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Gridley's Guide to Digital NY November 2012

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  • media time spent vs. ad spend All media channels undergoing considerable change today Print has maintained a large share, despite falling consumer attention. We are seeing that mobile will have a considerable impact on print in the next two to three years, more so than PC based Web had in the prior five years.
  • media time spent vs. ad spend All media channels undergoing considerable change today Print has maintained a large share, despite falling consumer attention. We are seeing that mobile will have a considerable impact on print in the next two to three years, more so than PC based Web had in the prior five years.
  • media time spent vs. ad spend All media channels undergoing considerable change today Print has maintained a large share, despite falling consumer attention. We are seeing that mobile will have a considerable impact on print in the next two to three years, more so than PC based Web had in the prior five years.
  • Transcript

    • 1. November 2012© 2012 Gridley & Company LLC
    • 2. Table of Contents 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© 2012 Gridley & Company LLC 2
    • 3. I. Introduction to the Report© 2012 Gridley & Company LLC
    • 4. IntroductionGridley’s Guide to Digital New York is a unique and comprehensive report for investors, buyers and entrepreneurs looking for oneplace 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 fromour 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 startingasking us about all of the “digital momentum” in NY. There was a feeling that lots was going on, but people didn’t really understandjust 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).© 2012 Gridley & Company LLC 4
    • 5. IntroductionThe Digital NY scene is still in its early formation days with lots of growth ahead. We believe that New York’s existing ecosystemwith big traditional advertising and media companies as well as many large data and internet industry leaders all headquartered heresets the stage for the unique development of the next generation of disruptive digital companies. Nowhere else in the country is theresuch 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 ofgreat use to you.Sincerely,On Behalf of the Gridley Team Questions About This Report? Peg Jackson Linda Gridley Pratik Patel Managing Director President & CEO Director peg.jackson@gridleyco.com linda.gridley@gridleyco.com pratik.patel@gridleyco.com 212-400-9709 212-400-9710 212-400-9712 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.© 2012 Gridley & Company LLC 5
    • 6. Interested in Other Gridley Reports?• Available at www.gridleyco.com/what-we-think/resources/ Comprehensive Industry Overviews Quarterly Newsletter© 2012 Gridley & Company LLC 6
    • 7. II. Digital NY Overview© 2012 Gridley & Company LLC
    • 8. The Past Six Years Have Shaped Much of NY’s Digital Media and Technology Landscape • Notable events in NY since 2007: Development of brand names across broad set of verticals / / ($275 million) ($3.1 billion) Closes deal and announces Mayor Bloomberg announces HQ move acquisition of leads / to NY in September Raises series A opens a starts up city-funded business incubator Googleplex in New in tech VC funding and deal ($680 million) round programs York City quantity April December June September For $183 million July January March 2007 2007 2007 2008 2009 2011 2011 January September November September June June August December 2007 2007 2007 2008 2009 2010 2011 2012 Raises series Mayor Bloomberg A round Raises series A offers $100 million and Acquires land to develop a top announces is founded round announces spin-offs of: Announces engineering school to acquisition of October 2007 For $125 million acquisition of encourage tech comes to New York development, to bring New York City to the forefront of innovation. for $745 millionRaises Series B Raises series Raises Series A for $30 billion round A round round announces acquisition of Raises series A round © 2012 Gridley & Company LLC 8
    • 9. NY’s Emergence as a Tech Hub • New York City has become a true digital media innovation center Q3 2012 Internet VC Funding by Top Cities Q3 2012 Internet VC Deals by Top Cities Total of Top Cities = $1,853 million Total of Top Cities = 175 Total including Others = $2,672 million Total including Others = 372 San Francisco, 69 Others San Francisco 31% 31% Bay Area Palo Alto, 13 98 Bay Area San Mateo, 9 $1,171M Sunnyvale, 6 Palo Alto Los Altos, 1 3% Others, 197 San Mateo New York, 52Los Angeles 3% 5% Boston Los Altos Sunnyvale 7% 2% Boston, 16 New York 5% Los Angeles, 9 13% Source: CB Insights “Venture Capital Activity Report” © 2012 Gridley & Company LLC 9
