(Made some amendments to data about Brandtology numbers below after reading FY2012 statements and also included more about people behind it).This is one of the stories which have been quoted quite widely in media and rightly so! Here is what i have gathered.
Eddie Chau and a few other founders which include Kelly Choo and Roger Yuen of Clozette started Brandtology back in 2008 with great foresight that with social media growing, there will be a strong demand for media monitoring of these platforms coupled with analytics tools. From what i can see, they raised about 1.75M in ordinary share capital and built up the business. Then in 2009, they got funded by Walden Seed Fund for 2M for a 25% stake. So just 1 year later, the firm was valued at 8M post money.
Eddie is a seasoned entrepreneur having already built up and sold e-Cop prior to this venture. His other more outward facing cofounder is Kelly Choo who is a frequent startup event speaker. Nice guy whom i met before as co-panelist. Roger Yuen is probably an investor with about 2.5%. I chatted with Roger in his office at Clozette. Nice "qianbei" who has been in tech much longer than me.
Brandtology was sold to Media Monitor a largish private firm based on out Australia for an undisclosed sum in Feb 2011. This is a short 2 year later. From what i can see, it is a partial sale of about 50% for the working shareholders and a complete exit for Walden. That makes sense since revenue for FY ending March 2010 was only 1.4M or so and clearly acquirers were buying a future story and they need the team and not the VCs. And so that readers do not think this is a skyhigh valuation deal, i believe in 2011, 2012 revenue probably grew dramatically because by FY2012, revenue is at 9.3M or some with 1.3M profit if i can recall what i read accurately. So about 5-7 times sales is not unreasonable.
Shows us that keeping management around and incentives via earnout equivalent structures probably makes a lot of sense and Brandtology current numbers look good. According to their site, they have 200 staff now. Win win all round. Media Monitor (now called iScentia) gets a good growing company whose revenue x8 in 2 short years, Eddie and shareholders got to exit 5-6M in total and still retain half their stakes for upside.
Of course, valuation must have been above 8M for Walden to exit. Sale valuation should be about 12-15M to give a min IRR of 25% for the 2 years. This is pure speculations since we cannot obtain actual sale value publicly. Also, shareholding for the company to me is quite reflective of this kind of deal. Eddie had about 42% stake after Walden came in. I always believe in the CEO/key entrepreneur/owner approach whom the buck stops at. That person needs about min 35% and up. His 2-3 other individual shareholders/founders like Kelly have much smaller stakes (5+%). Whether that incentivises them is another story but my take is that salaries can always help to mitigate a lower equity stake for the cofounders. But to me 5% is about bare min but we have to pay these co-founders properly or increase their stake with time.
What is interesting in this deal is that Media Monitor too has undergone much change. They themselves have been acquired by a PE fund and integrated together with a bunch of other media assets. It will be interesting to see how the PE guys play this one. IPO? Trade Sale? Time will tell. Hopefully the Brandtology team can participate one more time in that exit given that they kept about 50% stake.From what i can see, as of 2013, they are still holding the stake.
Thoughts on startup scene in South East Asia. While effort is made to be accurate in terms of numbers, i may sometimes get the data wrong. My purpose is to share what i know and what i have learned over the past 23 years. Feel free to leave comments or to email me. And if you are keen to learn more about Angel Investing pls visit https://www.angelcentral.co/investors/membership
Wednesday, October 16, 2013
Sunday, October 13, 2013
How to get good advice/insights from others?
This is a tough question which I encounter quite often. Entrepreneurs frequently feel very lonely and we sometimes do not know how to even start handling the problems that are in front of us. Some entrepreneurs swear by having a formal or informal board of advisors. Others say getting advice is a waste of time. I will share my personal experience on this topic and readers can draw their own conclusions. I believe it is not a waste of time but we need to have the right mindset and approach. Learning this way frequently has high impact to my business and helps me be more confident.
1) My business never got a formal set of advisors. We did ask around back in 2001 to see if anyone would join us formally but in the end it did not work out. I remember asking a politician and a GLC MD this and they both turned us down on grounds that they were too busy. Now on hindsight, i think they were right to turn us down for varying reasons.
a) I did not attempt to align them at all. No talk of equity, no clear idea how they can add value. Not that i think it makes sense to offer advisors equity except in very special cases. But i did not know that then.
b) I like to think they liked us and were self aware. They new that their value add to our work was minimal. Both were not business owners or business coaches, so I think from their point of view, they also wondered what kind of advice or coaching could they value add with.
2) The next time i got great learning was in 2003/4 when i got to meet Mark Chang who founded Jobstreet. Obviously as competitors, he did not advice us anything but what i learned just interacting was how an entrepreneur should think and how a business is run. We must have spent at least 40 hours interacting with him.
This is an important learning point. Frequently, the best advice i have gotten is from just paying attention to what other people do and say. From there, i will notice key attitudes and mindsets they have which point the direction to where i should go. Most recently, we paid a visit to Patrick of catcha at his office and i went away with some good food for thought on the psychology of Snr Mgmt.
