Two acquisitions caught my attention today:
1. Hot or Not acquired by Avid Life Media
2. Lecayla acquired by OpSource
Hot or Not is interesting to me because of my curiosity regarding Internet businesses especially where entrepreneurship and exit valuations are concerned. According to the Tech Crunch article linked above, Hot or Not received $20M in total consideration which is an estimated 4x revenue and 10x profits. Apparently, Hot or Not had no outside professional investors, so the full amount gets returned directly to the existing shareholders. James Hong, one of the founders of the site has a post here regarding the restarting of the site in 2006. Assuming their option plan was 15% of the outstanding equity, it was probably a good return for the owners and employees. It definitely wasn’t an IPO type of exit, but seriously, it’s a picture rating web site!!
Lecayla is interesting to me for many reasons. First, I’ve come to know Conor, the CEO of LeCayla, fairly well through SAAS events, deals we’ve worked on together and deals where we’ve competed and I like him. Second, LeCayla is a great comparable for Aria since they are a SAAS “billing” company and are at least adjacent to us in functionality. Third, OpSource has been a good partner for Aria and sells a lot of our software.
From the sparse details regarding the deal, it seems it was an all stock deal, meaning no cash changed hands. The existing LeCayla investors are now the proud owners of OpSource stock. (hopefully they got some preferred, but most likely, it was common burdened with at least $40M in preferences.)
Unlike the Hot or Not deal, LeCayla had some real potential. The SAAS delivery model is still emerging. None of our SAASy peers have come close to creating meaningful revenues yet. (In my opinion, SAAS won’t be taken seriously by the software industry until at least one company reaches $1Billion in revenue…market cap doesn’t count!) And, maybe more importantly, Billing is a mission critical application where existing ISV competitors have REVENUES in the BILLIONS!
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