The ‘Venture Capital’ Category
Steve Fletcher, managing director at boutique investment bank GCA Savvian, helped broker the Yahoo!/interclick deal and was lead financial adviser to interclick.
Fletcher discussed the transaction and its particulars.
AdExchanger.com: What are some of the key challenges of bringing together two public companies like Yahoo! and interclick?
SF: It’s always difficult to combine two public companies. However, Yahoo and interclick had a close working relationship prior to the transaction which should help facilitate this combination. Furthermore, with the acquisition, Yahoo is gaining an experienced team that will be additive to their existing sales capabilities.
How do you view the acquisition? Why is this in both companies' best interests?
I think this is a great transaction for both sides. Interclick’s shareholders are receiving a premium over the market price prior to announcement and Yahoo is gaining a great set of ad targeting capabilities for its guaranteed and non-guaranteed inventory, as well as a terrific team. We view this as a true win-win for both sets of shareholders.
What's driving consolidation today? How is this different than past consolidation periods, if you will?
I think buyers are being smart about what’s out there and finding capabilities that complement their existing strengths. It's not about the best price; rather, it's about finding a complementary asset with proprietary technology and a great team. As a result, we are seeing deals that are more strategic rather than simple add-ons or scale buys. We believe that there are plenty of excellent companies out there and the environment for building a great one-stop ad tech platform is very favorable.
Where do you see M&A going from here?
A lot of this may be macro-environment driven, but, as mentioned above, we think conditions are right to see smart, thoughtful acquisitions in the ad tech space.
By John Ebbert
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Jeff Crowe is Managing Partner of Norwest Venture Partners (NVP).
NVP's portfolio includes companies such as Admeld, Brand.net, Turn, Komli, Kayak and SocialVibe.
AdExchanger.com: Recently it was announced that Google will buy NVP portfolio company Admeld pending regulatory approval. What intrigued you about Admeld initially? And, beyond a successful exit, what is it that Admeld did/is doing that you would hope for all of your portfolio companies?
JC: My original interest in Admeld came from the time that I was spending in the display space. I saw how DSPs like my portfolio company, Turn, were benefiting advertisers, and I thought that advanced technology platforms for programmatic selling would equally benefit publishers. When I looked at the supply side platform vendors, I really liked the Admeld team, their technology platform and their traction with premium publishers. Since our initial investment, Admeld has done many things right, but they have been particularly good at listening very closely to what their publishers want and then moving swiftly and creatively to develop innovative solutions for those publishers.
How and why is "engagement" playing a part of NVP's investment thesis?
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David Pakman is a Partner at Venrock, a venture capital firm.
AdExchanger.com: Hypothetically speaking, what do you think the experience of being a venture capital investor affords you should you decide to get back into a startup of your own?
DP: Well, the best experience for building startups is doing startups, so nothing will prepare me better for doing another startup than having been involved in the three already in my past. But being a VC has afforded me a much broader view into all that is happening in tech. I was highly specialized in digital music and ecommerce before but now I have a much deeper understanding of what is happening with social data, ad tech, mobile, real-time communication and other important tech verticals. In addition, I think I now understand the process of raising VC money with more clarity and certainty than when I was an entrepreneur. Finally, my network has expanded exponentially which provides me with a greater source of superstars from which to recruit.
Looking at Venrock, what is the investment thesis today?
We focus on exceptional teams disrupting very large markets with robust technology innovation. We are investing in companies we believe can be worth hundreds of millions or billions of dollars at scale. Those investment goals require us to pursue really big ideas and less focus on incremental changes or feature additions to existing ecosystems. We have found exciting opportunities in ad tech, for example, where we see enormous disruption of the traditional advertising media markets, buying process, measurement, and most importantly, how a brand finds future customers. Other areas include everything mobile, social data, social commerce, newly imagined consumer services, and cloud/crowd companies.
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Todd Simon is Managing Director, Head of Digital Media at Oppenheimer & Co., an investment banking company. Simon is also on the Strategy Board of sell-side platform Rubicon Project.
AdExchanger.com: Given your background in investment banking, what is your take on today's M&A climate in the ad technology space?
