the deal

the deal

A profitable Internet start-up company is almost as rare in 2008 as it was in 1999.

It should be no surprise, then, that investors and bankers greeted closely held Internet start-up HomeAway.com with a measure of enthusiasm. The Austin, Texas, company, said to be profitable by its CEO and investors, considered nearly 10 venture capitalists as it sought to raise $250 million.

“It’s pretty tough to obtain capital right now, but it’s the opposite if you have a company that has strong earnings. I’ve never seen so much competition for financing,” said CEO Brian Sharples said.

HomeAway needed only three firms to meet its goal of $250 million, $175 million from Technology Crossover Ventures and $75 million from two existing investors–Institutional Venture Partners and Redpoint Ventures.

HomeAway.com is kind of an eBay for vacation-home rentals, and it has done booming business amid the downturn as many owners of second homes look to rent out their country houses to get additional cash. The company sought additional cash to make acquisitions as the market values of competitors fell.

The company was no stranger to big capital-raises or acquisitions, pulling in $160 million in November 2006 and completing 10 acquisitions in the past three years. The company used some of that cash to expand globally– 30% of its revenue now comes from overseas, according to Technology Crossover Ventures partner Woody Marshall.

To keep that expansion going, HomeAway flirted with a public listing: in October 2007, the company and its bankers, Goldman Sachs Group and Credit Suisse Group, “did 95% of the work toward putting an IPO together,” but pulled back before officially filing it with the Securities and Exchange Commission.

“I didn’t feel comfortable taking a company public in a market that would be under pressure,” Sharples says now. “The way I look at it now, I’m sort of grateful. There are big pros and cons to going public. It’s hard to go public and operate as you’d like to. The pros of going public are raising large amounts of capital at a good price and having liquidity for shareholders.”

Sharples says HomeAway might reconsider a public listing. “A couple of years from now, if the markets are right, we’ll consider going back to them,” he told us, confirming that Goldman and Credit Suisse would remain the likely underwriters.

Public or not, HomeAway still wanted to pay down its debt — $88 million from American Capital–and make sure that longtime employees could cash out some of their stock.

Enter TCV, IVP and Redpoint. Sharples called the three firms to raise $250 million, the amount that the company needed to help employees cash out, pay back its debt and have enough left over for acquisitions. Sharples and his management team also identified seven more investing firms that had previously been eager to put money in HomeAway; Sharples quipped to us that he has been “tailed and trailed” by banks and private-equity firms looking to do deals with the company.

Sharples chose TCV because Marshall, the lead investor there, had close ties with another HomeAway investor, Trident Capital, where he worked for 12 years before joining TCV several months ago. Marshall didn’t lead Trident’s investment in HomeAway but worked closely with board member John Moragne in doing the due diligence on the company.

TCV, for its part, wanted to invest in HomeAway because the company was similar to its previous Internet-based portfolio companies: Orbitz.com and Travelocity, as well as Netflix and eHarmony. In those cases, TCV bet on companies that could succeed in a “fragmented” market full of competitors, filled with customers that had multiple options in finding what they needed.

source: wsj deal journal

the deal

“People are going to be more conservative,” says venture capitalist Fred Wilson in a video interview with Tech Confidential about the impact of the crisis in the capital markets on the technology industry.
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Gilt Groupe is going to be one of the fastest-growing Internet companies that has ever happened,” predicts Kevin Ryan, CEO of New York incubator AlleyCorp, which owns the e-commerce fashion site.

“We’ll do tens of millions of dollars in revenue this year,” says Ryan of Gilt Groupe, which is like an online version of the designer sample sales New Yorkers love for their exclusivity almost as much as for their discounted prices.

“I used to walk by 18th Street and see 200 women waiting in line,” recalls Ryan, who is the former CEO of DoubleClick Inc. “I asked them, ‘What are you waiting for?,’ and they said, ‘Oh, the Marc Jacobs sample sale.’ And I thought, ‘That’s great, but why can’t I do that online, and people from Philadelphia or Westchester or many other places could take advantage of that?’ ”

“We’re taking the burden of schlepping to a sample sale at odd hours of the day, and we’re bringing the phenomenon online, not just to New Yorkers but to all of America,” explains Alexandra Wilkis Wilson, co-founder and chief merchandising officer of Gilt Groupe, which secured $5 million from Matrix Partners last year.

The invitation-only site features limited-time sales of clothing and accessories created by a wide range of designers, from the established Ralph Lauren to Band of Outsiders‘ hip newcomer Scott Sternberg. The company buys all the merchandise it sells and photographs it all especially for the site.

