Gridley's Guide to Digital NY November 2012
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Transcript of Gridley's Guide to Digital NY November 2012
© 2012 Gridley & Company LLC
November 2012
2© 2012 Gridley & Company LLC
I. Introduction to the Report
II. Digital NY Overview
III. Overview of NY Area Private Digital Companies
IV. Venture Capital and Private Equity Firms with NY Area Digital Investments
V. Overview of NY Area Public Digital Companies
VI. Advice for the Audience
Table of Contents
© 2012 Gridley & Company LLC
I. Introduction to the Report
4© 2012 Gridley & Company LLC
IntroductionGridley’s Guide to Digital New York is a unique and comprehensive report for investors, buyers and entrepreneurs looking for one place to quickly get up to speed on New York’s exciting, explosive digital ecosystem. In addition to this report, we have designed an “easy to use” website that lays out the information in this report (and more) in a fun, creative way. You can access this website from our firm’s home page, www.gridleyco.com, or at www.gridleydigitalny.com.
We decided to put together this report when we were out visiting companies and investors in May/June of last year and people starting asking us about all of the “digital momentum” in NY. There was a feeling that lots was going on, but people didn’t really understand just what “it” was and how extensive “it” was. Well, now we can tell you a few things about “it”:
• There has been $5.6 billion of capital invested in Digital NY companies since 2006.
• While the total number of Digital NY private companies probably is well over 500, we have identified 308 to be included in this report. Companies in our report either have raised at least $5 million of outside capital or are prominent enough in the Digital NY scene to merit inclusion. The digital sectors we focused on are: Content, eCommerce, Marketing, Mobile, and Social.
• There are approximately 150 investors with a focused interest in Digital NY. This includes all stages – Seed, Early Stage, Growth, and Buyout – and includes local firms as well as firms with little or no physical presence in NY.
• There have been seven private companies that have raised over $100MM of capital (Fab.com, Fotolia, Tremor Video, ZocDoc, Gilt Groupe, Tumblr, and Everyday Health) and 18 that have raised between $50MM and $100MM.
• There have been twelve $100MM+ sale transactions of private Digital NY companies since January 2008 (Buddy Media, Mediamind, Admeld, Huffington Post, Webloyalty, Hotjobs, Innovation Interactive, Zagat, OMGPOP, Register.com, Daily Candy, and Answers.com).
5© 2012 Gridley & Company LLC
IntroductionThe Digital NY scene is still in its early formation days with lots of growth ahead. We believe that New York’s existing ecosystem with big traditional advertising and media companies as well as many large data and internet industry leaders all headquartered here sets the stage for the unique development of the next generation of disruptive digital companies. Nowhere else in the country is there such a blend of the “old guard” with the “new kids on the block” – all in the same city.
So, whether you are looking to buy, sell, invest, or merely “browse”, we hope this report and our accompanying website will be of great use to you.
Sincerely,
On Behalf of the Gridley Team
Questions About This Report?
Linda GridleyPresident & CEO
Pratik PatelDirector
Peg JacksonManaging Director
About Gridley and Company LLC
Gridley is a boutique investment bank that provides financial advisory services to companies in the Information Services industry with a specific focus in the following sectors: Marketing Services, Internet Services, Financial Technology, Data Services, and Outsourcing Services. Our dedicated industry focus, thoughtful strategic insights and extensive relevant transaction experience differentiate us from other Wall Street firms and lead to successful results for our clients. Gridley & Company LLC was founded in 2001 and is headquartered in New York City.
6© 2012 Gridley & Company LLC
Interested in Other Gridley Reports?• Available at www.gridleyco.com/what-we-think/resources/
Comprehensive Industry Overviews Quarterly Newsletter
© 2012 Gridley & Company LLC
II. Digital NY Overview
8© 2012 Gridley & Company LLC
The Past Six Years Have Shaped Much of NY’s Digital Media and Technology Landscape• Notable events in NY since 2007:
June
2011
January
2007
/
April
2007
September
2010
November
2007
June
2008
September
2009January
2011
is founded announces spin-offs of:
opens a Googleplex in New
York City
Mayor Bloombergstarts up city-funded business incubator
programs
comes to New York
leads
in tech VC funding and deal quantity
Mayor Bloomberg offers $100 million and
land to develop a top engineering school to
encourage tech development, to bring New York City to the
forefront of innovation.