    • 10. NY’s Emergence as a Tech Hub• New York City has become a true digital media innovation center NY Tech Investments Over Time $1,200 $1,141 $1,000 $791 $800 $688 $608 $600 $453 $400 $200 $0 2007 2008 2009 2010 2011Source: PriceWaterhouse Coopers “MoneyTree Report 2012”, Media & Entertainment and Software investments© 2012 Gridley & Company LLC 10
    • 11. 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 549 185 171 41 1995 2011 NYC Silicon ValleySource: PriceWaterhouse Coopers “MoneyTree Report 2012”, Media & Entertainment and Software deals© 2012 Gridley & Company LLC 11
    • 12. NY Ecosystem has Very Different Roots and GrowthOpportunities than Silicon Valley Internet Services Wall Street Leadership Talent Operational Engineering Data Services Efficiencies Talent Advertising Key Creative Customers Talent Strategic Strategic Acquirers Partnerships Fashion Business Media Development© 2012 Gridley & Company LLC 12
    • 13. Major Disruption is Happening Across All Sectors Advertising / Marketing Commerce Content Finance Social TV© 2012 Gridley & Company LLC 13
    • 14. Top 25 Private Digital NY Sale Transactions January 2007 – October 2012 (Disclosed deals / rumored pricing available)(Enterprise Value in $MM) $1,000 $800 $400 $200 $0 2007 2008 2009 2010 2011 2012 Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 14
    • 15. I. Overview of NY Area Private Digital Companies © 2012 Gridley & Company LLC
    • 16. Digital Sector Categorizations (313) Digital Digital Content Marketing eCommerce Mobile Social (85) (114) (52) (34) (28) Content Enabling Audio & Video Brand Storefront Content Commerce Advertising Family & Daily Deals E-Commerce Content Curation Education Digital Agencies E-Commerce Marketing Dating Finance & Display Infrastructure Professional Advertising Social Enterprise Social Marketplace Games Email Advertising Funding Private Sales Health & Fitness Lead Generation Local Third Party Lifestyle Local Advertising Retailer Social Network Music Search Other Other Advertising Tech Social Marketing Video & Images ManagementNote: Several companies have distinct business units that place them in multiple categories© 2012 Gridley & Company LLC 16
    • 17. NY Area Private Digital Companies by Sector Digital Digital Content eCommerce Mobile Social Marketing FashionStake SpotOn Electric SheepNote: More companies illustrated on the following sector breakdown pages© 2012 Gridley & Company LLC 17
    • 18. NY Area Private Digital Content Companies (85) Content Family & 6 Finance & 9 12 Games 5 Lifestyle 25 Enabling Education Professional Electric Sheep Health & 4 Music 3 Tech 4 Video & 17 Fitness Images© 2012 Gridley & Company LLC 18
    • 19. NY Area Private Digital Marketing Companies (114) Audio & 7 Digital 32 Display 28 Email 5 Lead 5 Video Agencies Advertising Advertising Generation Advertising Local 10 Search 11 Social 16 Advertising Advertising Marketing Management Cloverhill Enterprises© 2012 Gridley & Company LLC 19
    • 20. NY Area Private eCommerce Companies (52) Brand 2 Daily Deals 12 E-Com 6 Marketplace 11 Private Sales 7 Storefront Infrastructure Third Party Other Retailer 11 3FashionStake© 2012 Gridley & Company LLC 20
    • 21. NY Area Private Mobile Companies (34) Content 9 eCommerce 4 Marketing 17 Social 4© 2012 Gridley & Company LLC 21
    • 22. NY Area Private Social Companies (28) Commerce 2 Content 8 Dating 2 Enterprise 1 Curation Social Funding 1 Social 12 Other 2 Network SpotOn© 2012 Gridley & Company LLC 22
    • 23. NY Area Private Digital Companies by EquityRaised (185 ) $5M-$10M 58 $10M-$20M 48 $20M-$30M 33 $30M-$50M 28 $30-$50 $50M-$100M 18 $50-$100 Electric Sheep Ryzac >$100M 7 FashionStakeSources: Capital IQ and TechCrunch, November 2012© 2012 Gridley & Company LLC 23
    • 24. Private Digital NY Sale Transactions >$100 millionSince January 2010 (Disclosed deals / rumored pricing available) Transaction Date Acquirer / Target Value ($MM) 6/4/2012 salesforce.com, inc Buddy Media, Inc. $745 6/16/2011 (NYSE:CRM) DG FastChannel MediaMind 524 6/3/2010 The Hearst Technologies Inc. iCrossing, Inc. 425 6/13/2011 Corporation Google AdMeld 400* 2/6/2011 AOL Huffington Post 315 1/19/2011 Affinion Web Loyalty 296 8/26/2012 IAC Search & About.com, Inc. 300 11/1/2011 Media, Inc. Yahoo! Inc. interclick, inc. 264 2/3/2010 (NasdaqGS:YHOO) HotJobs.com, Ltd. Monster 225 1/25/2010 Worldwide, Inc. Dentsu Innovation 200* 3/21/2012 Zynga, Inc. InternactiveInc. OMGPOP, 183 11/12/2012 (NasdaqGS:ZNGA) Ziff Davis Media j2 Global, Inc. 165 9/8/2011 (NasdaqGS:JCOM) Inc. Survey, LLC Google Inc. Zagat 151 6/17/2010 (NasdaqGS:GOOG) Register.com, Inc. Web.com Group, 135 Inc.Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value© 2012 Gridley & Company LLC 24
