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