3) Another example of learning is when i visited eFusion office back in 2007 or so. Looking at how metric driven that business is (they had whiteboards lining almost all the walls of the office!), gave me the advice i needed. Of course, this was reinforced by what Sam shared and it pointed and confirmed for me that my business needs to be ultra metric driven. This was before it became a trend.
4) Advice can directly sought. I have experienced this in an impactful way. When i was selling the company , i got in touch with an old friend who has done a fair bit of M&A work and whom i knew was a brilliant fella (scholar, mckinsey etc). Because as entrepreneurs, it is usually the first time we are encountering many concepts and terms like earnouts, reps and warranties etc, it helps to level the playing field by getting experienced professionals on our side. Together with a good lawyer, both proved to be invaluable in understanding the entire due diligence process and in negotiating the S&P agreement.
But what they were of little help with was on mindset to have during this process. Our business had no VCs, shareholders were almost all family and 1 CTO old friend. What helped me was a group of business owners whom i meet regularly. Their sharing on similar situations and view points helped tremendously.
5) Advice & insights can also be garnered from reading online and print literature and connecting the dots with our own experience. Recently, i have been reading many HBR case studies and books by Harvard professors (my better half is taking a course there). I am the type of person who learns by reading, so i actually find that advice and insights can come very much to me via reading good quality books.
For example, "The Man in the Mirror" by Kaplan is really a good book that has much insight on leadership. And by connecting the dots with own experience, it is as good as speaking with many advisors in my opinion.
So looking at the above cases, there are a few learning points.
1) Advice seems to be best for me when it comes from fellow business owners who are more advanced along their company development. This is extremely important. Learning from the snr management team of an established business is different from learning from the actual owner. Esp if the snr mgmt in question does not own equity.
2) Advice or learned insights can come when there is a clearly defined problem which we actively seek relevant people to get their opinion on, or it can come from serendipity where i learn from osmosis when interacting with business owners.
3) Professionals can give great advice but only if they are in the field they are advising on and if we are asking the right questions. So stuff like mindset learning not so useful but stuff like what are industry norms for earn outs, or what is fair based on the thousands of warranties they have seen or how to do best SEO/SEM etc
4) The person giving advice and sharing matters a lot. You need to view what they say with the background of what they come from. Eg. an american CEO of a F500 company's views on M&A considerations is very different from a 10M businesses view. But the same CEO view on leadership and the exercise of it may not be that different. But if against a 100K startup, then it may be too alien again.
5) If you are the reading type, learning from written case studies or books can be an excellent way to learn too. Only gripe i have is that there are too few case studies written for startups and SMEs. Most are for big organizations.
Hope the above helps! Feel free to share your experience with getting entrepreneurial insights and advice.
1) My business never got a formal set of advisors. We did ask around back in 2001 to see if anyone would join us formally but in the end it did not work out. I remember asking a politician and a GLC MD this and they both turned us down on grounds that they were too busy. Now on hindsight, i think they were right to turn us down for varying reasons.
a) I did not attempt to align them at all. No talk of equity, no clear idea how they can add value. Not that i think it makes sense to offer advisors equity except in very special cases. But i did not know that then.
b) I like to think they liked us and were self aware. They new that their value add to our work was minimal. Both were not business owners or business coaches, so I think from their point of view, they also wondered what kind of advice or coaching could they value add with.
2) The next time i got great learning was in 2003/4 when i got to meet Mark Chang who founded Jobstreet. Obviously as competitors, he did not advice us anything but what i learned just interacting was how an entrepreneur should think and how a business is run. We must have spent at least 40 hours interacting with him.
This is an important learning point. Frequently, the best advice i have gotten is from just paying attention to what other people do and say. From there, i will notice key attitudes and mindsets they have which point the direction to where i should go. Most recently, we paid a visit to Patrick of catcha at his office and i went away with some good food for thought on the psychology of Snr Mgmt.
3) Another example of learning is when i visited eFusion office back in 2007 or so. Looking at how metric driven that business is (they had whiteboards lining almost all the walls of the office!), gave me the advice i needed. Of course, this was reinforced by what Sam shared and it pointed and confirmed for me that my business needs to be ultra metric driven. This was before it became a trend.
4) Advice can directly sought. I have experienced this in an impactful way. When i was selling the company , i got in touch with an old friend who has done a fair bit of M&A work and whom i knew was a brilliant fella (scholar, mckinsey etc). Because as entrepreneurs, it is usually the first time we are encountering many concepts and terms like earnouts, reps and warranties etc, it helps to level the playing field by getting experienced professionals on our side. Together with a good lawyer, both proved to be invaluable in understanding the entire due diligence process and in negotiating the S&P agreement.
But what they were of little help with was on mindset to have during this process. Our business had no VCs, shareholders were almost all family and 1 CTO old friend. What helped me was a group of business owners whom i meet regularly. Their sharing on similar situations and view points helped tremendously.