($3.1 billion)
($680 million)
July
2007
/
/($275 million)
Closes deal and announces HQ move to NY in September
Raises Series B round
Raises series A round
Acquires
For $125 million
August 2008
Raises series A round
Raises series A round
September 2007
October 2007
Raises series A round
Development of brand names across broad set of
verticals
Raises Series A round
December
2007
Raises series A round
announces acquisition of
December2009
Announces acquisition of
for $30 billion
announces acquisition of
June
2012
For $183 million
March
2011
announces acquisition of
for $745 million
9© 2012 Gridley & Company LLC
San Francisco, 69
Palo Alto, 13
San Mateo, 9
Sunnyvale, 6Los Altos, 1
New York, 52
Boston, 16Los Angeles, 9
Others, 197
San Francisco31%
Palo Alto3%
San Mateo3%
Sunnyvale2%
Los Altos5%New York
13%
Boston7%
Los Angeles5%
Others31%
NY’s Emergence as a Tech Hub• New York City has become a true digital media innovation center
Source: CB Insights “Venture Capital Activity Report”
Total of Top Cities = $1,853 millionTotal including Others = $2,672 million
Q3 2012 Internet VC Funding by Top Cities Q3 2012 Internet VC Deals by Top Cities
Total of Top Cities = 175Total including Others = 372
Bay Area98
Bay Area$1,171M
10© 2012 Gridley & Company LLC
NY’s Emergence as a Tech Hub• New York City has become a true digital media innovation center
NY Tech Investments Over Time
$608$688
$453
$791
$1,141
$0
$200
$400
$600
$800
$1,000
$1,200
2007 2008 2009 2010 2011Source: PriceWaterhouse Coopers “MoneyTree Report 2012”, Media & Entertainment and Software investments
11© 2012 Gridley & Company LLC
NY is a Major Contender for Tech Dollars Now• New York City has gained much ground against Silicon Valley in the past 15 years
VC Funded Deals
41
171185
549
1995 2011
NYC Silicon Valley
Source: PriceWaterhouse Coopers “MoneyTree Report 2012”, Media & Entertainment and Software deals
12© 2012 Gridley & Company LLC
NY Ecosystem has Very Different Roots and Growth Opportunities than Silicon Valley
OperationalEfficiencies
LeadershipTalent
EngineeringTalent
CreativeTalent
Strategic Partnerships
StrategicAcquirers
KeyCustomers
Internet Services
AdvertisingData Services
Wall Street
Business Development
MediaFashion
13© 2012 Gridley & Company LLC
Major Disruption is Happening Across All Sectors
Advertising / Marketing Commerce Content
TVFinance Social
14© 2012 Gridley & Company LLC
Source: Capital IQ, TechCrunch, public filings, and press releases
$0
$800
(Enterprise Value in $MM)
(Enterprise Value in $MM)
$200
$400
2007 2008 2009 2010 2011
$1,000
Top 25 Private Digital NY Sale TransactionsJanuary 2007 – October 2012 (Disclosed deals / rumored pricing available)
2012
© 2012 Gridley & Company LLC
III. Overview of NY Area Private Digital Companies
16© 2012 Gridley & Company LLC
Digital Sector Categorizations (313)
Commerce
Content Curation
Dating
Enterprise Social
Funding
Local
Social Network
Other
Social(28)
Brand Storefront
Daily Deals
E-Commerce Infrastructure
Marketplace
Private Sales
Third Party Retailer
Other
eCommerce(52)
Content
E-Commerce
Marketing
Social
Mobile(34)
Audio & Video Advertising
Digital Agencies
Display Advertising
Email Advertising
Lead Generation
Local Advertising
Search Advertising
Social Marketing Management
Digital Marketing
(114)Content Enabling
Family & Education
Finance & Professional
Games
Health & Fitness
Lifestyle
Music
Tech
Video & Images
Digital Content
(85)
Note: Several companies have distinct business units that place them in multiple categories
17© 2012 Gridley & Company LLC
Note: More companies illustrated on the following sector breakdown pages
NY Area Private Digital Companies by Sector
Social
SpotOn
eCommerce
FashionStake
MobileDigital
MarketingDigital
Content
Electric Sheep
18© 2012 Gridley & Company LLC
NY Area Private Digital Content Companies (85)
Video & Images
TechMusicHealth & Fitness
LifestyleGames
Electric Sheep
4 3 4 17
Content Enabling
12 Family & Education
6 Finance & Professional
9 5 25
19© 2012 Gridley & Company LLC
NY Area Private Digital Marketing Companies (114)
Social Marketing
Management
Lead Generation
Local Advertising
Search Advertising
Email Advertising
Audio & Video
Advertising
Display Advertising
Digital Agencies
7 32 28 5 5
10 11 16
Cloverhill EnterprisesCloverhill Enterprises
20© 2012 Gridley & Company LLC
NY Area Private eCommerce Companies (52)
E-Com Infrastructure
Third Party Retailer
Marketplace
Other
Brand Storefront
Private SalesDaily Deals2 12 6 11 7
11 3
FashionStake
21© 2012 Gridley & Company LLC
SocialMarketingeCommerceContent 9 4 17 4
NY Area Private Mobile Companies (34)
22© 2012 Gridley & Company LLC
Enterprise Social
DatingContent Curation
OtherSocial Network
Funding
Commerce
SpotOn
2 8 2 1
1 12 2
NY Area Private Social Companies (28)
23© 2012 Gridley & Company LLC
NY Area Private Digital Companies by Equity Raised (185 )
Sources: Capital IQ and TechCrunch, November 2012
>$100M
$30-$50$30-$50
7
$50-$100$50M-$100M 18$20M-$30M$10M-$20M $30M-$50M 2848 33
Ryzac
$5M-$10M 58
Electric Sheep
FashionStake
24© 2012 Gridley & Company LLCSource: Capital IQ, TechCrunch, public filings, and press releases. *rumored value
Private Digital NY Sale Transactions >$100 millionSince January 2010 (Disclosed deals / rumored pricing available)
Date Acquirer / Target
Transaction
Value ($MM)
6/4/2012 salesforce.com, inc (NYSE:CRM)
Buddy Media, Inc. $745
6/16/2011 DG FastChannel MediaMind Technologies Inc.
