Surprising Insights From HubSpot's $35M Mezzanine Round. The following is a post from my friend and co-founder/CEO of HubSpot, Brian Halligan.HubSpot just closed its mezzanine round, so I thought I’d share some surprising things I learned during the process. I’m by no means an expert in this field, so these are just the observations of one entrepreneur. A Surprising Number Of Potential Investors With Widely Varying Value Propositions My impression is that times have changed in the growth equity game. It used to be that early stage venture folks just did early stage investing, late stage venture folks just did late stage investing, and public equity investors only invested in publicly traded stocks. What surprised me is that now, it seems like everybody invests in late stage private companies. This is certainly not the “official” way to look at it, but here’s the way I ended up bucketing types of investors in my own head.
That’s my sense of things based on insights from HubSpot’s mezzanine round of funding. Now, that’s HubSpot.
Hot startups valuations in M&A deals. Some hot startups series A & B valuations. Who Is In The New Billion Dollar Valuation Club? Recently I sat down with a well-connected Silicon Valley CEO who just raised a ton of money, and who knew of other startups raising even more. There is a new startup club of younger companies raising money right now at $1 billion valuations. I already knew a couple of them, but I started asking a few venture capitalists and now I have a pretty good list of who is in that club and who is trying to get in (see below). As we all watch the established Web companies go public (LinkedIn, Pandora) or prepare for an IPO (Groupon, Zynga, Facebook), there is this new class of younger, but fast-growing, startups rising up right behind them. A lot of them are out raising money right now at $1 billion valuations.
So who is in the new billion dollar valuation club? Airbnb is definitely in the club. Square is also in the club. Spotify is finally closing its $1 billion round that’s been in the works since at least February, with DST, Kleiner, and Accel participating. Gilt Groupe is already in the club. Disney Acquires Social Network For Kids Togetherville. Doubling Down On The Overpay. One thing I've seen many VCs do wiith their initial investment in a company is invest more when the valuation gets expensive. They are ownership driven, not valuation driven.
So if they originally wanted to invest $4mm at a $20mm post money valuation and buy 20% of the company, they talk themselves into investing $8mm at a $40mm post money valuation so they can still buy 20% of the company. I have never liked this approach. When the price of an initial investment goes up, I prefer to invest less, or nothing at all.
Investing nothing at all is a fairly obvious approach when the price gets beyond your comfort zone. Investing less is not as obvious. My rationale for investing less has to do with the fact that most venture investments involve multiple rounds. Investing more when the price is too high makes no sense to me. I try to invest as if I have a fixed amount of capital and it is my own capital (some of it is). So instead of being ownership focused, I prefer to be valuation focused. Bit.ly Raises $10 Million Series B, Still Growing Like Crazy. It looks like short links are here to stay, at least for a while longer. Bit.ly, the largest independent link shortening service out there, closed a $9 million Series B financing.
(Correction: An earlier version of this story had $10 Million as the amount raised. The actual amount was $8.9 million). The round was led by RRE Ventures, with AOL Ventures also becoming a new investor. Existing investors betaworks, O’Reilly Alpha Tech Ventures, SV Angel, Founders Fund, and a few angels participated as well. Every day, more than 200 million bit.ly short links are clicked on and decoded by the link-shortening service. Bit.ly has been able to scale up to this point with only $5 million in capital invested. But the bigger opportunity for bit.ly is in all the data it is harvesting about which links people are sharing in realtime. On sites which it helps to operate like News.me, bit’ly will make traditional advertising revenue. Poland’s Facebook, Nasza Klasa, rumoured to be for sale for €130m. We’re hearing from two separate sources that Nasza Klasa, the largest Polish social networking platform, is on the block for €130 million.
Launched in November 2006, at its height the service had over 27 million registered users. But figures have been nose-diving this year as Facebook eats into its core social networking user base. It may be that heat from Facebook which is prompting the sale. We’ve reached out to Nasza Klasa for comment. The American investment fund Tiger Global is the current owner of Nasza Klasa, however there is also a stake owned by Excolimp, based in Cyprus (frankly the ownership is byzantine). Nasza Klasa is similar in concept to the American-based Classmates.com, allowing its users to register from particular schools and graduation years. We understand that the M&A bank advising on the deal is London-based NOAH Advisors.
