1. Talabaat
- Kuwait’s Success Story with Tech Startup
Since Yahoo!
acquired Maktoob in 2009 for $165 million the region has anticipated the next
big exit. Today the German ecommerce group Rocket Internet is expanding its
portfolio in the Middle East with its complete acquisition of Kuwait’s
Talabat.com, a food takeaway platform, for the sum of 150 million Euros ($170
million USD).
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| Venture Art Value Proposition |
“The Middle
East is one of the most attractive markets with significant growth potential
and highly attractive EBITDA [earnings before interest, tax, depreciation, and
amortization] margins,” said Rocket Internet CEO Oliver Samwer in a statement.
“The acquisition of Talabat.com is another important step in our long-term
global Food & Groceries strategy.”
Rocket
Internet acquires Kuwait’s Talabat for $170M, largest MENA tech acquisition
since Maktoob
Founded in
2004, Talabat.com, which was sold once before by Abdulaziz Al Loughani in 2010
to Mohamed Jaafar, owner of the Kuwait London General Trading, has since become
one of the largest online delivery services in the region, covering Oman, the
UAE, Kuwait, KSA, Qatar, and Bahrain. The site operates with over 1,300
restaurants, including major brands like Burger King, KFC, Johnny Rocket’s,
Hardees, TGI Fridays, and Subway.
Effect on
Kuwait and the region
A Kuwait
company by birth the acquisition of Talabat.com can only be seen as boon for
the tech entrepreneur scene of the country. It is also an example of how big
value cannot be created overnight; it took both Talabat.com and Maktoob 11
years to go from founding to exit.
1.1. Souq.com Said Worth $1 Billion in
Fundraising
The Dubai-based online retailer Souq.com is
seeking $300 million
Dubai-based
online retailer Souq.com, backed by investors including Tiger Global
Management, is seeking $300 million for expansion, according to three people
with knowledge of the matter.
The
fundraising would value the business at about $1 billion, the people said,
asking not to be identified as the information is private. New York-based Tiger
Global and South Africa’s Naspers, another existing investor in the company,
are leading the fundraising, two of the people said.
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| Project Report - Feasibility Report - Venture Art |
1.2. The Daily Startup: Munchery is Valued
at $300 Million in New Funding
Venture
capitalists’ appetite for food-delivery and meal-kit services seems to be
insatiable lately. The meal-delivery service Munchery the latest that is
fundraising, and it is being valued at about $300 million in the new round, The
Wall Street Journal’s Douglas MacMillan reports. The startup’s service delivers
prepared meals that are then heated up at a person’s home.
It was just a few weeks ago that the Journal
also broke the news about meal-kit service Blue Apron out fundraising at a
valuation of about $2 billion. Blue Apron’s service delivers boxes of
ingredients that the user then prepares and cooks. Another venture-funding in
the space was in late April when meal-delivery service Sprig raised $45
million. That service delivers meals, like Munchery, but that are already
warmed. Other meal-kit services–including Plated, HelloFresh and Marley
Spoon–also have sprouted in the last few years. Now many of them are looking to
grow beyond San Francisco and New York–the tech hotbeds where they started–and
other large cities.
2. Silicon Valley Tech Investment and Exit
Report
Silicon Valley doubles funding and deal volume
in the last five years. The internet and mobile sectors attract the lion’s
share of funding in the region.
The internet
sector has also consistently led deal share, which has remained very stable
since 2009, only fluctuating by two percentage points. Computer hardware &
services, electronics, and software have each decreased slightly, accounting
for a combined 15% of deals in 2013. Mobile & telecom grew from 15% of
deals in 2009 to 25% in 2013 as it takes share from sectors that are no longer
en vogue.
2.1. Startup Valuations Are A Combination
Of Science, Smoke And Mirrors, And Hubris.
Seed round
financings are also ballooning upwards –valuations for seed-stage companies
have increased by 63% since 2008, averaging $5.3 million.
Series A
round valuations are averaging $9.2 million, increasing at a modest rate of 23
percent.
Series B
rounds, in contrast, are the one area of venture capital where the proportion
of uprounds has contracted from 2012, although they still comprise 71% of
Series B financings. The median B round valuation is $25.6 million.
Series C
rounds rose by 93% in the first three quarters of 2013. The median Series C
valuation is now $75 million.
The median
valuation for Series D or later rounds is where numbers are really soaring —
valuations spiked by 116% over the past five years and surpassed the $100
million threshold — it stands at $132 million.
The rise is
even steeper in the software sector, which increased by 350%.
We have seen
some incredible funding rounds and valuations in 2013 — Uber raised $285
million at a $3.5 million valuation, Snapchat is rumored to be raising $200
million at a $4 billion valuation, and Pinterest recently secured $225 million
at a $3.8 billion valuation.
2.2. The Age of Unicorns
The billion-dollar tech startup was supposed
to be the stuff of myth. Now they seem to be … everywhere.
Stewart
Butterfield had one objective when he set out to raise money for his startup
last fall: a billion dollars or nothing. If he couldn’t reach a $1 billion
valuation for Slack, his San Francisco business software company, he wouldn’t
bother. Slack was hardly starving for cash. It was a rocket ship, with
thousands of people signing up for its workplace collaboration tools each week.
