3 ms·

Since SimpleGeo has raised nearly $10 million in venture capital, it’s likely that all or nearly all of the acquisition price would go to the last round investo

Since SimpleGeo has raised nearly $10 million in venture capital, it’s likely that all or nearly all of the acquisition price would go to the last round investors due to their liquidity preference. Very unlikely, the team probably got a chunk. Remember that the acquiring company is shelling out several million and they really don't give a rat's behind about the liquidity preference. They want the new team to be motivated. It is standard for the VCs to waive the preference during the negotiations (after much wheedling and whining). If they don't, the deal doesn't go down.

pkaler 15y ago
You are assuming that the consideration was cash. I wouldn't be surprised if consideration was equity.
- jpdoctor 15y ago
  > You are assuming that the consideration was cash. No, I was not. The acquiring company causes the liquidity pref to vanish regardless of the currency, if they're sensible.
  - borism 15y ago
    The acquiring company causes the liquidity pref to vanish regardless of the currency, if they're sensible. huh? and how exactly would they do that in a legal way?
    - fleitz 15y ago
      They say it's part of the deal, if the VC says no then there is no deal and company is free to shop around for someone willing to buy the company with the preference in place. If they are just after the team, they could just offer signing bonuses directly to the team. Such as when Borland didn't want to sell to Microsoft.
      - borism 15y ago
        well then we wouldn't be talking about acquisition but a team change, would we?
        fleitz 15y ago
        The VC's BATNA to the acquisition is owning a shell of a company, investing more money, etc. After UA takes the founders and employees SG has no founders and no employees. It's pretty much worthless. The team's BATNA to the acquisition is a signing bonus, or another job. The founder's BATNA to the acquisition is a signing bonus, or another job. The acquirer's BATNA to the acquisition is a giving signing bonuses, or hiring the team. Everyone's BATNA is signing bonuses so if the VC screws around on the preference they get nothing. That's why were not talking about a team change because the best situation for everyone is for the VC to give up the preference. You get deals done by presenting an option that is superior to the BATNA. (Assuming everyone is rational) See KART / Indy for what happens when people are prepared to accept the BATNA in the face of a superior offer.
    - deleted 15y ago
      [deleted]
    - jpdoctor 15y ago
      > huh? and how exactly would they do that in a legal way? Simple: The acquiring company turns to the VCs and says "If you want the acquisition to happen, you are going to waive your liquidity pref". It's not complicated. And as for "legal", contracts are renegotiated all the time. You might in fact argue that the liquidity pref is put in as a throwaway, since it is rare that they are ever exercised.
nl 15y ago
Very unlikely, the team probably got a chunk. The Series A was $8.14M and they were acquired for $3.5M. If the team tried to get a chunk of that then I doubt they'll be getting funding again. Remember that the acquiring company is shelling out several million and they really don't give a rat's behind about the liquidity preference. It's not as simple as that. Both SimpleGeo and UrbanAirship are Foundry Group companies[1][2]. This was clearly a firesale, and Joe Stump appears to care for his team somewhat: Cofounder Joe Stump used to be Digg’s chief architect. According to TechCrunch, three of the new hires were laid off by Digg in March and the fourth one decided to leave. Now, SimpleGeo is bringing in the new guns but also familiar people, which seems to really solidify the team that stands now at 17 employees.[1] It might be as simple as making sure everyone got a new job, and maybe the non-Foundry Group investors got some money back. [1] http://venturebeat.com/2010/05/18/simplegeo-second-funding/ http://venturebeat.com/2010/05/18/simplegeo-second-funding/ [2] http://www.prweb.com/releases/UrbanAirshipFunding/SeriesB2010/prweb4739174.htm http://www.prweb.com/releases/UrbanAirshipFunding/SeriesB201...
- jpdoctor 15y ago
  > If the team tried to get a chunk of that then I doubt they'll be getting funding again. Again, it is in the interest of the acquiring company to have the liquidity prefs waived. They want the money to go to the team and have no interest in enriching the VCs. One exception: Sometimes there is a conflict of interest, where the acquirer has someone in a key position who is also a limited in the VC fund. This is often the reason for some really dumb prices being paid in various deals.

pkaler 15y ago

You are assuming that the consideration was cash. I wouldn't be surprised if consideration was equity.

jpdoctor 15y ago
> You are assuming that the consideration was cash. No, I was not. The acquiring company causes the liquidity pref to vanish regardless of the currency, if they're sensible.
- borism 15y ago
  The acquiring company causes the liquidity pref to vanish regardless of the currency, if they're sensible. huh? and how exactly would they do that in a legal way?
  - fleitz 15y ago
    They say it's part of the deal, if the VC says no then there is no deal and company is free to shop around for someone willing to buy the company with the preference in place. If they are just after the team, they could just offer signing bonuses directly to the team. Such as when Borland didn't want to sell to Microsoft.
    - borism 15y ago
      well then we wouldn't be talking about acquisition but a team change, would we?
      - fleitz 15y ago
        The VC's BATNA to the acquisition is owning a shell of a company, investing more money, etc. After UA takes the founders and employees SG has no founders and no employees. It's pretty much worthless. The team's BATNA to the acquisition is a signing bonus, or another job. The founder's BATNA to the acquisition is a signing bonus, or another job. The acquirer's BATNA to the acquisition is a giving signing bonuses, or hiring the team. Everyone's BATNA is signing bonuses so if the VC screws around on the preference they get nothing. That's why were not talking about a team change because the best situation for everyone is for the VC to give up the preference. You get deals done by presenting an option that is superior to the BATNA. (Assuming everyone is rational) See KART / Indy for what happens when people are prepared to accept the BATNA in the face of a superior offer.
  - deleted 15y ago
    [deleted]
  - jpdoctor 15y ago
    > huh? and how exactly would they do that in a legal way? Simple: The acquiring company turns to the VCs and says "If you want the acquisition to happen, you are going to waive your liquidity pref". It's not complicated. And as for "legal", contracts are renegotiated all the time. You might in fact argue that the liquidity pref is put in as a throwaway, since it is rare that they are ever exercised.

nl 15y ago

Very unlikely, the team probably got a chunk. The Series A was $8.14M and they were acquired for $3.5M. If the team tried to get a chunk of that then I doubt they'll be getting funding again. Remember that the acquiring company is shelling out several million and they really don't give a rat's behind about the liquidity preference. It's not as simple as that. Both SimpleGeo and UrbanAirship are Foundry Group companies[1][2]. This was clearly a firesale, and Joe Stump appears to care for his team somewhat: Cofounder Joe Stump used to be Digg’s chief architect. According to TechCrunch, three of the new hires were laid off by Digg in March and the fourth one decided to leave. Now, SimpleGeo is bringing in the new guns but also familiar people, which seems to really solidify the team that stands now at 17 employees.[1] It might be as simple as making sure everyone got a new job, and maybe the non-Foundry Group investors got some money back. [1] http://venturebeat.com/2010/05/18/simplegeo-second-funding/ http://venturebeat.com/2010/05/18/simplegeo-second-funding/ [2] http://www.prweb.com/releases/UrbanAirshipFunding/SeriesB2010/prweb4739174.htm http://www.prweb.com/releases/UrbanAirshipFunding/SeriesB201...

jpdoctor 15y ago
> If the team tried to get a chunk of that then I doubt they'll be getting funding again. Again, it is in the interest of the acquiring company to have the liquidity prefs waived. They want the money to go to the team and have no interest in enriching the VCs. One exception: Sometimes there is a conflict of interest, where the acquirer has someone in a key position who is also a limited in the VC fund. This is often the reason for some really dumb prices being paid in various deals.