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October 2011

October 2011. The Past Four Years Have Shaped Much of NY’s Digital Media and Technology Landscape. Notable events in NY since 2007:. Development of brand names across broad set of verticals. /. /. ($275 million) Closes deal and announces HQ move to NY in September. ($3.1 billion).

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October 2011

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  1. October 2011

  2. The Past Four Years Have Shaped Much of NY’s Digital Media and Technology Landscape • Notable events in NY since 2007: Development of brand names across broad set of verticals / / ($275 million) Closes deal and announces HQ move to NY in September ($3.1 billion) Mayor Bloomberg starts up city-funded business incubator programs / leads opens a Googleplex in New York City Raises series A round in tech VC funding and deal quantity ($680 million) April 2007 December 2007 June 2008 September 2009 July 2007 January 2011 January 2007 September 2007 November 2007 September 2010 June 2011 August 2008 December2009 Raises series A round Mayor Bloomberg offers $100 million and land to develop a top engineering school to encourage tech development, to bring New York City to the forefront of innovation. Raises series A round Acquires is founded announces spin-offs of: Announces acquisitionof October 2007 For $125 million comes to New York Raises Series A round for $30 billion Raises series A round Raises Series B round announces acquisition of Raises series A round

  3. NY’s Emergence as a Tech Hub • New York City has become a true digital media innovation center 1H2011 Internet VC Funding by Top Cities (in millions) 1H2011 Internet VC Deals by Top Cities (# of deals) Bay Area167 Bay Area$1,534 Source: CB Insights “Venture Capital Activity Report”

  4. NY Ecosystem has Very Different Roots and Growth Opportunities than Silicon Valley Leadership Talent Wall Street Internet Services OperationalEfficiencies Engineering Talent Key Customers Creative Talent Advertising Data Services Strategic Acquirers Strategic Partnerships Business Development Fashion Media

  5. Top 25 Private Digital NY Sale TransactionsJanuary 2007 – September 2011 (Disclosed deals / rumored pricing available) (Enterprise Value in $M) $1,000 $800 $400 $200 $0 2007 2008 2009 2010 2011YTD Source: Capital IQ, TechCrunch, public filings, and press releases

  6. Overview of NY Area Private Digital Companies

  7. Digital Sector Categorizations (295) Digital Content(80) Digital Marketing(110) eCommerce(48) Social(30) Mobile(34) Brand Storefront Daily Deals eCommerce Infrastructure Marketplace Private Sales Third Party Retailer Other Content Enabling Family & Education Finance & Professional Games Health & Fitness Lifestyle Music Tech Video & Images Audio & Video Advertising Digital Agencies Display Advertising Email Advertising Lead Generation Local Advertising Search Advertising Social Marketing Management Content eCommerce Marketing Social Commerce Content Curation Dating Enterprise Social Funding Local Social Network Other Note: Several companies have distinct business units that place them in multiple categories

  8. NY Area Private Digital Companies by Equity Raised (143) Electric Sheep FashionStake $5M-$10M 41 $10M-$20M 36 $20M-$30M 24 $30M-$50M $30-$50 $30-$50 24 $50M-$100M $50-$100 13 5 >$100M Source: Capital IQ and TechCrunch, as of 9/28/2011

  9. Top 10 Private Digital NY Sale TransactionsJanuary 2008 – September 2011 (Disclosed deals / rumored pricing available) 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) Transaction Value (in $M) $524 400* 315 296 225 200* 135 125 120 98 Date 06/15/2011 06/13/2011 02/06/2011 01/19/2011 02/03/2010 01/25/2010 06/17/2010 08/05/2008 09/07/2010 10/20/2008 Acquirer/Target Source: Capital IQ, TechCrunch, public filings, and press releases *rumored value

  10. Venture Capital and Private Equity Firms With NY Area Digital Investments

  11. “The Locals” - Digital Focused VC/PE Firms Headquartered in NY Area By Number of NY Area Digital Investments January 2008 – September 2011 20 18 7 >10 >10 1-3 1-3 4-10 4-10 Seed Early Stage Growth Buyout Source: Capital IQ, TechCrunch, public filings, and press releases

  12. “The Satellites” - Digital Focused VC/PE Firms With a NY Area OfficeBy Number of NY Area Digital Investments January 2008 – September 2011 5 7 2 4-10 4-10 >10 >10 1-3 1-3 Seed Early Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases

  13. “The Outsiders” - Digital Focused Non-NY VC/PE Firms By Number of NY Area Digital Investments January 2008 – September 2011 26 11 1 4-10 4-10 >10 >10 1-3 1-3 Seed Early Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases

  14. “The All-Stars” - VC/PE Firms with at Least 5 NY Area Digital InvestmentsJanuary 2008 – September 2011 20 6 8 “The Locals” “The Satellites” “The Outsiders” Seed Early Stage Growth Source: Capital IQ, TechCrunch, public filings, and press releases

