7 ms·

EBay acquires Hunch for $80m

158 points by speedracr 15y ago

dr_ 15y ago
I never used Hunch much, and I'm not sure if an 80 million exit with 20 million in VC funding is so great for the founders, but I suppose it gives eBay a footing in NYC - that's the part of the article I found most interesting.
- danssig 15y ago
  15 million a piece. I don't know how long they were working on it but the very top billed actors tend to make, what, 20 million for movies that take ~3 years to make.
  - ebaysucks 15y ago
    So you assume the VC's only scored a 1x on this deal and had no special treatment for their preferred shares such as accrued dividends, liquidity preference, participating preferred, etc?
    - danssig 15y ago
      I went by what the GP said.
  - onemoreact 15y ago
    Most top actors spend 3-4 months on average per film. It's a scheduling things where you need a lot of people to film a movie some of which have offers for 3-4 movies that year. So people are working 12 hour days in one short burst and a lot of time in editing / post production but there is a ticking clock because investors want their money back ASAP. Reproduction can be slow simply because there is not a lot of money involved in the project yet.
  - blacksmythe 15y ago
    Top billed actors have an excellent chance of making their full rate on an average movie. Founders have an excellent chance of making nothing on an average startup.
    - danssig 15y ago
      So what do they need to make exactly? For me, anything beyond FU money is pretty much irrelevant.
vaksel 15y ago
did anyone actually use Hunch seriously?
- charlemagne 15y ago
  Taking this question further, what did Hunch help you do? I tried it early and passed, really interested to hear what it has done for others.
  - smokinn 15y ago
    I tried it a couple of times too. First time I figured it was basically a slightly better stumbleupon. Next time I tried it was still the same thing and never went back.
- suking 15y ago
  No freaking kidding - only thing I saw the founder do was interview people on TC. Never heard anyone mention hunch outside of those interviews. What is ebay thinking?
  - hassy 15y ago
    > What is ebay thinking? Impressive back-end tech (the recommendation engine) that can now process millions and millions of items on eBay to help increase sales (something like a quarter of Amazon's sales come from recommendations).
    - suking 15y ago
      Very hard to imagine ebay doesn't already do a good job of this with their years of experience. I mean it's possible, but I doubt it.
    - smokinn 15y ago
      80 million dollars is a lot to pay for a recommendation engine. Netflix had their own and paid a million dollars as prize payout for an absolutely state of the art system. If it really was just a tech acquisition they massively overpaid.
speedracr 15y ago
Is Arrington rebuilding a proper tech blog as a counterpart to the growing news machine of Techeablecrunchbeat?
- hswolff 15y ago
  I think it's just in his blood at this point to blog about tech news. Good for him I say. If you love what you do then do it.
jnorthrop 15y ago
"It’s been a long journey for Hunch." They were founded in 2008 and sold for $80m 3 years later. That is considered a "long journey" these days? Statements like this give me that "we're in a bubble" feeling.
- hassy 15y ago
  I am somewhat disappointed since Chris Dixon has said Hunch would be in it for the long-term. (I've followed Hunch since it's early days* and always wanted to see it go big.) $80m is a nice pay-out though, the systems they've built have the potential to bring an immense amount of value to eBay's offerings, and a lot of that money will trickle down to other startups via angel investments. * http://hassy.posterous.com/my-favorite-startups-hunch http://hassy.posterous.com/my-favorite-startups-hunch
  - kmfrk 15y ago
    Hunch is not for sale. The founders have already sold companies before and have no desire to sell Hunch. We want to build it into a large company. hunch responded one year ago http://www.formspring.me/hunch/q/1392572735 http://www.formspring.me/hunch/q/1392572735
    - jjm 15y ago
      I've learned that in one year, one's goals can change dramatically.
      - AznHisoka 15y ago
        It's also one thing to say something. But the situation changes when a ton of money is actually thrown right in front of you.
        kennystone 15y ago
        If the number is right, $80m is not a ton of money for people who have already had big exits and took $20m in VC to start this company.
Brajeshwar 15y ago
I never felt the need to use Hunch on its own. Now that it can be more of a tool to supplement other objectives, it sure might be the right tool after-all.