5) Advice & insights can also be garnered from reading online and print literature and connecting the dots with our own experience. Recently, i have been reading many HBR case studies and books by Harvard professors (my better half is taking a course there). I am the type of person who learns by reading, so i actually find that advice and insights can come very much to me via reading good quality books.
For example, "The Man in the Mirror" by Kaplan is really a good book that has much insight on leadership. And by connecting the dots with own experience, it is as good as speaking with many advisors in my opinion.
So looking at the above cases, there are a few learning points.
1) Advice seems to be best for me when it comes from fellow business owners who are more advanced along their company development. This is extremely important. Learning from the snr management team of an established business is different from learning from the actual owner. Esp if the snr mgmt in question does not own equity.
2) Advice or learned insights can come when there is a clearly defined problem which we actively seek relevant people to get their opinion on, or it can come from serendipity where i learn from osmosis when interacting with business owners.
3) Professionals can give great advice but only if they are in the field they are advising on and if we are asking the right questions. So stuff like mindset learning not so useful but stuff like what are industry norms for earn outs, or what is fair based on the thousands of warranties they have seen or how to do best SEO/SEM etc
4) The person giving advice and sharing matters a lot. You need to view what they say with the background of what they come from. Eg. an american CEO of a F500 company's views on M&A considerations is very different from a 10M businesses view. But the same CEO view on leadership and the exercise of it may not be that different. But if against a 100K startup, then it may be too alien again.
5) If you are the reading type, learning from written case studies or books can be an excellent way to learn too. Only gripe i have is that there are too few case studies written for startups and SMEs. Most are for big organizations.
Hope the above helps! Feel free to share your experience with getting entrepreneurial insights and advice.
Thursday, October 3, 2013
Current Record Holder for Best Multiple in an Acquistion - Hungrygowhere
Decided to write this article after reading this article on techinasia.
Deal as we know it. InSing bought GTW Holdings who owns Hungrygowhere and TableDB back in mid 2012. Great deal for NYPS, CHS class mate Dennis, UofMich school mate Hoong Ann and last partner Yung Yih. They put in a lot of pain and effort to build up the business. I met the 3 of them periodically from the day they started back in 2006/07and it is clear that they went though hard startup times like anyone else. So I am happy for them that the deal was done and that their effort was rewarded.
Deal details based on public information :
1) Sold for S$12M cash to Singtel
2) Entity integrated into InSing under Singtel Digital Media.
3) 3 main founders with 2M investment from Walden. Each of 3 main founders had about 24% stake so about 2.88M each (nice number).
4) Best deal ever in SG based on historical revenue multiple of about 16 since in FY 2012
Consider that Sgcarmart sales is only 7.5 times revenue and they had profit margins in the 30+%!
Rationale for Deal?
Singtel POV makes some sense. Great traffic on the topic of F&B. I think it Singlehandedly gives InSing good traffic moving forward if they do not screw up running HGW. There is further upside, if they can implement TableDB well. Everyone can see how strong OpenTable is as a NASDAQ listed business in USA. I also believe there was a strong acquhire element here. We may feel 2.88M is alot, but if we think that a fresh graduate scholar costs an organization about $300K and 3 years to wait... then to get these 3 founders is quite ok?
HGW POV makes great sense though i would personally feel a little early. There was probably room to grow revenues and hence profits many folds more and build the local and regional story a bit more. TableDB also was just started and so has a lot potential. But as I always believe, only the management and founders know the full details and to take money off the table will never be totally wrong.
Deal as we know it. InSing bought GTW Holdings who owns Hungrygowhere and TableDB back in mid 2012. Great deal for NYPS, CHS class mate Dennis, UofMich school mate Hoong Ann and last partner Yung Yih. They put in a lot of pain and effort to build up the business. I met the 3 of them periodically from the day they started back in 2006/07and it is clear that they went though hard startup times like anyone else. So I am happy for them that the deal was done and that their effort was rewarded.
Deal details based on public information :
1) Sold for S$12M cash to Singtel
2) Entity integrated into InSing under Singtel Digital Media.
3) 3 main founders with 2M investment from Walden. Each of 3 main founders had about 24% stake so about 2.88M each (nice number).
4) Best deal ever in SG based on historical revenue multiple of about 16 since in FY 2012
Consider that Sgcarmart sales is only 7.5 times revenue and they had profit margins in the 30+%!
Rationale for Deal?
Singtel POV makes some sense. Great traffic on the topic of F&B. I think it Singlehandedly gives InSing good traffic moving forward if they do not screw up running HGW. There is further upside, if they can implement TableDB well. Everyone can see how strong OpenTable is as a NASDAQ listed business in USA. I also believe there was a strong acquhire element here. We may feel 2.88M is alot, but if we think that a fresh graduate scholar costs an organization about $300K and 3 years to wait... then to get these 3 founders is quite ok?
HGW POV makes great sense though i would personally feel a little early. There was probably room to grow revenues and hence profits many folds more and build the local and regional story a bit more. TableDB also was just started and so has a lot potential. But as I always believe, only the management and founders know the full details and to take money off the table will never be totally wrong.
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