Gridley's Guide to Digital NY

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Gridley’s Guide to Digital New York is a unique and comprehensive free report for investors, buyers and entrepreneurs looking for one place to quickly get up to speed on New York’s exciting, explosive digital ecosystem.

WHO
- Gridley’s Guide to Digital New York is published by Gridley & Company LLC -- a New York based boutique investment bank that provides financial advisory services to companies in the Information Services industry with a specific focus on the following sectors: Digital Media, Marketing, Internet, and Financial Technology.

WHY
- There is a lot of excitement globally about the NYC digital ecosystem, but it’s still a pretty recent phenomena that continues to grow and be defined.
- Many investors and strategic buyers struggle to keep up with the hot new technologies, the changing landscape and emerging category leaders throughout the Digital NY landscape.
- Entrepreneurs looking to build or grow their business development, investor and resource networks don’t typically have a full picture of the breadth and depth of NYC’s digital sector.
- New York’s existing ecosystem with big traditional media, advertising, data and internet industry leaders set the stage for the unique development of the next generation of disruptive digital companies.

WHAT
- Momentum in the Digital NY Industry: $4.5 Billion invested in Digital NY since 2006 – Interest remains very high, very exciting for NYC.
- Target Audience: Investors, Strategic Buyers & Entrepreneurs, looking for one place to quickly get up to speed on NYC digital ecosystem.
- Dynamic Website – Our website (www.gridleydigitalny.com) enables visitors to quickly gain an overview of what’s happening in New York and to focus on key areas of interest. It includes everything in the report plus details on companies, a list of Digital NY Events, and a Twitter feed following the leading Digital NY companies.

Visit www.gridleyco.com/digitalny for interactive website on digital NY companies.

Published in: Economy & Finance, Business
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Gridley's Guide to Digital NY