- jkaljundi 15y ago
  Hunch was always more of an API company than a destination site.
  - movingahead 15y ago
    Can you name some companies which were using its API? Their developer site doesn't take any names.
    - jkaljundi 15y ago
      What I meant was the goal of the company was to build technology and license that via an API, not become a destination site.
AznHisoka 15y ago
Wow, this is like a knight in a white horse for Hunch.. I seriously doubt they were making any profit... This sounds like a talent acquisition. I mean this is ridiculous... but it goes to show you.. you gotta show up for the game (the startup game, I mean) to win it... $80 m for a site that doesn't even get 1 million uniques (per Compete) a month is a STEAL. I mean.. seriously, everyone who has a CS background should just start something on the side if a deal like this is possible.
- dmix 15y ago
  > you gotta show up for the game (the startup game, I mean) to win it... This type of thinking is why the valley is so full of zombie companies pumped up with capital, but with no real traction or any way of ever being profitable PG and many speakers at startup school repeatedly said that its easy to spot the ones who are just doing it because they want to be "that guy" like Zuckerberg - the ones who want to play the game. Instead of starting a company to figure out what customers want. What motivates you to start a company is really important. Especially during the downswings that kills most startups (google "trough of sorrows").
- speedracr 15y ago
  +1 on the talent acquisition, although much like Slide, About.me, this shows that once you're lucky, twice you know who to speak to if you've gotten to a sizeable exit before. Also helps that eBay is looking for its second act to avoid the fate of a crumbling Yahoo!
- arturadib 15y ago
  > everyone who has a CS background should just start something on the side if a deal like this is possible Chris Dixon is a veteran investor and entrepreneur, with enormous visibility in the tech world. Contacts with potential acquirers are a non-issue for him. A poor CS fellow could have created a version of Hunch that was 100x better and they still would have 1,000x less of an exit opportunity as compared to any startup Dixon founded. Get real.
  - arctangent 15y ago
Zirro 15y ago
"It’s been a long journey for Hunch. The company was founded in 2008." Knowing how long it can take for a small company with a good idea and product to launch, I wouldn't really call that a long journey. Still, congratulations to them. I hope eBay is able to make something good out of what they have created so far.
kennystone 15y ago
Chris Dixon talked a lot about "going big", growing big companies, etc. He talked a lot about a new "data tier" for the web and how Hunch would be an intelligent filter for all the data. I wonder what changed?
- frou_dh 15y ago
  A chance to leverage synergies?
dgurney 15y ago
Something about Hunch's trajectory is utterly predictable and ever-so-slightly depressing. I suppose building to sell is a perfectly valid business model -- if you succeed -- but it makes me feel a little dirty. And if nobody buys you, you're well and truly f#%@$ed. Although who am I to argue with $80 million.
- wyclif 15y ago
  And if nobody buys you, you're well and truly f#%@$ed. Really? If you don't have a 'building to sell' roadmap in the first place, why be depressed? If you're building a long-term, stable company with real value and profits, you're not for sale in the first place.
beagledude 15y ago
Hunch is like my divorced neighbor who couldn't work it out, so now they're giving up and short selling the house and bringing down the values for everyone.
rokhayakebe 15y ago
"I have a hunch nobody ever meaningfully used Hunch." http://twitter.com/#!/rafat/status/138633186300264448 http://twitter.com/#!/rafat/status/138633186300264448
subpixel 15y ago
Whatever Hunch is really good at, we haven't seen it yet. I assume Ebay has, and that it has everything to do with crunching customer browsing & purchase behavior to offer them products they're most likely to purchase.
- Tichy 15y ago
  I think their predictions were actually really good. A while ago I tested several movie recommendation engines and hunch was the only one that delivered. On the downside, they really asked a lot of questions, which made me uncomfortable with using it.
iampims 15y ago
I like their movie predictor: http://hunch.com/movies/ http://hunch.com/movies/
pepdek 15y ago
There is a great play around the collection of data outside of just social space. Hunch has done a great job aggregating this data via a social means and displaying the data to the masses in an appealing way to drive more people towards their "recommendation" engine. I work for a site called Ranker and we're focused on a similar data play with much greater focus on SEO. * http://www.ranker.com/ http://www.ranker.com/
