Tech Exits in Silicon Alley
Although opportunities in traditional New York industries such as finance, media and fashion may have cooled in the last few years, that hasn't stopped phenomenal growth for New York's Silicon Alley. Recently, there's been an increase in available angel dollars (in 2008, New York City represented 12% of all angel investment rounds in the United States; five years later, that number is 20%), growth in the size and number of tech investment funds (Softbank just closed a $51 million fund exclusively for earlystage NYC and New York tech companies in May 2013) and a mushrooming of spaces where emerging tech companies can get started (the Cornell and Technion Roosevelt Island Campus will anchor dozens of startup accelerators, incubators and co-working spaces already canvassing the city). New York's next generation of moguls clearly count "starting a tech company" among their best opportunities.
But while early-stage opportunities are exciting, a robust tech ecosystem demands companies "exit" by acquisition, merger or IPO. Exits are critical because they mint a class of entrepreneurs to fund and advise the next generation of startups, and also free up experienced talent to fill the "missing middle" of ranks needed for companies to scale from dozens to hundreds of employees. This year there's been no shortage of New York tech company exits. Recent deals include headline-grabbing acquisitions of Tumblr, MakerBot, Boxee and HopStop (by Yahoo!, StrataSys, Samsung and Apple, respectively.) In addition to the current wave, notable exits for New York tech companies in the last few years include Huffington Post to AOL; Hunch to eBay; GroupMe to Skype; Buddy Media to Saleforce; and Behance to Adobe. And although the first half of 2013 has been impressive, there are more Big Apple-based tech companies ripe for exit this year. Here are three favorites:
Mashable: Although Mashable started in Aberdeen, Scotland and spent formative years in San Francisco, the site has come into its own as one of the most popular blogs in the world since founder Pete Cashmore brought the company's headquarters to New York in 2010. The site started out covering social media and tech news, but has expanded content to include topics ranging from politics to parenting. Today, Mashable has twenty million unique monthly visitors, syndicates original content to a global array of online news outlets and has held out from potential acquisitions, including last year's $200 million bid from CNN. With their recent UX overhaul to create consistent branding and a better user experience, Mashable is poised to add freshness and credibility with millennial readers to any traditional news house, making exit seem like a "when, not if" proposition. Unencumbered by outside investment, Mashable is uniquely positioned to move at Cashmore's discretion. But if someone makes an offer he can't refuse, a la the $315 million price tag paid by AOL for the Huffington Post in 2011, Mashable could be one of fall's biggest Silicon Alley exits.
AppNexus: In his Right Media days, Brian O'Kelly toyed with the idea of creating a platform to bid on and buy online advertisements in real-time. After Right Media was acquired by Yahoo! (another New York-based deal), O'Kelly launched AppNexus, turning his idea into reality. Since then, the startup has emerged as one of the most innovative and disruptive companies to headquarter itself in NYC. AppNexus closed a $75 million round of financing at a valuation rumored to be just short of a $1B in January 2013, bringing total funding north of $140 million. According to Forbes, the company handled $700 million in ad spending last year and processes over 16 billion ad buys per day. Never slowing down, the team is bringing the platform to mobile technology this year. Acquisition by Microsoft (which joined investors Venrock, Kodiak Venture Partners and First Round Capital in AppNexus' $50 million Series C in 2010), Yahoo! or Facebook seems possible in the second half of this year. Finding the perfect acquirer could be challenging, however. With more than 150 employees added over the last seven months, AppNexus' exit likely would rival that of New York's richest internet ad service exit, Google's purchase of DoubleClick for $3.1 Billion in 2007.
MongoDB: Formerly 10gen, the newly branded MongoDB provides the leading NoSQL database altering the way 'big data' gets stored via a modern database designed for agility and scalability. In addition to renaming, it has made moves to strengthen its relationship with IBM's DB2, and relocated its New York offices from trendy SoHo to the outskirts of Times Square. The company has received about $80 million in funding, from prominent venture firms including Sequoia, Union Square Ventures and Flybridge Capital Partners. Founded in 2007, MongoDB has grown to over 200 employees across its U.S. offices and global outposts in London, Sydney, Dublin and Barcelona. The company shows no sign of slowing as more developers rely on their NoSQL database, including Fortune 100's Disney, Cisco and MetLife to deploy their enterprise level services. Although the company is in the early stages of monetization, the recent focus on strengthening the MongoDB brand could be indicative of upcoming moves in terms of an exit; potential acquirers include Oracle and the aforementioned IBM. MongoDB embodies the spirit of NYC emerging tech, and will continue to be a huge successes story for Silicon Alley.
This article was co-authored by Matthew R. Kittay (Attorney, Reitler Kailas & Rosenblatt) and Loughlin F. Rodd (Analyst, Reitler Advisory Group).
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