    • 25. IV. Venture Capital and Private Equity Firms With NY Area Digital Investments © 2012 Gridley & Company LLC
    • 26. “The Locals” - Digital Focused VC/PE FirmsHeadquartered in NY Area (72) Seed 30 Early Stage 33 Growth Equity 23 Buyout 7 (<$2M) ($1M-$10M) ($10M-$50M) Upstage VenturesNote: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases© 2012 Gridley & Company LLC 26
    • 27. “The Locals” - Digital Focused VC/PE FirmsHeadquartered in NY Area• By Number of NY Area Digital Investments January 2008 – October 2012 1-3 1-3 25 4-10 4-10 27 >10 >10 7 Seed Early Stage Growth BuyoutSource: Capital IQ, TechCrunch, public filings, and press releases© 2012 Gridley & Company LLC 27
    • 28. “The Satellites” - Digital Focused VC/PE FirmsWith a NY Office (27) Seed 9 Early Stage 13 Growth Equity 12 Buyout 5 (<$2M) ($1M-$10M) ($10M-$50M)Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases© 2012 Gridley & Company LLC 28
    • 29. “The Satellites” - Digital Focused VC/PE Firms With a NY Area Office • By Number of NY Area Digital Investments January 2008 – October 2012 1-3 9 4-10 7 >10 2 SeedEarly Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 29
    • 30. “The Outsiders” - Digital Focused Non-NY VC/PEFirms (50) Seed 11 Early Stage 34 Growth Equity 30 (<$2M) ($1M-$10M) ($10M-$50M)Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases© 2012 Gridley & Company LLC 30
    • 31. “The Outsiders” - Digital Focused Non-NY VC/PE Firms • By Number of NY Area Digital Investments January 2008 – October 2012 1-3 1-3 34 4-10 4-10 15 >10 >10 2 SeedEarly Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 31
    • 32. “The All-Stars” - VC/PE Firms with at Least 5 NY Area Digital Investments • January 2008 – October 2012 “The Locals” 28 “The Satellites” 7 “The Outsiders” 12 SeedEarly Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 32
    • 33. V. Overview of NY Area Public Digital Companies © 2012 Gridley & Company LLC
    • 34. Public Companies with a NY Area Presence byIndustry (47) Data Digital Media Marketing Traditional Media 9 10 11 11 eCommerce 6© 2012 Gridley & Company LLC 34
    • 35. Public Companies with a NY Area Presence byMarket Cap <$500M 12 $500M-$2B 7 $2B-$5B 7 $5B-$15B 5 >$15B 12Note: Market cap calculated on 10/31/2012. Source: Capital IQ and public filings© 2012 Gridley & Company LLC 35
    • 36. Public Companies <$1 Billion Valuation ($ in millions) $1,100 $900 $700Enterprise Values $500 $300 $100 $60 $40 $20 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x NM LTM Revenue Multiple Source: Capital IQ and public filings as of 10/31/2012 © 2012 Gridley & Company LLC 36
    • 37. Public Companies >$1 Billion Valuation ($ in billions) $250 $200 $150 $100Enterprise Values $50 $40 $30 $20 $10 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x LTM Revenue Multiple Source: Capital IQ and public filings as of 10/31/2012 © 2012 Gridley & Company LLC 37
    • 38. Public Acquirers with a NY Area Presence By Number of Acquisitions January 2008 – October 2012 Select Acquisitions Acquirer # of Acquisitions (in $M Enterprise Value) Wildfire - $400 – 07/31/2012 (a)1) TxVia – NA – 04/02/2012 (b) 82 AdMob – $675 – 11/09/2009 Admeld – $400 – 06/13/2011 (a, b) FX Alliance -- $680 – 07/09/2012 (b)2) 78 Global Objectives Limited – $530 – 05/16/2011 Pangea3 – $95 – 11/18/2010 (b) LBi International - $582 – 09/20/20123) 64 Rosetta – $575 – 05/17/2011 Razorfish – $530 – 09/09/2009 Big Fuel Communications – NA – 07/18/2011 (b) Kenexa - $1,397 – 10/27/20124) TeaLeaf Technology – NA – 05/02/2012 49 Netezza – $1,730 – 09/20/2010 Sterling Commerce – $1,400 – 05/24/2010 Adam & Eve Group – $78 – 05/24/20125) 44 Clemenger – $138 – 09/01/2010 Source: Capital IQ, TechCrunch, public filings, and press releases. Communispace – $100 – 02/07/2011 (a) (a) Rumored value, (b) New York deal.© 2012 Gridley & Company LLC 38
    • 39. VI. Advice for the Audience© 2012 Gridley & Company LLC
    • 40. General Advice • 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.© 2012 Gridley & Company LLC 40
    • 41. Advice for the Entrepreneur • 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.© 2012 Gridley & Company LLC 41
    • 42. Advice for the Investors • 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.© 2012 Gridley & Company LLC 42
    • 43. Advice for the Public Companies • 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 wont stay that way if they dont 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.© 2012 Gridley & Company LLC 43
    • 44. © 2012 Gridley & Company LLC

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