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News  30, Jan 2013

Foodspotting’s US$10M exit: Is it attractive? What does it mean for other players?

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acquisitionIt’s over the news now. San Franscisco-based food photo sharing app Foodspotting has just been acquired by OpenTable to the tune of US$10 million.

Is a US$10 million exit attractive?

Prior to the acquisition, Foodspotting raised a US$750,000 seed round from investors, which include 500Startups, as well as a few other angel investors including Dave Morin and Dan Martell back in August 2010. In January 2011, Foodspotting closed a US$3 million funding round from Blue Run Ventures.

Fast forward to January 2013, is the US$10 million an attractive exit? Two years since their series A funding would suggest that the 12 person team is possibly very near the end of their runway. For the founders, the exit would probably be good news for the team. Exactly how much would each party get out of the investments will depend a lot on the liquidation preferences. Hacker News user kareemm did a simple calculation to give a scenario of a possible payout:

Looking through all the comments and discussions on the web and speaking to a few venture capitalists, many seemed to agree that the angels and the cofounders of Foodspotting probably did “okay” from the exit, and Blue Run Ventures probably got their money back with some extras.

When I spoke and discussed the acquisition deal with Amit Anand, founding partner of Jungle Ventures, he shared with me a really interesting angle to the acquisition.

“Once a really smart founder educated me that he considered such exits as growth stage investments instead. The fact that Foodspotting would now be able to grow much more rapidly under and with Opentable’s support is more important to the founders than the eventual exit multiples for the investors. Interesting when you think about it that way.”

Is mobile hard to monetize?

Another interesting point of discussion about the US$10 million exit is whether mobile is hard to monetize or not. Is there an exit strategy? While some argued that the acquisition of FoodSpotting might be an acqui-hire, perhaps what is more interesting is whether there are exits other than acqui-hires. Until today, startups and companies are still figuring out how to monetize all the eyeballs and pageviews on mobile.

A friend of mine in the mobile space also discussed the acquisition with me, which also suggested that mobile monetization is hard. Let’s do a simple comparison between Foodspotting’s exit and HungryGoWhere’s exit (Caveat: Quick and Simple, not exactly apple to apple comparison; I am also acknowledging the fact that HungryGoWhere has been around for longer). Foodspotting exits for US$10 million, and is a mobile app with a rumoured two million total users, which targets an international audience. HungryGoWhere exits for S$12 million (US$9.7 million), and is a web app targeting mostly Singapore audience. A quick comparison would suggest that mobile monetization is indeed a huge challenge, judging from the fact that Foodspotting has an international audience.

Read also: SingTel acquires HungryGoWhere for S$12 million dollars, merges service with inSing.com

What does this mean for other food photo sharing apps like Burpple or SnapDish?

Another interesting point of discussion is whether the acquisition of Foodspotting will increase the “relative attractiveness” of Burpple and SnapDish to new investors, since the acquisition sort of “validated” that food photo sharing app might be a viable mid-term strategy for any VCs’ portfolio. Burpple recently closed their US$500,000 funding round from Neoteny Labs as well as QuestVC earlier last month, and SnapDish also received their new round of funding from Digital Garage in November 2012. Will the acquisition of Foodspotting signal possible acquisitions of either Burpple or SnapDish soon?

What do you think?

Read also: Asia’s top venture capitalists predict what’s in store for 2013

Jacky Yap

Jacky Yap

Having spent one year abroad in Shanghai under the NUS Overseas College Programme, Jacky has an avid interest in entrepreneurship and web based startups. Jacky used to run N-House, Singapore's first entrepreneurial themed residence in NUS, and was also part of the organizing team for Startup Weekend Singapore 2012. You can reach him at jacky [at] e27 [dot] co

  • http://500startups.com/ Dave McClure

    you’re a pretty smart guy jacky ;)

  • Meritxell Rosich

    Great article Jacky!!

  • Pingback: Dave McClure is hungry for food tech, says 500 Startups might head to China and Southeast Asia soon - e27

  • http://www.facebook.com/heislyc.loh Heislyc Loh

    Well covered and suggested!

  • http://www.facebook.com/colorpyen Peter Yen

    Thanks Jacky for the great coverage. Food photo sharing is very popular especially among people in Asia, people like to take photos of food just to keep journal of their life and share with friends. However, I do think it poses challenges to further monetize given ads or reviewed-based ads, since the food providers, mostly are restaurants, may probably think it’s their food to make the behavior so interesting and not willing to pay, but there might still lots of room for collaboration to explore, like deal campaigns, new opening of a new restaurant ?

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