Update: We have some new figures now to update this. (there are ceo’s of forticom behind – Vitaly Rubstein and Igor Slahov). Valuation Witchcraft - Where Do Seed Valuations Come From? - robgo.org. Valuation Witchcraft – Where Do Seed Valuations Come From? September 29, 2010 Given all the talk recently about rising seed valuations and AngelGate, I wanted to do a sequel to my old post on how VC’s Value Early Stage Companies. The valuation dynamics are even more puzzling at the seed stage, where there is even less to value. Rather than provide a very structured formula for seed stage pricing, I just want to offer some principles of seed stage pricing to help entrepreneurs navigate this process better. Principle One: Early stage company valuations are a negotiation exercise. It’s not a quantitative analysis of intrinsic value. The best way to create pricing power as an entrepreneur is to create competition for your equity.
Principle Two: Price is not everything. Principle Three: High pricing has its costs. Principle Four: Pricing ebbs and flows. One final thought. What this means to me is that as an investor, you shouldn’t get too hung up on price at the seed stage. Yammer, the Twitter for businesses, crosses 1 million users. Yammer, a status update tool for businesses, said it crossed 1 million users today and added that the number of paid users has grown by more than 57 percent from the first quarter of this year. Sometimes called Twitter for business, Yammer is an internal social network that lets co-workers and teams share what they’re working on continuously.
More than 70 percent of Fortune 500 companies are working with it now and overall, the company has about 80,000 companies and organizations using it. The company, founded by serial entrepreneur and former PayPal chief operating officer, David Sacks, launched two years ago. It works on a freemium model — it’s free for a basic account, but if a business wants more like security controls and custom branding, they’ll have to pay anywhere from $3 to $5 per user per month. Yammer added that all companies with paid contracts that have come up for renewal have continued using their service. Yammer has raised about $15 million in two rounds of funding. Skype Hits 521 Million Users And $185 Million In Quarterly Reven. Even though it is embroiled in a nasty legal battle with its founders over its future, Skype continues to rack up impressive numbers. In today’s third quarter earnings from eBay (which still owns Skype, but is preparing to unload it), the company breaks out Skype’s performance (see slide above).
Skype’s registered users grew 41 percent to 521 million people. That’s a stunning 40 million new registered users in the past three months. Revenues grew 29 percent to $185 million. Free Skype-to-Skype minutes grew 74 percent to 27.7 billion minutes, whereas SkypeOut minutes (which is what members pay for) grew 44 percent to 3.1 billion minutes. All of those SkypeOut calls translated to a healthy $185 million in revenues, up 29 percent from a year ago.
Skype was one of the few bright spots in eBay’s earnings, along with Paypal, which brought in $688 million in revenues (up 15 percent). eBay’s bread-and-butter marketplaces business was down 1 percent to $1.365 billion. One billion users, $1 billion: how did Twitter get the numbers? A company valued by its private investors at $1 billion, with nary any revenue in sight? Color most traditional investors incredulous. But the company — and its investors — must have justified its value somehow. Earlier this summer, leaked company documents showed Twitter was gunning for 1 billion users in 2013 — a user base that would make it the largest site in the world. That was the result of a thought exercise, co-founder Biz Stone told us in an interview earlier this year. “We started with a very broad idea that the open exchange of information has a positive impact on the world,” he said. “Then we worked backwards thinking that if there’s more than 6 billion people and 1.5 billion web users, what’s a crazy number of users that we could grow the company to for that vision and that would work for us?”
Of course, with that comes great expectations. Hence, valuations range from: Think about that for a second: the largest estimate is twenty times the size of the smallest one. Top Tech Acquisitions Of 2009. We track a lot of acquisitions on CrunchBase. At the beginning of 2009, acquisitions were at a standstill. But as the economy begrudgingly roused itself from recession, the deal flow started to pick up in the summer, and then rebounded more in the third quarter. There are still a couple weeks left in the year, and a lot can still happen, such as Google buying Yelp for more than $500 million. But with the year wrapping up, we put together an initial list of the top technology acquisitions of 2009. We’ll update the list if necessary at the end of the year (for instance, we don’t include Yelp in our list because it is not yet final), but it is not likely to change by much. The largest announced deal, Oracle’s $7.4 billion purchase of Sun Microsystems, is still awaiting regulatory approval.
