks acquirers are competing with VCs, Lewin said he doesn’t think so given the scale of their business. They look at businesses that are close to the core, extending the business.
Dave McClure, Chris Sacca, Dan’l Lewin
David Hornik, Jeremy Wenokur, Eric Archambeau
David Hornik, August Capital
- 2009 was a great year for August Capital as they closed a new $650M fund.
- Hornik did 4 deals in the last 12 months (6 in the last 15 months).
- Size of those deals: between $1M to $35M. Usually, they are Series A rounds (approximately $4M)
- What’s a successful investment for Hornik: when he can say “that was great!”.
- In 2010, a lot of people are hoping is the year that VC are able to raise money. In the case of Gowalla, competition for the deal between funds drove the price up.
- Hornik mentioned that it’s cheap to start companies these days but, as it starts scaling, it’s not as cheap. It’s cheaper the ten years ago but it’s not cheap. The things that succeed require capital.
Jeremy Wenokur, Angel investor & Advisor to Apax Partner
- Wenokur says he took 9 months off and just restarted investing.
- The size of his deals: $25-50k investments.
- He’s seen the shift of money to smaller funds and that’s why you see a lot of deals being chased.
- For him, a good exit is $20M-30M exit and it happens one out of five times.
Eric Archambeau, General Partner, Wellington Partners
- They search Europe for investments
- They have 800M euros in management
- They do 50K to 25M euros investments
- in Web investment, they look for evidence of traction
- In reference to smaller exits in 2009, Archambeau says that maybe VCs were less patient this year and maybe exited too early.
December 9, 2009
I had the opportunity to listen to Niklas Zennstrom this afternoon. He’s currently a Partner at Atomico Ventures (his VC fund) but he’s well-known as the founder of Kazaa, Skype and Joost. I wrote about Joost and Zennstrom recently. He talked about entrepreneurship, his own personal failures and successes and the European scene. As an entrepreneur myself, it was a very inspiring speech.
A few excerpts:
- Entrepreneurship is a lifestyle and takes up all your life. It requires lots of sweat and long hours of work.
- You need an unshakeable belief in your startup, to be passionate about it, even when people don’t believe it.
- For Kazaa, they were too early, actually several years early. This was a missed opportunity in terms of business development as their proposal to music companies fell on deaf ears.
- If something is not working, take a deep breath and start again. In Zennstrom’s case, it became Skype. They went after a large market (phone companies) with fat margins. Skype got a lot of traction really quickly but it was very difficult to raise money. No one wanted to touch the company. VCs thought it was too risky.
- He believes Loic Le Meur is probably the last European entrepreneur to move to Silicon Valley (Loic moved to San Francisco a few years ago to launch Seesmic, his current startup)
- Entrepreneurs need to think of Europe as a market (critical mass vs. the US market)
- Europe has a tendency to stigmatize failure but you cannot have big returns if you don’t have big risks
- Joost was a misjudged opportunity. They could not strike the right partnerships.
- Whatever you do, you never know the results in advance.
- How’s the scene now? We’ve seen more and more companies from Europe being successful with a culture of international startup company. Companies think globally from the get go.
- We now have European role models: Zennstrom himself, Loic Le Meur, Martin Varsavsky, etc.
- Do we need an European Silicon Valley (i.e. a physical place)? No, we can meet online and then network at events.
- Capital is no longer as important for entrepreneurs as a few years ago. Building a startup is more cost efficient and companies are able to reinvent themselves quicker with agile entrepreneurs.
- It’s exciting to be an entrepreneur in Europe. In recession, you build companies and in peak market, you exit. The next few years will be fantastic. Disfunctional markets means entrepreneurs will enter the market.
- Atomico Ventures wants to bet on European entrepreneurs that want to build tomorrow’s global companies. It’s all about the people (passionate) and it’s all about the size of the market.
More on Techcrunch.
August 29, 2009
OneRiot, a real-time search engine, announced a $7M financing round on Thursday. Launched in November 2008, OneRiot is trying to organize the real-time Web around shared links in social media. According to Techcrunch, the money “will be used to improve three key area of the service: Speed, scale and relevance”. Appian Ventures, Commonwealth Capital Ventures, and Spark Capital put the money in.
What it means: you know a space is heating up when VC money starts coming in. Yet another sign that this is a fundamental shift in the way people will discover content in the near-future.
January 7, 2009
Back in December, Valleywag and Silicon Valley Insider tried to estimate the current valuation of Facebook by calculating the price at which employee shares are transacting on closed markets. Valleywag wondered if Facebook was only worth $1.3B while Insider said it might be worth around $2B, thereby facing the prospect of a down round in their next financing round. As we all remember, Microsoft had invested a $240M in Facebook for a 1.6% stake in the company in October 2007, valuing the company at $15B.
I don’t buy it. Not Valleywag or Insider’s calculations of Facebook’s current valuation. I don’t buy the fact that Microsoft thought Facebook was once worth $15B (even though their press release says so).
Let’s review what I think happened. In October 2007, Microsoft announced that they had taken a 1.6% stake in the company. The Wall Street Journal wrote at the time: “Facebook sells ads on its own and also struck a deal last year that allows Microsoft to broker display ads on Facebook’s U.S. site until 2011. (…) As part of yesterday’s agreement, which lasts through 2011, Microsoft will sell advertisements on international versions of the Facebook service”. The press release adds “Microsoft will be the exclusive third-party advertising platform partner for Facebook” Interesting. An exclusive search/contextual/banner ad deal is part of the agreement.
Go back one more year, in 2006. Fox Interactive Media announced in August 2006 that they had ”entered into a nearly $1 billion, 3+ year deal with Google to exclusively power search across most Fox online sites, including Myspace.” That deal had minimum revenue guarantees for Fox. If I remember correctly, Microsoft had bid for that business and lost it.
Go back further, in December 2005. Google and AOL announced the expansion of their strategic partnership through a $1B investment from Google in AOL (for a 5% stake). Microsoft had previously lost that one as well.
With a fledgling search advertising business and a recently acquired ad network/ad technology (through the purchase of aQuantive in May 2007), Microsoft needed strategically to have at least one sexy partner. When Facebook exploded into the scene, they had found the deal they needed to absolutely make. I remain convinced today that the partnership business case was mostly built on the ad deal, which allowed Microsoft to claim Facebook as a partner, offer more inventory in their ad network and keep Google at bay. The small investment made sure the Facebook’s exec team remained aligned with that goal. Facebook must have made the request to include the valuation in the press release and Microsoft obliged. In a sense, this really worked for Facebook given that the Microsoft deal might have helped them strike two subsequent consecutive funding deals (for a total of $100M) with Li Ka-shing in November 2007 and March 2008.
In conclusion, Facebook raised (hopefully) enough money ($340M!) for a good runway and Microsoft got the strategic partner they needed while shutting off Google. But I don’t think Microsoft ever really thought Facebook was worth $15B.