What Slack needed, Butterfield believed, was the cachet of the billion-dollar
mark.
It wasn’t
long ago that the idea of a pre-IPO tech startup with a $1 billion market value
was a fantasy. Google GOOG -0.43% was never worth $1 billion as a private
company. Neither was Amazon AMZN -0.70% nor any other alumnus of the original
dotcom class.
Today the
technology industry is crowded with billion-dollar startups. When Cowboy
Ventures founder Aileen Lee coined the term unicorn as a label for such
corporate creatures in a November 2013 TechCrunch blog post, just 39 of the
past decade’s VC-backed U.S. software startups had topped the $1 billion
valuation mark. Now, casting a wider net, Fortune counts more than 80 startups
that have been valued at $1 billion or more by venture capitalists (full list
here). And given that these companies are privately held, a few are sure to
have escaped our detection. The rise of the unicorn has occurred rapidly and
without much warning, and it’s starting to freak some people out.
Finally, there is the intangible element of
perception. In the startup world, a valuation of $1 billion says that you’re no
longer a fly-by-night startup with plans to quickly sell out to Google.
“It
absolutely gives us credibility and the ability to hire some very important
people,” says Apoorva Mehta, the 28-year-old CEO of on-demand grocery delivery
service Instacart, which has been in business for only two years but reportedly
is valued at $2 billion. “And it tells the world that we’re looking to build a
long-lasting worldwide brand instead of looking to get acquired.”
Facebook set tongues wagging when it paid $19
billion for instant-messaging startup WhatsApp. , then followed it up a month
later by shelling out $2 billion for virtual reality headset maker Oculus VR.
In 2014, Google paid $3.2 billion for smart thermostat maker Nest, Apple AAPL
-1.08% acquired headphone maker Beats for $3 billion, and Microsoft spent $2.5
billion to own the Swedish gaming startup responsible for Minecraft. Even
health care VCs cashed in, selling Seragon Pharmaceuticals to Genentech for
upwards of $1.7 billion.
That explains, in part, why a company like
Instacart raised $120 million in new funding earlier this month at its reported
$2 billion valuation just six months after raising $44 million at a $400
million valuation. Or why social media company Pinterest raised $625 million
over three rounds of funding between February 2013 and May 2014, doubling its
valuation from $2.5 billion to $5 billion.
3. How to Calculate the Value of Your
Early-Stage Startup
Valuing
mature companies is a fairly straightforward — albeit somewhat subjective —
process. Things like market capitalization and sales multiples give investors a
solid foundation from which to work with when determining a company’s
valuation. For early-stage startups, however, the process looks quite
different.
Without
years of financial data to rely on, startups and their investors (angels and
venture capitalists) have had to rely on more creative ways to substitute for
these inputs. In a nutshell, the process goes back to quantifying a bit of
basic finance: ‘risk versus reward’. In startup terminology, it’s: ‘traction
versus market size’.
3.1. How does an early-stage investor value
a startup?
The biggest
determinant of your startup’s value are the market forces of the industry &
sector in which it plays, which include the balance (or imbalance) between
demand and supply of money, the regency and size of recent exits, the
willingness for an investor to pay a premium to get into a deal, and the level
of desperation of the entrepreneur looking for money.
Some of the
valuation methods you may have have heard about include (links temporarily down
due to Wikipedia’s position on SOPA and PIPA):
· The DCF (Discounted Cash Flow)
· The First Chicago method
· Market & Transaction Comparables
· Asset-Based Valuations such as the
Book Value or the Liquidation value
An Investor
Is Willing To Pay More For Your Company
· It is in a hot sector: investors that
come late into a sector may also be willing to pay more as one sees in public
stock markets of later entrants into a hot stock.
· If your management team is shit hot:
serial entrepreneurs can command a better valuation (read my post of what an
investor looks for in a management team). A good team gives investors faith
that you can execute.
· You have a functioning product (more
for early stage companies)
· You have traction: nothing shows value
like customers telling the investor you have value.
3.2. How Startup Valuation Works –
Measuring a Company’s Potential
Early-stage valuation is commonly described as
“an art rather than a science,” which is not helpful. Let’s make it more like a
science. Let’s see what factors influence valuation.
Traction.
Out of all things that you could possibly show an investor, traction is the
number one thing that will convince them. The point of a company’s existence is
to get users, and if the investor sees users – the proof is in the pudding.
So, how many
users?
If all other
things are not going in your favor, but you have 100,000 users, you have a good
shot at raising $1M (that is assuming you got them within about 6-8 months).
The faster you get them, the more they are worth.
· Reputation. There is the kind of
reputation that someone like Jeff Bezos has that would warrant a high valuation
no matter what his next idea is. Kevin worked at Google for two years, but
other than that he had no major entrepreneurial success. Same story with
Pinterest founder Ben Silbermann. In their cases, their respective VCs said
they followed their intuition.
· Revenues. Revenues are more important
for the B-to-B startups than consumer startups. Revenues make the company
easier to value.
· Distribution Channel: Even though your
product might be in very early stages, you might already have a distribution
channel for it.
· Hotness of industry. Investors travel
in packs. If something is hot, they may pay a premium.
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