Gilt Groupe got a new chief executive on Monday. Susan Lyne, the former CEO of Martha Stewart Living Omnimedia, is replacing co-founder Alexis Maybank in the CEO role. Maybank is taking on the chief strategist title.

Gilt Groupe is one of half a dozen technology startups founded and seeded by Ryan and AlleyCorp chairman Dwight Merriman, who as co-founder of DoubleClick was the online ad firm’s chief technologist. For more of Tech Confidential’s behind-the-scenes tour of AlleyCorp and its network of startups, see video interviews with Ryan, Silicon Alley Insider LLC CEO Henry Blodget and a previous interview with Music Nation CEO Daniel Klaus. Check back later in the week for our conversation with Merriman. These days, he’s chairman of AlleyCorp as well as CEO of its newest endeavor, 10Gen, a so-called “cloud-computing” platform provider backed by Union Square Ventures. - Mary Kathleen Flynn

the deal

“There’s an opportunity to build a new form of journalism,” says Henry Blodget, CEO of Silicon Alley Insider LLC, publisher of the eponymous business blog, in a video interview with Tech Confidential.

“What you’re seeing with traditional media, especially with regards to business coverage, is that it’s cracking apart at the seams,” says the former Wall Street Internet analyst.

Newspapers have “an obsolete delivery mechanism that worked for 200 years — they had a great run. But you would never start a newspaper today and deliver it by a truck and print it.” And the trouble with magazines is that they are a week, or even a month, late in covering news, while the problem with TV is that it’s one-way.

As the convergence between “pajama bloggers” and traditional media accelerates, Blodget sees a window of opportunity for Silicon Alley Insider, which he describes as combining professional journalism with a conversational tone and “higher-velocity” publishing. “We’ll take advantage of this opportunity where everything is being disruptive, and we’ll build a company in the middle of it,” Blodget says.

Silicon Alley Insider secured a $1 million Series A in July from prominent media and technology angels, including former Wall Street Journal publisher L. Gordon Crovitz, HuffingtonPost.com Inc. co-founder Ken Lerer and Mayfield Fund managing director Allen Morgan. The company is owned by AlleyCorp, a network of six companies co-founded by Kevin Ryan and Dwight Merriman, the former CEO and co-founder of DoubleClick Inc., respectively.

Tech Confidential got a behind-the-scenes tour of AlleyCorp from Ryan, Merriman, Blodget and Gilt Groupe co-founder Alexandra Wilkis Wilson. Click here to see the video interview with Ryan and here for a previous interview with Music Nation CEO Daniel Klaus. Check back soon for our conversations with Merriman and Wilkis Wilson. - Mary Kathleen Flynn

the deal

“Someone might want to check technology entrepreneurs Kevin Ryan (left) and Dwight Merriman for steroids.

Since selling DoubleClick Inc., where Ryan was CEO and Merriman was co-founder and chief technologist, to Hellman and Friedman LLC for $1.1 billion in 2005, they have coached not just one but half a dozen startups under the AlleyCorp LLC franchise, which they describe as a network of affiliated companies. (Meanwhile, Google Inc. bought DoubleClick for $1.3 billion earlier this year.)

Indeed, there’s little connection among AlleyCorp’s startups, beyond being the brainchildren of Ryan and Merriman. The pair are the companies’ founders, providing the companies with seed funding and often acting as CEOs until a permanent chief is hired.Perhaps the New York firm’s best-known startup is Silicon Alley Insider, a fast-growing media company that publishes business blogs and that recently obtained a $1 million Series A funding from well-known angel investors including Mayfield Fund managing director Allen Morgan. Other AlleyCorp holdings include Gilt Groupe, an invitation-only designer fashion site that provides the online equivalent of a sample sale and that secured $5 million from Matrix Partners last year; 10gen, a provider of so-called cloud computing technology for Web site developers that received $1.5 million from Union Square Ventures over the summer. (Merriman is now 10gen’s CEO); and Music Nation, a music service that lets musical artists and fans connect online.

Here’s Tech Confidential’s tour of AlleyCorp’s operation in Manhattan’s Silicon Alley. We start with our video interview with Ryan. Tune in later for my chats with Merriman, Silicon Alley Insider CEO Henry Blodget and Gilt Groupe co-founder Alexandra Wilkis Wilson. — Mary Kathleen Flynn”

the deal

Tech accelerator LaunchBox Digital is trotting out the first nine graduates of its summer startup program. After their first demo day in front of a group of potential investors at the…
source: The Deals Blog Networks

“Aiming at building a reputation among both technology and investment types as it expands a subscription service for filtered investment news, Silicon Valley startup SkyGrid Inc. is adding former American Express Co. CEO James Robinson and his RRE Ventures fund as lead investor in an $11 million Series B round set to be announced Wednesday.
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