TS: We expect a robust M&A market over the next 12-18 months, based on continued strength in the advertising environment, private capital raises for acquisitions, greater venture urgency for exits, and new public currencies. We are also seeing more dialogue around deals that produce scale and sub-sector leadership in online and mobile, cross-media combinations, convergence of adtech with gaming, social networking and ecommerce, and demand for innovative mobile and geo technology.
There has been a lot of talk about video bringing brand dollars online. How do you see this playing out?
It's happening now, with spending of $1.4b in 2010, up 340% from 2006, going to $5.5 billion in 2014. Looking ahead, we are very bullish on the space, and the unlocking of the $60b TV ad budget. As it stands, video is priority #1 for brand advertisers in sectors like auto, finance, travel, and food, while large sites are feeling the pressure to accelerate their video-related brand initiatives. In terms of changing the mindset, recent independent studies are confirming higher user engagement, in a medium that is fundamentally more measurable, more addressable. The supply side is perhaps the most challenging, and we are really excited to see companies like Cinesport, Healthination and Machinima cracking the code on high quality, low cost production of super-high contextual content. In terms of ecosystem development, we like the innovators RealGravity for syndication and Adap.tv for real-time bidding.
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Kiran Hebbar is General Partner of Valhalla Partners, a venture capital firm with investments in such companies as JumpTap, Legolas and TidalTV among many others.
AdExchanger.com: How did you get started in the venture biz?
KH: I was the first person in my family to go to college and am very achievement oriented. I have always felt that making a new product or service was the most valuable thing one could achieve. I began my career writing 3D CAD software program at Bentley Systems, a leading engineering design software company. My first taste of the venture capital business was in 2002, during an internship at a VC firm during business school. I spent most of my time working with the CEO of a portfolio company on a new product launch: I was hooked. Being a VC seemed like a way to magically multiply my bandwidth and work at several world-changing start-ups simultaneously. However, I didn't have the functional breadth to be effective in a VC role. I spent the next few years in product management and marketing roles in an e-commerce start-up in New York and at Siebel Systems in Silicon Valley. I was fortunate to be selected as a Kauffman Fellow and met Valhalla through that avenue. I was impressed by the early stage view, operational expertise and track record of the partners at Valhalla and have been with the firm since 2006.
What is the investment thesis at Valhalla?
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Chris Fralic is Managing Partner of First Round Capital, an early-stage investment company. In an update of his interview a year ago, Fralic recently spoke to AdExchanger.com about the investment climate and the digital advertising ecosystem.
AdExchanger.com: In retrospect, what has surprised you about last year's acquisition of Invite Media by Google?
CF: I'm impressed with how fast Invite Media has grown inside of Google which probably isn’t too surprising, but more surprised that there haven't been more acquisitions in the space to date and yet there's still a fair amount of investment going in. I still think there will be more M&A activity around DSP's, but many of them have now shifted and adapted and are adding Audience Management/DMP and other services to their offerings.
Along those lines - where do you think the next "Google" will come from? Or, what will this new company's traits look like?
You could argue that Facebook is the new Google, and Google is the new Microsoft. A real differentiator for Facebook is social on a scale never seen before, and on a relative basis great companies like Google and Apple haven't fully realized their social potential yet. The other big factor with Facebook is they've enabled a thriving platform with lots of companies making lots of money with them.
What broader trends is First Round seeing today from an investment perspective?
We continue to see a lot of great companies in the advertising and ad tech/infrastructure space, and one strong theme is companies helping marketers reach users where they're spending more and more time, on platforms like Facebook. We're also seeing a lot of exciting companies in new online shopping models and e-commerce infrastructure. We're also increasingly seeing “mobile first” and online/offline models like @HotelTonight and @Uber.
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Two weeks ago, Adobe Systems acquired data management provider Demdex in a deal facilitated in part by boutique investment bank, LUMA Partners. Read about the deal.
LUMA Partners' Terence Kawaja (maker of his well-known ad tech ecosystem map/"eye chart") discussed the acquisition and its ramifications.
AdExchanger.com: Given LUMA Partners advisory services in the Demdex sale to Adobe, what do you think was Adobe's strategic rationale with the acquistion?