  1. 1. January 2012© 2012 Gridley & Company LLC
  2. 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. 3. I. Introduction to the Report© 2012 Gridley & Company LLC
  4. 4. IntroductionWELCOME to Gridley’s Guide to Digital New York. While many of you were out at the beach or on the golf course this summer,we had a team toiling away on this project. We are very excited to share the results with you.Gridley’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 and people starting asking usabout all of the “digital momentum” in NY. There was a feeling that lots was going on, but people didn’t really understand just what“it” was and how extensive “it” was. Well, four months later, we can tell you a few things about “it”: • There has been $4.5 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 approximately 300 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 five private companies that have raised over $100MM of capital (Tremor Video, ZocDoc, Gilt Groupe, Tumblr, and Everyday Health) and 15 that have raised between $50MM and $100MM. • There have been ten $100MM+ sale transactions of private Digital NY companies since January 2008 (Mediamind, Admeld, Huffington Post, Webloyalty, Hotjobs, Innovation Interactive, Zagat, Register.com, Daily Candy, and Answers.com).© 2012 Gridley & Company LLC 4
  5. 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. 6. Interested in Other Gridley Reports?• Available at www.gridleyco.com/what-we-think/resources/ Recent Conference Presentations Comprehensive Industry Overviews Quarterly Newsletter© 2012 Gridley & Company LLC 6
  7. 7. II. Digital NY OVERVIEW© 2012 Gridley & Company LLC
  8. 8. The Past Four 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 Mayor Bloomberg announces HQ move starts up city-funded leads / to NY in September Raises series A opens a business incubator Googleplex in New in tech VC funding and deal ($680 million) round programs York City quantity April July December June September January 2007 2007 2007 2008 2009 2011 January September November September June August December 2007 2007 2007 2008 2009 2010 2011 Raises series Mayor Bloomberg offers A round Raises series A $100 million and land to Acquires develop a top is founded round announces spin-offs of: Announces engineering school to October 2007 For $125 million acquisition of encourage tech comes to New York development, to bring New York City to the Raises Series A for $30 billion forefront of innovation.Raises Series B Raises series round A round round announces acquisition of Raises series A round © 2012 Gridley & Company LLC 8
  9. 9. Over 300 NY Digital Start-Ups Founded in the LastFew Years… Digital Start-Ups Founded in NY 80 71 62 60 53 2007 2008 2009 2010 2011Sources: CapIQ and Gridley estimates© 2012 Gridley & Company LLC 9
  10. 10. NY’s Emergence as a Tech Hub• New York City has become a true digital media innovation center 1H2011 Internet VC Funding by Top Cities 1H2011 Internet VC Deals by Top CitiesTotal = $3,431 billion Total = 289 Boston, 9 Los Angeles Washington, Boston 3% Los Angeles, 13 D.C., 1 6% San Francisco Chicago, 18Washington, D.C. 21% 12% San Francisco, 103 Bay Area Palo Alto $1,534 bn Bay Area Chicago 11% New York, 81 167 17% Redwood City 6% Palo Alto, 29 M ountain View San M ateo, 7 New York 4% M ountain View, San M ateo Redwood City, 9 19 18% 2%Source: CB Insights “Venture Capital Activity Report”© 2012 Gridley & Company LLC 10
  11. 11. NY’s Emergence as a Tech Hub• New York City has become a true digital media innovation center NY Tech Investments Over Time $1,000 $947 $900 $775 $800 $700 $642 $600 $541 $493 $500 $400 $300 $200 $100 $0 2007 2008 2009 2010 Q1-Q3 2011Source: PriceWaterhouse Coopers “MoneyTree Report 2011”, Media & Entertainment and Software investments© 2012 Gridley & Company LLC 11
  12. 12. 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 385 186 172 37 1995 2010 NYC Silicon ValleySource: PriceWaterhouse Coopers “MoneyTree Report 2011”, Media & Entertainment and Software deals© 2012 Gridley & Company LLC 12
  13. 13. 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 13
  14. 14. Major Disruption is Happening Across All Sectors Advertising / Marketing Commerce Content Finance Social TV© 2012 Gridley & Company LLC 14
  15. 15. Top 25 Private Digital NY Sale Transactions January 2007 – December 2011 (Disclosed deals / rumored pricing available)(Enterprise Value in $M) $1,000 $800 $400 $200 $0 2007 2008 2009 2010 2011 Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 15
  16. 16. III. Overview of NY Area Private Digital Companies© 2012 Gridley & Company LLC
  17. 17. Digital Sector Categorizations (298) Digital Digital Content Marketing E-Commerce Mobile Social (82) (112) (48) (32) (31) 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 17
  18. 18. 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 18
  19. 19. NY Area Private Digital Content Companies (82) Content Family & 4 Finance & 9 14 Games 5 Lifestyle 25 Enabling Education Professional Electric Sheep Health & 4 Music 3 Tech 3 Video & 15 Fitness Images© 2012 Gridley & Company LLC 19