524
6/3/2010 The Hearst Corporation
iCrossing, Inc. 425
6/13/2011 Google AdMeld 400
2/6/2011 AOL Huffington Post 315
1/19/2011 Affinion Web Loyalty 296
8/26/2012 IAC Search & Media, Inc.
About.com, Inc. 300
11/1/2011 Yahoo! Inc. (NasdaqGS:YHOO)
interclick, inc. 264
2/3/2010 Monster Worldwide, Inc.
HotJobs.com, Ltd. 225
1/25/2010 Dentsu Innovation Internactive
200
3/21/2012 Zynga, Inc. (NasdaqGS:ZNGA)
OMGPOP, Inc. 183
11/12/2012 j2 Global, Inc. (NasdaqGS:JCOM)
Ziff Davis Media Inc.
165
9/8/2011 Google Inc. (NasdaqGS:GOOG)
Zagat Survey, LLC 151
6/17/2010 Web.com Group, Inc.
Register.com, Inc. 135
**
**
© 2012 Gridley & Company LLC
IV. Venture Capital and Private Equity Firms With NY Area Digital Investments
26© 2012 Gridley & Company LLC
BuyoutGrowth Equity ($10M-$50M)
Seed (<$2M)
Early Stage ($1M-$10M)
30 33 23 7
Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases
“The Locals” - Digital Focused VC/PE Firms Headquartered in NY Area (72)
UpstageVenturesUpstageVentures
27© 2012 Gridley & Company LLC
Source: Capital IQ, TechCrunch, public filings, and press releases
Seed
Early Stage
Growth
1-3 4-10 >10
Buyout
1-3 4-10 >10 72725
“The Locals” - Digital Focused VC/PE Firms Headquartered in NY Area• By Number of NY Area Digital Investments January 2008 – October 2012
28© 2012 Gridley & Company LLC
BuyoutGrowth Equity ($10M-$50M)
Seed (<$2M)
Early Stage ($1M-$10M)
9 13 12 5
“The Satellites” - Digital Focused VC/PE Firms With a NY Office (27)
Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases
29© 2012 Gridley & Company LLC
“The Satellites” - Digital Focused VC/PE Firms With a NY Area Office
Source: Capital IQ, TechCrunch, public filings, and press releases
Seed
Early Stage
Growth
1-3 4-10 >10 279
• By Number of NY Area Digital Investments January 2008 – October 2012
30© 2012 Gridley & Company LLC
Growth Equity ($10M-$50M)
Seed (<$2M)
Early Stage ($1M-$10M)
11 34 30
Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases
“The Outsiders” - Digital Focused Non-NY VC/PE Firms (50)
31© 2012 Gridley & Company LLC
“The Outsiders” - Digital Focused Non-NY VC/PE Firms
Source: Capital IQ, TechCrunch, public filings, and press releases
Seed
Early Stage
Growth
4-101-3 >101-3 4-10 >10 21534
• By Number of NY Area Digital Investments January 2008 – October 2012
32© 2012 Gridley & Company LLC
“The All-Stars” - VC/PE Firms with at Least 5 NY Area Digital Investments
Source: Capital IQ, TechCrunch, public filings, and press releases
“The Locals” “The Satellites” “The Outsiders”
Seed
Early Stage
Growth
12728
• January 2008 – October 2012
© 2012 Gridley & Company LLC
V. Overview of NY Area Public Digital Companies
34© 2012 Gridley & Company LLC
Public Companies with a NY Area Presence by Industry (47)
Data Traditional MediaMarketing
eCommerce
Digital Media9 10
6
11 11
35© 2012 Gridley & Company LLC
Note: Market cap calculated on 10/31/2012. Source: Capital IQ and public filings
$5B-$15B$2B-$5B<$500M $500M-$2B >$15B12 7 7 5 12
Public Companies with a NY Area Presence by Market Cap
36© 2012 Gridley & Company LLC
Public Companies <$1 Billion Valuation
0.0x 4.0x NM5.0x
$300
Ent
erpr
ise
Val
ues
Ent
erpr
ise
Val
ues
3.0x2.0x1.0x
$100
$60
$40
$20
$1,100
$900
$700
$500
($ in millions)
LTM Revenue MultipleLTM Revenue MultipleSource: Capital IQ and public filings as of 10/31/2012
37© 2012 Gridley & Company LLC
Public Companies >$1 Billion ValuationE
nter
pris
e V
alue
sE
nter
pris
e V
alue
s
($ in billions)