bproper 15y ago
Here's an interview with Chris Dixon on the Ebay purchase. eBay is an interesting challenge because so many of the listings don't have metadata like product IDs. The work Hunch has been doing on the open web is a good fit for this kind of unstructured data. http://www.betabeat.com/2011/11/21/chris-dixon-ebay-hunch/ http://www.betabeat.com/2011/11/21/chris-dixon-ebay-hunch/
socratic 15y ago
Could someone experienced breakdown what a transaction like this looks like for everyone involved? I'm super curious. I've never been acquired, so I really have no insight into the process other than what I've read. Here's the facts as I see them: Crunchbase says Hunch started in September of 2007 and had 23 employees on LinkedIn when they exited. (TechCrunch calls it a 20-person team, so I'm presuming that's all the employees.) They've gotten $19.2m in funding, let's just say $20m. TechCrunch claims the sale was "around" $80m. So what does the breakdown look like? Who gets what? What are the likely investor terms? My totally naive guess would be that the investors got at least a 1x liquidation preference, maybe more. I mean, did Hunch have any revenue? So there was at most $40m to go around to the people at the company. Of course, most of that probably went to the founders. Would maybe 20% of that have gone to the 20-ish employees? So naively pretending that each of the 20-ish employees got 1% for four years, did they each end up with an extra $100k/year? What's the likely distribution of shares among employees? What are the transaction costs (lawyers, taxes, etc.) for this sort of acquisition? How long will the employees have to be at eBay to get their earn-out, and will that earn-out be in addition to their common stock in Hunch? Will they end up being paid less to work for eBay during their earn-out than if they were on the open market? Of course, their are many other reasons to do a deal like this (passion for improving eBay's recommendations, for example), but let's ignore that for now.
- drusenko 15y ago
  Here's a wild, random-ass guess: - Let's keep it simple and say that since this is an experienced team, the investors invested $20m at a $60m post, so they have 1/3 of the company. Since it is an experienced team, I'm going to guess no participation or anything else hokey. 1x liquidation preference is likely but won't matter in this scenario b/c preferred will convert to common. - With a 20 person team, you've probably given away 5-10% of the company to employees. The later employees probably did not get much, but then again, they weren't around for that long. Let's be very generous and call it 10%. - That leaves the founders with 57% of the company. - Let's just not count transaction costs, they're probably in the $75-$200k range, and it's not super material to this discussion. In that scenario, the founders make $11.4 million each pre-tax, or about $8.55m post-tax (assuming all founders are equal, which is probably also unlikely here). The employees make $8m pre-tax total, or ~$350k each pretax, or ~$190k each post-tax, but the distribution is going to be skewed towards earlier employees. Investors make $26.4m, which is a pretty poor return for a 3-year investment -- investors are mostly looking at IRR, which means the longer an exit takes, the higher the outcome needs to be to make it worth it. This is just a wild ass guess on what a transaction like this might look like, but lots and lots of things are likely way different than I guessed here, and I can guarantee that I've over-estimated the amount of money everybody made, because as a general rule of thumb that always happens. EDIT: > How long will the employees have to be at eBay to get their earn-out, and will that earn-out be in addition to their common stock in Hunch? Will they end up being paid less to work for eBay during their earn-out than if they were on the open market? Probably 2-4 years for the earn-out. The employees might get more retention bonuses to stick around, above what they would normally get from the transaction. They will not earn below-market due to the retention package.
benhalllondon 15y ago
Anyone have any suggestions about how Hunch would scale to eBay levels? Seems Hunch has gone the 'Mega Machine' route (1 T RAM, 48 Core [1]), from 700k users (80m Total TTHY / 113THAYs [1]), make 250k API users How do you scale that out to eBay numbers? [1]http://blog.hunch.com/wp-content/uploads/2011/05/110509-HUNCH-TASTEGRAPH_800px_v2_small.png http://blog.hunch.com/wp-content/uploads/2011/05/110509-HUNC...