The top 30 tech M&A deals are below: How Much is Twitter Worth? Less Than You Think. Twitter, the San Francisco-based micro-messaging startup, recently raised about $98 million dollars from T. Rowe Price, Insight Venture Partners, Spark Capital and Institutional Venture Partners, valuing the company at a whopping $1.1 billion. NeXt Up Research, the firm founded by veteran financial analyst Michael Moe, disagrees with that post-money valuation, and instead values Twitter at about $526-$674 million.
NeXt Up’s research report is offered to users of SharesPost, a Santa Monica, Calif. -based private online exchange that allows the sale of shares of private companies to willing buyers. Most of their concern is coming from the lack of revenues and worries that any diversification into money-making services could alienate the Twitter user base. According to the report, Twitter has over 70 million users. The company‘s revenue model has yet to be tested.
Valuation metrics: What's your company worth? GoWalla Worth Nearly $30 Million After Financing. Time To Make Y. If you were gettin’ all antsy in the pantsies about yesterday’s launch of the LG Expo and it’s detachable projector accessory, you might be a bit bewildered right now. A full day later, AT&T’s still showing no sign of the handset. WMExperts did a bit of digging, and found out that the Expo has been delayed for at least “a few days” due to shipping issues.
When this sort of stuff happens, it’s generally because a cargo ship coming from Asia had to turn around for one reason or another, or otherwise never left the port. There’s no word just yet on a new ETA for the handset – we’ll let you know if that changes. How to measure how well an online media company is scaling. « Li.
Two years ago I posted about the three ways to grow an online media business to $50 million in revenue. In this article I focused on RPM (Revenue per thousand pageviews, = CPM x sell through rate x # of ad units per page) and drew the distinction between three strategies, and the traffic needed for each strategy to get to scale: 1. Broad Reach, low RPM, traffic in the 10s of billions of pageviews/mth 2. Demographic Targeting, moderate RPM, traffic around 1 billion pageviews/mth 3. Endemic Targeting, high RPM, traffic in the 100s of millions of pageviews/mth I think using CPM/RPM in this is a useful framework to think about strategy, but it isn’t necessarily the most useful way to think about howe well an online media business is scaling.
Direct sales shows real economies of scale. Right now, the key measure that I use to judge how well an online media company is scaling is by looking at quarterly revenue by advertiser. Demand Media Acquisition Rumors Heat Up Again. CEO Says No Way. Evernote Reaches Two Million Lifeloggers, Half Of Them Are On Th. The idea of a life recorder that captures every moments of your life on video is still a bit of a tech fantasy, but an early version of the life recorder already exists. It is called Evernote, the popular iPhone (and now Android) app which lets you record your memories by snapping geo-tagged photos, making voice notes, or just text notes and making it easy to search through them. Evernote does not yet support video recording other than as an attachment (for premium subscribers), but when that becomes more practical it will. “Evernote is definitely positioned to be the lifelogging tool of choice,” says CEO Phil Libin.
“That ambient video capture was my original plan for Evernote—always recording, not storing, you bookmark it—that is exactly what we want to do.” Evernote just reached 2 million unique users, only 7 months after reaching its first million. Libin says the company is profitable on a gross margin basis. Looking at new users per day is more instructive. Valuing early stage companies | Startable - Healy Jones' & Prasa. Since this is my first post as a former venture capitalist I thought it might be interesting to answer a one of the more… opaque issues in venture financing.
Two of the most frequent questions I got as a VC from entrepreneurs were “how much is my company worth” and “how do venture capitalists value my company?” The truth is that the answer has nothing to do with DCF’s or other business school theories, but instead is based around what the VC thinks/needs to return to their fund from that particular investment. The following is a bit of an over simplification, but is as close to a “rule” as I could gleam from my time in venture capital. Series A valuations Series A* valuations are usually based on percentages – as in, how much of the company does the venture capital fund want to own.
Getting a higher valuation Strange as it sounds, this does imply that the more you raise the higher the valuation. Have a name-brand management team. The rational Does this make sense? You Don’t Mean Average, You Mean Median. Top Ten Digital M&A Deals For 2010. The Dark Side of the Late 2009 M&A Surge. Polarized outcomes: Lessons from some recent exits. Amended: Twitter has NOT raised more funding. KODA Secures Another $1.5 Million For Its Social Jobs Site. Looks Like Twitter Paid Mixer Labs $5.17M in Stock – GigaOM. FF - FB deal. Groupon Raises Huge New Round at $1.2 Billion Valuation (Updated.