Home Venture Capital Why Was The Peer39 Acquisition Price Revealed By DG? – @Venture Crush NY Event

Why Was The Peer39 Acquisition Price Revealed By DG? – @Venture Crush NY Event

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ventureNobody was talking investment or tech bubble at Lowenstein Sandler‘s annual Venture CrushNY Event which took place in New York City’s Edison Ballroom today. The venture capital community came together for a discussion of its world as well as a review of several hot startups. Ed Zimmerman of law firm Lowenstein Sandler was emcee and moderator and opened the event by promising to “call bullsh*t” on any upcoming panelists.

Zimmerman promptly introduced the first panel which included CEO Brian O’Kelley of AppNexus providing his ad tech and investment opinion along with BirchBox Co-Founder/Co-CEO Katia Beauchamp, Huffpo exec Eric Hippeau of Lerer Ventures and Deven Parekh of Insight Venture Partners.

Zimmerman asked O’Kelley if he saw the Right Media’s success coming in the early days – think 2004-ish. O’Kelley said he saw an opportunity to help disrupt when he built the original version of Yield Manager – which he admitted was a failure. “You thought I was going to say it was a success, didn’t you?,” he said gesturing to the crowd.

Initially, the exchange model had not been fully realized and O’Kelley explained that the early days of the ad exchange was a lot about experimentation and failure. O’Kelley gave credit to former Right Media CEO Mike Walrath for letting him build the exchange and take “existential risk.” He intimated an “$18 million pre” round of investment for Right Media’s ad network product in 2004 was rejected and eventually led to a Redpoint Ventures-led investment that came in at a $42 million pre in anticipation of the “a-ha” moment. His point – Right Media knew something good was coming, they just weren’t sure exactly what, and they needed investors who were good with that.

Next, Zimmerman called out Hippeau’s recent tweet that he thinks it’s over for Yahoo!: “Yahoo goes from mishap to catastrophe, all self-inflicted.” Hippeau said there was always an inherent conflict at Yahoo around: “Are we a technology company or a media company?” Hippeau suggested that this conflict was exacerbated when new Yahoo! management decided it wanted to push forward as a media company, not technology.

Hippeau said Yahoo!’s growth from $600 million to $6 billion in media revenue was a great success, crediting former Yahoo! and current Criteo exec Greg Coleman, in particular. But in hindsight, Hippeau said that this time period was when Yahoo! lost its ability to be its true self: a media and technology hybrid.

Zimmerman asked the panel if there was anything that can be learned from the Yahoo! experience, for new emerging companies. Deven Parekh of Insight Venture Partners answered unequivocally that Yahoo! has been inherently mis-managed over the past 5 to 7 years. He pointed to Yahoo! being unable to keep its entrepreneurial talent as perhaps the most clear signal of its failure.

Next up – semantic technology? Yes.

Zimmerman brought up DG’s recent acquisition of Peer39 that was far less than the invested capital ($15.5 million versus nearly $27.4 million). Zimmerman wondered aloud if this was a warning signal for ad tech and asked O’Kelley if the price scared him in terms of the valuation of AppNexus. O’Kelley said dryly, “We’re terrified. Truly frightened.” In general, O’Kelley saw a period of natural contraction going on. He said that the significant part of the Peer39 acquisition was that the price was revealed since normally it wouldn’t be. What O’Kelley appeared to leave explicitly unsaid – and likely the reason Zimmerman posed the question – “the reveal” will affect the ad tech landscape’s ability to grow or sell their companies. For example, venture firms won’t invest in a company when they think they’re not going to make a significant, VC-like return (5x, 10x, etc.).

Hippeau piled on the ad tech discussion and said that he didn’t believe there was much going on in terms of ad tech innovation – other than a few companies as he through a bouquet to O’Kelley.

Insight’s Parekh followed up that MediaMind was his venture firm’s former investment and successful from his viewpoint. He said it was bought for $500 million in 2011 (editor’s note.. hmmm, had been thought to be $400 million-ish in the past. Rounding error by Parekh?). He agreed about a lack of differentiation today. Parekh didn’t mention that DG’s stock is now in the single digits with less than a $250 million market cap in the public markets and several hundred million dollars in debt.

Later, O’Kelley said that trying to make a comparison with B2C businesses and companies like his is tough in that his company is B2B with 250 “users” (clients). But he did let loose with a tidbit that his company has seen $40 million in media run through his platform in the last 30 days. O’Kelley talked a bit about how his company pivoted from a cloud computing company, too, and how the pivot into ads wasn’t easy. He claimed Invite Media had a similar moment of crisis where he and others invested in Invite and helped them bridge through into the next phase, which ultimately led to Google’s acquisition of the company for $80 million.

In spite of the negative talk about the Peer39 acquisition, the investment world still seems ready to pump cash into tech companies. Whether it’s an investment bubble or not remains to be seen. It will also be interesting to see how the JOBS Act – crowdfunding for startups – in the United States affects the venture business later in the year and thereafter.

By John Ebbert

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