158 points by speedracr 15y ago

dr_ 15y ago

I never used Hunch much, and I'm not sure if an 80 million exit with 20 million in VC funding is so great for the founders, but I suppose it gives eBay a footing in NYC - that's the part of the article I found most interesting.

danssig 15y ago
15 million a piece. I don't know how long they were working on it but the very top billed actors tend to make, what, 20 million for movies that take ~3 years to make.
- ebaysucks 15y ago
  So you assume the VC's only scored a 1x on this deal and had no special treatment for their preferred shares such as accrued dividends, liquidity preference, participating preferred, etc?
  - danssig 15y ago
    I went by what the GP said.
- onemoreact 15y ago
  Most top actors spend 3-4 months on average per film. It's a scheduling things where you need a lot of people to film a movie some of which have offers for 3-4 movies that year. So people are working 12 hour days in one short burst and a lot of time in editing / post production but there is a ticking clock because investors want their money back ASAP. Reproduction can be slow simply because there is not a lot of money involved in the project yet.
- blacksmythe 15y ago
  Top billed actors have an excellent chance of making their full rate on an average movie. Founders have an excellent chance of making nothing on an average startup.
  - danssig 15y ago
    So what do they need to make exactly? For me, anything beyond FU money is pretty much irrelevant.

vaksel 15y ago

did anyone actually use Hunch seriously?

charlemagne 15y ago
Taking this question further, what did Hunch help you do? I tried it early and passed, really interested to hear what it has done for others.
- smokinn 15y ago
  I tried it a couple of times too. First time I figured it was basically a slightly better stumbleupon. Next time I tried it was still the same thing and never went back.
suking 15y ago
No freaking kidding - only thing I saw the founder do was interview people on TC. Never heard anyone mention hunch outside of those interviews. What is ebay thinking?
- hassy 15y ago
  > What is ebay thinking? Impressive back-end tech (the recommendation engine) that can now process millions and millions of items on eBay to help increase sales (something like a quarter of Amazon's sales come from recommendations).
  - suking 15y ago
    Very hard to imagine ebay doesn't already do a good job of this with their years of experience. I mean it's possible, but I doubt it.
  - smokinn 15y ago
    80 million dollars is a lot to pay for a recommendation engine. Netflix had their own and paid a million dollars as prize payout for an absolutely state of the art system. If it really was just a tech acquisition they massively overpaid.

speedracr 15y ago

Is Arrington rebuilding a proper tech blog as a counterpart to the growing news machine of Techeablecrunchbeat?

hswolff 15y ago
I think it's just in his blood at this point to blog about tech news. Good for him I say. If you love what you do then do it.

jnorthrop 15y ago

"It’s been a long journey for Hunch." They were founded in 2008 and sold for $80m 3 years later. That is considered a "long journey" these days? Statements like this give me that "we're in a bubble" feeling.

hassy 15y ago
I am somewhat disappointed since Chris Dixon has said Hunch would be in it for the long-term. (I've followed Hunch since it's early days* and always wanted to see it go big.) $80m is a nice pay-out though, the systems they've built have the potential to bring an immense amount of value to eBay's offerings, and a lot of that money will trickle down to other startups via angel investments. * http://hassy.posterous.com/my-favorite-startups-hunch http://hassy.posterous.com/my-favorite-startups-hunch
- kmfrk 15y ago
  Hunch is not for sale. The founders have already sold companies before and have no desire to sell Hunch. We want to build it into a large company. hunch responded one year ago http://www.formspring.me/hunch/q/1392572735 http://www.formspring.me/hunch/q/1392572735
  - jjm 15y ago
    I've learned that in one year, one's goals can change dramatically.
    - AznHisoka 15y ago
      It's also one thing to say something. But the situation changes when a ton of money is actually thrown right in front of you.
      - kennystone 15y ago
        If the number is right, $80m is not a ton of money for people who have already had big exits and took $20m in VC to start this company.