LTM Revenue MultipleLTM Revenue MultipleSource: Capital IQ and public filings as of 10/31/2012
0.0x
$250
$100
$50
3.0x2.0x1.0x
$200
$150
$40
$30
$20
$10
5.0x 6.0x4.0x 7.0x
38© 2012 Gridley & Company LLC
Public Acquirers with a NY Area Presence By Number of Acquisitions January 2008 – October 2012
Acquirer # of AcquisitionsSelect Acquisitions
(in $M Enterprise Value)
4)
3)
2)
1)
78
82
64
49
445)
Wildfire - $400 – 07/31/2012 (a)
TxVia – NA – 04/02/2012 (b)
AdMob – $675 – 11/09/2009
Admeld – $400 – 06/13/2011 (a, b)
LBi International - $582 – 09/20/2012
Rosetta – $575 – 05/17/2011
Razorfish – $530 – 09/09/2009
Big Fuel Communications – NA – 07/18/2011 (b)
Adam & Eve Group – $78 – 05/24/2012
Clemenger – $138 – 09/01/2010
Communispace – $100 – 02/07/2011 (a)
Kenexa - $1,397 – 10/27/2012
TeaLeaf Technology – NA – 05/02/2012
Netezza – $1,730 – 09/20/2010
Sterling Commerce – $1,400 – 05/24/2010
FX Alliance -- $680 – 07/09/2012 (b)
Global Objectives Limited – $530 – 05/16/2011
Pangea3 – $95 – 11/18/2010 (b)
Source: Capital IQ, TechCrunch, public filings, and press releases. (a) Rumored value,(b) New York deal.
© 2012 Gridley & Company LLC
VI. Advice for the Audience
40© 2012 Gridley & Company LLC
• LOTS of exciting stuff is happening in Digital NY right now. Ignore it at your peril!
• Opportunities come in all shapes and sizes.
• The Digital NY entrepreneur network is tight – get connected.
• There is an increasing depth of NY engineering talent – tap into it.
General Advice
41© 2012 Gridley & Company LLC
• Digital NY is getting crowded with lots of startups. Be sure of your objectives and how to achieve them.
• There is a quality group of NY-based technology focused lawyers, accountants and recruiters – network into them.
• Not everyone will be able to sell for $100MM+ valuations. Be realistic about where you stand on your chances.
• The scope of what is "strategic" to a buyer is constantly expanding. Make sure to keep as many lines of communication open to large organizations.
• There are LOTS of outside capital. Think through what is the right amount for you.
• Choosing a VC is as important as choosing a co-founder. It could be a 5+ year relationship, so get as much outside perspective on them as possible.
Focus on the partner involved, not the firm overall.
Advice for the Entrepreneur
42© 2012 Gridley & Company LLC
• Digital NY is getting crowded with lots of startups. Make sure your deal filter is clearly understood.
• Not everyone will be able to sell for $100MM+ valuations. Keep the cap table in check.
• Leading VCs have common characteristics today – honesty, preparedness, respect and insight. Make sure to understand an entrepreneur’s expectations before investing your time or theirs.
• The "West Coast is coming". They are aggressive and highly persuasive to entrepreneurs. Be prepared.
Advice for the Investors
43© 2012 Gridley & Company LLC
• Tremendous value being created, competitive dynamics are changing.
• There is a new generation of "Digital Leaders" among the emerging CEOs in the NY startup scene. Make sure you know who they are.
• Market leadership is a fungible thing these days. The traditional leaders today won't stay that way if they don't pursue digital growth strategies.
• If some of the "new billion dollar babies" (i.e., Facebook, Zynga, LinkedIn, Groupon, etc.) enter the M&A game in a meaningful way, you can forget about "winning" hot companies that are being sold.
Advice for the Public Companies
© 2012 Gridley & Company LLC