7 ms·

RNTS Media buys mobile ad network Heyzap (YC W09) for $45M

66 points by quickfox 11y ago

x0x0 11y ago
This seems like a weird acquisition given HeyZap's claims they were profitable since mid-2014. In the spirit of numerous recent articles, given they raised $8m and were acquired for only $20m cash, this sounds like a bust for everybody but the founders. For example, a 1% pre-A options package fully vested would probably be diluted to roughly .2% (or less!) and is worth $32k. Pretax. Yes there are earnouts but I haven't heard of too many of those being paid. Also, I hold shares in a private adtech company. The valuations of the handful being acquired or going public aren't propitious for me.
- serge2k 11y ago
  But I'm sure those employees were paid a high salary, so the mediocre return is fine. Right? Right? They totally made more money off this startup than just working at someplace bigger.
  - frisco 11y ago
    Seriously though, you don't get it both ways. There's been this backlash against startups paying below market on the promise of equity, so then many startups in reality do start paying at or above market, and then people are still unhappy when things like this happen. This is a side effect of the increased cost of labor which makes many startups less viable. Silicon Valley doesn't run on "screw you pay me". At or above market salaries are a huge cost to startups to the detriment of their equity, and so honestly I'm not too upset about employees who have been making market salaries not getting much out of an acqui-hire. Hopefully the ones who were in the trenches with the founders will be rewarded, and if it's the case here where that's much of the team, then hopefully there's an earn out structure that provides that if the acquirer is trying to manage the acquisition risk.
    - habith 11y ago
      > many startups in reality do start paying at or above market I think that's the key phrase here. I don't know if they paid at or above market rate and that would be where I'd start looking before passing judgement. Your company's job postings suggest "competitive salary and meaningful equity", which is a much better signal than Heyzap's posting[0] i.e. no mention of compensation whatsoever (I personally prefer a salary range to know if the discussion is even worth our collective time). They're a small startup so the data is incomplete and meaningless, but assuming the one salary posted on Glassdoor ($65-75k for a marketing manager) is accurate, I think it's fair to say that their compensation package was quite low and heavy on equity. > I'm not too upset about employees who have been making market salaries not getting much out of an acqui-hire I completely agree with you. If you're getting market or above market salary then equity shouldn't be an issue whatsoever. [0] https://www.glassdoor.com/job-listing/software-engineer-heyzap-JV_IC1147401_KO0,17_KE18,24.htm?jl=1162901135 https://www.glassdoor.com/job-listing/software-engineer-heyz... [1] https://www.glassdoor.com/Salary/Heyzap-Salaries-E493011.htm https://www.glassdoor.com/Salary/Heyzap-Salaries-E493011.htm
      - phamilton 11y ago
        If any startups pay high market salaries, it's in ad-tech. There's little "I believe in the product" and frequently tech is boring. The only redeeming quality is they pay well. That said, this doesn't seem like a successful exit.
    - blackguardx 11y ago
      I think the key word is "hopefully." I accepted a below market salary at Square and barely made enough off their stock to bump me up to market. It would have been much easier to just get a market-rate job to begin with.
ramoq 11y ago
They had $13MM in annual revenue (in 2014) and were acquired for $45MM (~3.5x). Interesting.
- nedwin 11y ago
  They will end the year with $20m revenue and the deal is $20m cash plus incentives. So effectively a 1x deal at the outset, rising to 2x if they meet performance and retention goals.
  - danieltillett 11y ago
    Me thinks the future is not looking too bright.
- zazpowered 11y ago
  What are some possible reasons for why the numbers are like this?
- ig1 11y ago
  (I don't know any specifics on this case but speaking generally about this type of business) It could well be that revenue figure includes "pass through revenue" (aka GMV) as the company isn't public they're not required to follow standard accountancy practices (GAAP, etc.) in reporting revenue. For startups most of their burn rate tends to be salaries and burn rate tends to be greater than revenue. So assuming they have 20 employees and were break-even and an average revenue per employee of between 150-200k that would imply an actual revenue in 3m-4m range which would be in line with the acquisition figure.
zump 11y ago
It amazes me that someone would be interested in creating a startup for this.
sharpshoot 11y ago
Congratulations to Jude & Immad on getting to exit. They are some of the hardest working entrepreneurs I know. And it wasn't plain sailing.