Brajeshwar 15y ago

I never felt the need to use Hunch on its own. Now that it can be more of a tool to supplement other objectives, it sure might be the right tool after-all.

jkaljundi 15y ago
Hunch was always more of an API company than a destination site.
- movingahead 15y ago
  Can you name some companies which were using its API? Their developer site doesn't take any names.
  - jkaljundi 15y ago
    What I meant was the goal of the company was to build technology and license that via an API, not become a destination site.

AznHisoka 15y ago

Wow, this is like a knight in a white horse for Hunch.. I seriously doubt they were making any profit... This sounds like a talent acquisition. I mean this is ridiculous... but it goes to show you.. you gotta show up for the game (the startup game, I mean) to win it... $80 m for a site that doesn't even get 1 million uniques (per Compete) a month is a STEAL. I mean.. seriously, everyone who has a CS background should just start something on the side if a deal like this is possible.

dmix 15y ago
> you gotta show up for the game (the startup game, I mean) to win it... This type of thinking is why the valley is so full of zombie companies pumped up with capital, but with no real traction or any way of ever being profitable PG and many speakers at startup school repeatedly said that its easy to spot the ones who are just doing it because they want to be "that guy" like Zuckerberg - the ones who want to play the game. Instead of starting a company to figure out what customers want. What motivates you to start a company is really important. Especially during the downswings that kills most startups (google "trough of sorrows").
speedracr 15y ago
+1 on the talent acquisition, although much like Slide, About.me, this shows that once you're lucky, twice you know who to speak to if you've gotten to a sizeable exit before. Also helps that eBay is looking for its second act to avoid the fate of a crumbling Yahoo!
arturadib 15y ago
> everyone who has a CS background should just start something on the side if a deal like this is possible Chris Dixon is a veteran investor and entrepreneur, with enormous visibility in the tech world. Contacts with potential acquirers are a non-issue for him. A poor CS fellow could have created a version of Hunch that was 100x better and they still would have 1,000x less of an exit opportunity as compared to any startup Dixon founded. Get real.
- arctangent 15y ago

Zirro 15y ago

"It’s been a long journey for Hunch. The company was founded in 2008." Knowing how long it can take for a small company with a good idea and product to launch, I wouldn't really call that a long journey. Still, congratulations to them. I hope eBay is able to make something good out of what they have created so far.

kennystone 15y ago

Chris Dixon talked a lot about "going big", growing big companies, etc. He talked a lot about a new "data tier" for the web and how Hunch would be an intelligent filter for all the data. I wonder what changed?

frou_dh 15y ago
A chance to leverage synergies?

dgurney 15y ago

Something about Hunch's trajectory is utterly predictable and ever-so-slightly depressing. I suppose building to sell is a perfectly valid business model -- if you succeed -- but it makes me feel a little dirty. And if nobody buys you, you're well and truly f#%@$ed. Although who am I to argue with $80 million.

wyclif 15y ago
And if nobody buys you, you're well and truly f#%@$ed. Really? If you don't have a 'building to sell' roadmap in the first place, why be depressed? If you're building a long-term, stable company with real value and profits, you're not for sale in the first place.

beagledude 15y ago

Hunch is like my divorced neighbor who couldn't work it out, so now they're giving up and short selling the house and bringing down the values for everyone.

rokhayakebe 15y ago

"I have a hunch nobody ever meaningfully used Hunch." http://twitter.com/#!/rafat/status/138633186300264448 http://twitter.com/#!/rafat/status/138633186300264448

subpixel 15y ago

Whatever Hunch is really good at, we haven't seen it yet. I assume Ebay has, and that it has everything to do with crunching customer browsing & purchase behavior to offer them products they're most likely to purchase.