  15. Overview of NY Area Public Digital Companies

  16. Public Companies with a NY Area Presence by Industry (47) Traditional Media Data Digital Media Marketing 9 10 11 11 eCommerce 6

  17. Public Companies with a NY Area Presence by Market Cap $5B-$15B >$15B $500M-$2B $2B-$5B <$500M 15 7 7 8 10 Note: Market cap calculated on 9/28/11 Source: Capital IQ and public filings

  18. Public Companies <$1 Billion Valuation ($ in millions) $1,000 900 800 700 600 Enterprise Value 500 400 300 200 100 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 16.0x 18.0x LTM Revenue Multiple Note: Enterprise value calculated on 9/28/11 Source: Capital IQ and public filings

  19. Public Companies >$1 Billion Valuation ($ in billions) $250 $200 $150 $100 $50 Enterprise Value $40 $30 $20 $10 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x LTM Revenue Multiple Note: Enterprise value calculated on 9/28/11 Source: Capital IQ and public filings

  20. Public Acquirers with a NY Area Presence By Number of Acquisitions January 2008 – September 2011 Select Acquisitions (in $M Enterprise Value) Acquirer # of Acquisitions 1) Pangea3 – $95 – 11/18/2010 Hugin Group – $60* – 09/21/2009 59 ITA Software – $700 – 06/01/2010 AdMob – $675 – 11/09/2009 Admeld – $400* – 06/13/2011 Invite Media - $75 – 06/02/2010 2) 58 Rosetta – $575 – 05/17/2011 Razorfish – $530 – 09/09/2009 Big Fuel Communications – NA – 07/18/2011 3) 46 Netezza – $1,730 – 09/20/2010 Sterling Commerce – $1,400 – 05/24/2010 SPSS – $1,122 – 07/28/2009Coremetrics – NA – 06/15/2010 4) 37 Clemenger – $138 – 09/01/2010 Communispace – $100*– 02/07/2011 Saffirio.Tortelli.Vigoriti – $24 – 03/18/2011 5) 36 Source: Capital IQ, TechCrunch, public filings, and press releases *rumored value, bold represents New York deals

  21. Advice for the Audience

  22. General Advice • LOTS of exciting stuff is happening in Digital NY right now. Ignore it at your peril! • Opportunities come in all shapes and sizes. • The Digital NY entrepreneur network is tight – get connected. • There is an increasing depth of NY engineering talent – tap into it.

  23. Advice for the Entrepreneur • Digital NY is getting crowded with lots of startups. Be sure of your objectives and how to achieve them. • There is a quality group of NY-based technology focused lawyers, accountants and recruiters – network into them. • Not everyone will be able to sell for $100MM+ valuations. Be realistic about where you stand on your chances. • The scope of what is "strategic" to a buyer is constantly expanding. Make sure to keep as many lines of communication open to large organizations. • There are LOTS of outside capital. Think through what is the right amount for you. • Choosing a VC is as important as choosing a co-founder. It could be a 5+ year relationship, so get as much outside perspective on them as possible. • Focus on the partner involved, not the firm overall.

  24. Advice for the Investors • Digital NY is getting crowded with lots of startups. Make sure your deal filter is clearly understood. • Not everyone will be able to sell for $100MM+ valuations. Keep the cap table in check. • Leading VCs have common characteristics today – honesty, preparedness, respect and insight. Make sure to understand an entrepreneur’s expectations before investing your time or theirs. • The "West Coast is coming". They are aggressive and highly persuasive to entrepreneurs. Be prepared.

  25. Advice for the Public Companies • Tremendous value being created, competitive dynamics are changing. • There is a new generation of "Digital Leaders" among the emerging CEOs in the NY startup scene. Make sure you know who they are. • Market leadership is a fungible thing these days. The traditional leaders today won't stay that way if they don't pursue digital growth strategies. • If some of the "new billion dollar babies" (i.e. Facebook, Zynga, LinkedIn, Groupon, etc.) enter the M&A game in a meaningful way, you can forget about "winning" hot companies that are being sold.

  26. PANEL DISCUSSION “Let’s Hear from the Digital Leaders of NYC – Issues and Opportunities” Moderator: Linda Gridley President & CEO, Gridley & Company LLC Panelists: Henry Blodget, CEO & Editor-in-Chief, Business Insider Habib Kairouz, Managing Partner, Rho Capital Partners Ben Lerer, Co-founder, Thrillist Howard Morgan, Managing Partner, First Round Capital Michael Rubenstein, President, AppNexus David Tisch, Managing Director, TechStars NYC Ed Zimmerman, Chair-Tech Group, Lowenstein Sandler PC

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