  20. 20. NY Area Private Digital Marketing Companies (112) Audio & 5 Digital 31 Display 29 Email 5 Lead 6 Video Agencies Advertising Advertising Generation Advertising Local 9 Search 11 Social 16 Advertising Advertising Marketing Management Cloverhill Enterprises© 2012 Gridley & Company LLC 20
  21. 21. NY Area Private eCommerce Companies (48) Brand 2 Daily Deals 12 E-Com 4 Marketplace 10 Private Sales 7 Storefront Infrastructure Third Party Other Retailer 10 3FashionStake© 2012 Gridley & Company LLC 21
  22. 22. NY Area Private Mobile Companies (32) Content 9 eCommerce 4 Marketing 15 Social 4© 2012 Gridley & Company LLC 22
  23. 23. NY Area Private Social Companies (31) Commerce 2 Content 7 Dating 2 Enterprise 2 Curation Social Funding 1 Local 2 Social 11 Other 4 Network SpotOn© 2012 Gridley & Company LLC 23
  24. 24. NY Area Private Digital Companies by EquityRaised (148 ) $5M-$10M 43 $10M-$20M 37 $20M-$30M 23 $30M-$50M 25 $30-$50 $50M-$100M 15 $50-$100 Electric Sheep >$100M 5 FashionStakeSources: Capital IQ and TechCrunch, December 2011© 2012 Gridley & Company LLC 24
  25. 25. Top 10 Private Digital NY Sale TransactionsJanuary 2008 – December 2011 (Disclosed deals / rumored pricing available) Transaction Date Acquirer/Target Value (in $M) 1) 06/15/2011 $524 2) 06/13/2011 400* 3) 02/06/2011 315 4) 01/19/2011 296 5) 02/03/2010 225 6) 01/25/2010 200* 7) 09/08/2011 151 8) 06/17/2010 135 9) 08/05/2008 125 10) 09/07/2010 120Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value© 2012 Gridley & Company LLC 25
  26. 26. IV. Venture Capital and Private Equity Firms With NY Area Digital Investments© 2012 Gridley & Company LLC
  27. 27. “The Locals” - Digital Focused VC/PE FirmsHeadquartered in NY Area (60) Seed 22 Early Stage 27 Growth Equity 20 Buyout 7 (<$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 27
  28. 28. “The Locals” - Digital Focused VC/PE FirmsHeadquartered in NY Area• By Number of NY Area Digital Investments January 2008 – December 2011 1-3 1-3 20 4-10 4-10 18 >10 >10 7 Seed Early Stage Growth BuyoutSource: Capital IQ, TechCrunch, public filings, and press releases© 2012 Gridley & Company LLC 28
  29. 29. “The Satellites” - Digital Focused VC/PE FirmsWith a NY Office (25) Seed 10 Early Stage 11 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 29
  30. 30. “The Satellites” - Digital Focused VC/PE Firms With a NY Area Office • By Number of NY Area Digital Investments January 2008 – December 2011 1-3 6 4-10 8 >10 2 SeedEarly Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 30
  31. 31. “The Outsiders” - Digital Focused Non-NY VC/PEFirms (42) Seed 6 Early Stage 28 Growth Equity 25 (<$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 31
  32. 32. “The Outsiders” - Digital Focused Non-NY VC/PE Firms • By Number of NY Area Digital Investments January 2008 – December 2011 1-3 1-3 27 4-10 4-10 11 >10 >10 2 SeedEarly Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 32
  33. 33. “The All-Stars” - VC/PE Firms with at Least 5 NY Area Digital Investments • January 2008 – December 2011 “The Locals” 20 “The Satellites” 7 “The Outsiders” 10 SeedEarly Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases © 2012 Gridley & Company LLC 33
  34. 34. V. Overview of NY Area Public Digital Companies© 2012 Gridley & Company LLC
  35. 35. Public Companies with a NY Area Presence byIndustry (47) Data Digital Media Marketing Traditional Media 9 10 10 11 eCommerce 7© 2012 Gridley & Company LLC 35
  36. 36. Public Companies with a NY Area Presence byMarket Cap <$500M 14 $500M-$2B 8 $2B-$5B 8 $5B-$15B 6 >$15B 11Note: Market cap calculated on 12/30/2011. Source: Capital IQ and public filings© 2012 Gridley & Company LLC 36
  37. 37. 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 10.0x 11.0x LTM Revenue Multiple Source: Capital IQ and public filings as of 12/30/2011 © 2012 Gridley & Company LLC 37
  38. 38. 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 10.0x LTM Revenue Multiple Source: Capital IQ and public filings as of 12/30/2011 © 2012 Gridley & Company LLC 38
  39. 39. Public Acquirers with a NY Area Presence By Number of Acquisitions January 2008 – December 2011 Select Acquisitions Acquirer # of Acquisitions (in $M Enterprise Value) ITA Software – $700 – 06/01/20101) AdMob – $675 – 11/09/2009 69 Admeld – $400* – 06/13/2011 Zagat - $151 – 09/08/2011 Pangea3 – $95 – 11/18/20102) 65 Hugin Group – $60* – 09/21/2009 Rosetta – $575 – 05/17/20113) 50 Razorfish – $530 – 09/09/2009 Big Fuel Communications – NA – 07/18/2011 Netezza – $1,730 – 09/20/2010 Sterling Commerce – $1,400 – 05/24/20104) 41 SPSS – $1,122 – 07/28/2009 DemandTec – $422 – 12/08/2011 Clemenger – $138 – 09/01/20105) 40 Communispace – $100*– 02/07/2011 Saffirio.Tortelli.Vigoriti – $24 – 03/18/2011 Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value, bold represents New York deals© 2012 Gridley & Company LLC 39
  40. 40. VI. Advice for the Audience© 2012 Gridley & Company LLC
  41. 41. 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 41
  42. 42. 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 42
  43. 43. 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 43
  44. 44. 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 44
  45. 45. © 2012 Gridley & Company LLC

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