Tichy 15y ago
I think their predictions were actually really good. A while ago I tested several movie recommendation engines and hunch was the only one that delivered. On the downside, they really asked a lot of questions, which made me uncomfortable with using it.

iampims 15y ago

I like their movie predictor: http://hunch.com/movies/ http://hunch.com/movies/

pepdek 15y ago

There is a great play around the collection of data outside of just social space. Hunch has done a great job aggregating this data via a social means and displaying the data to the masses in an appealing way to drive more people towards their "recommendation" engine. I work for a site called Ranker and we're focused on a similar data play with much greater focus on SEO. * http://www.ranker.com/ http://www.ranker.com/

bproper 15y ago

Here's an interview with Chris Dixon on the Ebay purchase. eBay is an interesting challenge because so many of the listings don't have metadata like product IDs. The work Hunch has been doing on the open web is a good fit for this kind of unstructured data. http://www.betabeat.com/2011/11/21/chris-dixon-ebay-hunch/ http://www.betabeat.com/2011/11/21/chris-dixon-ebay-hunch/

socratic 15y ago

Could someone experienced breakdown what a transaction like this looks like for everyone involved? I'm super curious. I've never been acquired, so I really have no insight into the process other than what I've read. Here's the facts as I see them: Crunchbase says Hunch started in September of 2007 and had 23 employees on LinkedIn when they exited. (TechCrunch calls it a 20-person team, so I'm presuming that's all the employees.) They've gotten $19.2m in funding, let's just say $20m. TechCrunch claims the sale was "around" $80m. So what does the breakdown look like? Who gets what? What are the likely investor terms? My totally naive guess would be that the investors got at least a 1x liquidation preference, maybe more. I mean, did Hunch have any revenue? So there was at most $40m to go around to the people at the company. Of course, most of that probably went to the founders. Would maybe 20% of that have gone to the 20-ish employees? So naively pretending that each of the 20-ish employees got 1% for four years, did they each end up with an extra $100k/year? What's the likely distribution of shares among employees? What are the transaction costs (lawyers, taxes, etc.) for this sort of acquisition? How long will the employees have to be at eBay to get their earn-out, and will that earn-out be in addition to their common stock in Hunch? Will they end up being paid less to work for eBay during their earn-out than if they were on the open market? Of course, their are many other reasons to do a deal like this (passion for improving eBay's recommendations, for example), but let's ignore that for now.

drusenko 15y ago
Here's a wild, random-ass guess: - Let's keep it simple and say that since this is an experienced team, the investors invested $20m at a $60m post, so they have 1/3 of the company. Since it is an experienced team, I'm going to guess no participation or anything else hokey. 1x liquidation preference is likely but won't matter in this scenario b/c preferred will convert to common. - With a 20 person team, you've probably given away 5-10% of the company to employees. The later employees probably did not get much, but then again, they weren't around for that long. Let's be very generous and call it 10%. - That leaves the founders with 57% of the company. - Let's just not count transaction costs, they're probably in the $75-$200k range, and it's not super material to this discussion. In that scenario, the founders make $11.4 million each pre-tax, or about $8.55m post-tax (assuming all founders are equal, which is probably also unlikely here). The employees make $8m pre-tax total, or ~$350k each pretax, or ~$190k each post-tax, but the distribution is going to be skewed towards earlier employees. Investors make $26.4m, which is a pretty poor return for a 3-year investment -- investors are mostly looking at IRR, which means the longer an exit takes, the higher the outcome needs to be to make it worth it. This is just a wild ass guess on what a transaction like this might look like, but lots and lots of things are likely way different than I guessed here, and I can guarantee that I've over-estimated the amount of money everybody made, because as a general rule of thumb that always happens. EDIT: > How long will the employees have to be at eBay to get their earn-out, and will that earn-out be in addition to their common stock in Hunch? Will they end up being paid less to work for eBay during their earn-out than if they were on the open market? Probably 2-4 years for the earn-out. The employees might get more retention bonuses to stick around, above what they would normally get from the transaction. They will not earn below-market due to the retention package.

benhalllondon 15y ago

Anyone have any suggestions about how Hunch would scale to eBay levels? Seems Hunch has gone the 'Mega Machine' route (1 T RAM, 48 Core [1]), from 700k users (80m Total TTHY / 113THAYs [1]), make 250k API users How do you scale that out to eBay numbers? [1]http://blog.hunch.com/wp-content/uploads/2011/05/110509-HUNCH-TASTEGRAPH_800px_v2_small.png http://blog.hunch.com/wp-content/uploads/2011/05/110509-HUNC...