66 points by quickfox 11y ago

x0x0 11y ago

This seems like a weird acquisition given HeyZap's claims they were profitable since mid-2014. In the spirit of numerous recent articles, given they raised $8m and were acquired for only $20m cash, this sounds like a bust for everybody but the founders. For example, a 1% pre-A options package fully vested would probably be diluted to roughly .2% (or less!) and is worth $32k. Pretax. Yes there are earnouts but I haven't heard of too many of those being paid. Also, I hold shares in a private adtech company. The valuations of the handful being acquired or going public aren't propitious for me.

serge2k 11y ago
But I'm sure those employees were paid a high salary, so the mediocre return is fine. Right? Right? They totally made more money off this startup than just working at someplace bigger.
- frisco 11y ago
  Seriously though, you don't get it both ways. There's been this backlash against startups paying below market on the promise of equity, so then many startups in reality do start paying at or above market, and then people are still unhappy when things like this happen. This is a side effect of the increased cost of labor which makes many startups less viable. Silicon Valley doesn't run on "screw you pay me". At or above market salaries are a huge cost to startups to the detriment of their equity, and so honestly I'm not too upset about employees who have been making market salaries not getting much out of an acqui-hire. Hopefully the ones who were in the trenches with the founders will be rewarded, and if it's the case here where that's much of the team, then hopefully there's an earn out structure that provides that if the acquirer is trying to manage the acquisition risk.
  - habith 11y ago
    > many startups in reality do start paying at or above market I think that's the key phrase here. I don't know if they paid at or above market rate and that would be where I'd start looking before passing judgement. Your company's job postings suggest "competitive salary and meaningful equity", which is a much better signal than Heyzap's posting[0] i.e. no mention of compensation whatsoever (I personally prefer a salary range to know if the discussion is even worth our collective time). They're a small startup so the data is incomplete and meaningless, but assuming the one salary posted on Glassdoor ($65-75k for a marketing manager) is accurate, I think it's fair to say that their compensation package was quite low and heavy on equity. > I'm not too upset about employees who have been making market salaries not getting much out of an acqui-hire I completely agree with you. If you're getting market or above market salary then equity shouldn't be an issue whatsoever. [0] https://www.glassdoor.com/job-listing/software-engineer-heyzap-JV_IC1147401_KO0,17_KE18,24.htm?jl=1162901135 https://www.glassdoor.com/job-listing/software-engineer-heyz... [1] https://www.glassdoor.com/Salary/Heyzap-Salaries-E493011.htm https://www.glassdoor.com/Salary/Heyzap-Salaries-E493011.htm
    - phamilton 11y ago
      If any startups pay high market salaries, it's in ad-tech. There's little "I believe in the product" and frequently tech is boring. The only redeeming quality is they pay well. That said, this doesn't seem like a successful exit.
  - blackguardx 11y ago
    I think the key word is "hopefully." I accepted a below market salary at Square and barely made enough off their stock to bump me up to market. It would have been much easier to just get a market-rate job to begin with.

ramoq 11y ago

They had $13MM in annual revenue (in 2014) and were acquired for $45MM (~3.5x). Interesting.

nedwin 11y ago
They will end the year with $20m revenue and the deal is $20m cash plus incentives. So effectively a 1x deal at the outset, rising to 2x if they meet performance and retention goals.
- danieltillett 11y ago
  Me thinks the future is not looking too bright.
zazpowered 11y ago
What are some possible reasons for why the numbers are like this?
ig1 11y ago
(I don't know any specifics on this case but speaking generally about this type of business) It could well be that revenue figure includes "pass through revenue" (aka GMV) as the company isn't public they're not required to follow standard accountancy practices (GAAP, etc.) in reporting revenue. For startups most of their burn rate tends to be salaries and burn rate tends to be greater than revenue. So assuming they have 20 employees and were break-even and an average revenue per employee of between 150-200k that would imply an actual revenue in 3m-4m range which would be in line with the acquisition figure.

zump 11y ago

It amazes me that someone would be interested in creating a startup for this.

sharpshoot 11y ago

Congratulations to Jude & Immad on getting to exit. They are some of the hardest working entrepreneurs I know. And it wasn't plain sailing.