TK: For Adobe, this is a very smart move. They augment the Omniture product suite with data management capabilities. Adobe has an incredibly rich data set captured through its SiteCatalyst product, the leading web analytics product on the market. By adding Demdex's audience management solution, Adobe will now instantly become a leader in display advertising. Advertisers will be able to combine its first-party SiteCatalyst data with third party data to identify and categorize the site visitors, and then effectively target high-value audience segments with display advertising campaigns. Similarly, Publishers utilizing the Demdex audience management solution will better understand their site visitors, and therefore be able to more effectively sell their inventory. Demdex's audience management solution and its approach to the market was an ideal fit with Adobe's product line and sales model, making Adobe + Demdex a perfect match.
The data management (DMP) space has become an attractive sector for both investment and now acquisition. Why would you say that is and do you see more activity?
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Petsky Prunier provided investment banking services in today's announced acquisition of ClearSaleing by GSI Commerce.
Sanjay Chadda, Partner & Managing Director at Petsky Prunier discussed the transaction.
AdExchanger.com: How long was the deal in the making? What's your view on M&A momentum currently?
SC: As a high profile company and given its #1 ranking in several research reports, the Company was approached by a number of interested parties including potential acquirers and investors. We started working with the Company in the middle of the summer. We took over those initial conversations and began a strategic outreach to other likely partners.
The market right now is excellent. Our firm's research group reported mergers and acquisitions and investment volume in the Marketing, Information and Digital Media/Commerce industries grew 49 percent in 2010 while aggregate transaction value increased 87 percent, compared to 2009. We have already closed several transactions this year and expect a record 2011. We continue to see strategic buyers looking to grow their service offerings and secure client relationships and financial investors are increasingly looking to put money to work.
Do you expect more deals around attribution? Why or why not?
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Updating the old slide from only this past October, Terence Kawaja of LUMA Partners has released a brand, new update of his ad tech ecosystem map- and a new video!
Kawaja promises that this new ad ecosystem map has:
- More logos (up to 245)!
- More categories!
- Color-coded categories!
- And, acquired companies denoted!
Kawaja adds, "It's interesting to note that no less than 24 companies (by my count) have been acquired in the last 18 months."
Also, below is what Kawaja describes as a "Stephen Colbert-style" mock interview with Sir Martin Sorrell, which he prepared for a WPP digital think-tank offsite that took place in Athens, Greece, and included among its attendees Sir Martin Sorrell.
See what he saw now...
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Ken Allen is Senior Vice President, Blackstone Advisory Partners L.P., an advisory and investment firm.
AdExchanger.com: First, can you give a quick background on you, Blackstone and your responsibilities today?
KA: Blackstone is one of the world’s leading advisory and investment firms. The firm was originally founded in 1985 as a boutique M&A advisory firm by Steve Schwarzman and Pete Peterson and advisory has remained core to the firm’s activities for over 25 years. Our firm has advised on some of the most important and complex transactions worldwide, including advising AIG and Ford in their restructuring during the recent financial crisis, Reuters in its sale to Thomson Corporation, Microsoft in its search negotiations and partnership with Yahoo!, and Xerox in its purchase of Affiliated Computer Services.
I have led the advisory group’s efforts in the Digital Media and Internet sectors since coming to Blackstone from Deutsche Bank in 2007. I have spent 10 years covering the media and technology sectors and have advised on over $10 billion in transaction value during that period. In addition to the Yahoo! search partnership, Blackstone has been extremely active in the digital space, having advised on numerous recent high-profile deals such as Publicis in its acquisition of Razorfish from Microsoft, Sapient in its acquisition of The Nitro Group, and BuyVIP in its sale to Amazon.com.
Our philosophy for 25+ years has been to provide thoughtful, objective, and realistic advice to companies and entrepreneurs throughout all stages of a company’s lifecycle, whether during the start-up phase or as a large corporation. Within the digital media sector and with respect to high-growth emerging businesses, in particular, we find there to be a serious lack of impartial, trusted advisory services. Many of the small boutiques are simply pushing product to buyers’ corporate development departments and do not have the depth or breadth of relationships with buyers, the long-term strategic perspective, the global reach, or the M&A expertise necessary to provide best-in-class service. Conversely, the larger bulge bracket firms are not able to deliver the same senior-level attention, the objectivity, or the depth of sector-knowledge that we do. Finally, our relationship with the private equity side of the business enables us to have a principal mindset and truly put ourselves in the shoes of the companies we advise with an eye toward creating long-term shareholder value.
What's your view of the digital ad technology landscape today? Are there too many companies?
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