Category Archives: Start-up data

IPO again: Carbonite is the new star

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I just discovered about Carbonite, one of the companies in The 17 Most Important IPOs To Watch For In 2011. Storage and backup are clearly hot fields in 2011 (just have a look at Fusion-io for example). In the 1st link I just mentioned above, Carbonite is described this way:

Carbonite, the online storage backup for consumers and businesses, has raised roughly $67 million in various venture rounds, while its sales have doubled each year since its launch in 2006. The company claims to have backed up some 80 billion files, with more than 150 million new files backed up daily. It also claims to have restored more than 7.2 billion files that would have been otherwise lost forever. Inc. Magazine placed it as #9 on its Inc. 500 list for 2010 of the 500 fastest growing private companies. With “the cloud” remaining a hot topic and with its annual basic plan starting at less than $55.00 a year, Carbonite should have a solid reception when it comes to market.

So I digged the IPO S-1 document and looked at the company with my usual interest. Cap. table. founders, investors, ESOP. The 2 foudners has 7-8% each pre-IPO, investors 60% and employess the remaining 25%. What might be a little scary though is the lack of profitability. Here it is.

The S-1 also gives the list of selling shareholders.

But following a few exchanges of comments on a recent post, Is There A Peak Age for Entrepreneurship?, I looked at something else, the founders and their age. Here is what the prospectus gives:

David Friend (63) has served as our chief executive officer and as a member of our board of directors since he co-founded our company with Mr. Flowers in February 2005. Mr. Friend also served as our president from February 2005 to September 2007 and again since August 2010. Prior to starting our company, Mr. Friend co-founded with Mr. Flowers and served as chief executive officer and president of Sonexis, Inc., a software company providing audio-conferencing services, from March 1999 through March 2002 and served as a director of Sonexis from March 1999 through August 2004. From June 1995 through December 1999, Mr. Friend co-founded with Mr. Flowers and served as chief executive officer and as a director of FaxNet Corporation, a supplier of messaging services to the telecommunications industry. Prior to that time, Mr. Friend co-founded Pilot Software, Inc., a software company, with Mr. Flowers. Previously, Mr. Friend founded Computer Pictures Corporation, a software company whose products applied computer graphics to business data, and served as president of ARP Instruments, Inc., an audio hardware manufacturer. Mr. Friend served as a director of GEAC Computer Corporation Ltd., a publicly-traded enterprise software company, from October 2001 to October 2006, and currently serves as a director of CyraCom International, Inc., Marketplace Technologies, Inc. and DealDash Oy. Mr. Friend holds a B.S. in Engineering from Yale University. We believe that Mr. Friend is qualified to serve on our board of directors based on his historic knowledge of our company as one of its founders, the continuity he provides on our board of directors, his strategic vision for our company and his background in internet and software companies.

Jeffry Flowers (57) has served as our chief architect since April 2011, as a member of our board of directors since he co-founded our company with Mr. Friend in February 2005, and as our chief technology officer from February 2005 to March 2011. Mr. Flowers co-founded with Mr. Friend and served as chief technical officer of Sonexis, Inc., a software company providing audio-conferencing services, from March 1999 through March 2002 and served as a director of Sonexis from March 1999 through August 2004. Prior to that time, Mr. Flowers co-founded with Mr. Friend and served as chief technology officer and as a director of FaxNet Corporation, a supplier of messaging services to the telecommunications industry, and co-founded Pilot Software, Inc., a software company, with Mr. Friend. Mr. Flowers served as VP of Development at ON Technology Corporation, a publicly-traded software vendor, from June 1994 through February 1996. Mr. Flowers holds an M.S. and a B.S. in Information and Computer Science from Georgia Institute of Technology. We believe that Mr. Flowers is qualified to serve on our board of directors based on his historic knowledge of our company as one of its founders, the continuity he provides on our board of directors, his strategic vision for our technology, and his background in internet and software companies.

Doing simple math (so maybe not very accurate, this would give the following table)

Founder Friend Flowers
Born in 1948 1954
Company Founded at age Founded at age
Sonexis in 1998 50 44
Faxnet in 1994 46 40
Computer Pict. in 1982 34

So it shows that the founders are not young, not even middle-age. They are serial entrepreneurs and probably close friends given the facts they have co-founded 3 companies together and were definitely not in their twenties when they did it. In my next post today, I will come back on the topic.

Ecommerce cap. tables: Responsys, Salesforce and Broadvision

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For different reasons, I’ve been looking at a few other ecommerce companies. No real connection except the field. It’s more a summer post for my archives but at the same time, there are interesting elements. These are

– Responsys founded in 1998 and IPO in 2011.
– Salesforce.com founded in 1999 but public in 2004.
– Broadvision was founded in 1993 and public before any of the two others even existed, in 1996!

They are all based in Silicon Valley. They are typical in their structure (founders, managers, VCs, stock options, directors. Now let’s have a look at them individually.

I studied Responsys because it was one of the early 2011 IPO. An old company (13 years!). Two founders with very little equity. It could be explained with the large amount of money raised ($60M) but this cannot be the reason. Just have a look at teh price per share of the rounds. $3, then $16, then $6 then $0.25. The terrible down rounds… of course this was extremely dilutive for many shareholders.

The two founders Ragu Raghavan and Anand Jagannathan were not active with responsys for some time.

Broadvision is the oldest of the 3. It was one of the stars of the late 90s. It’s still a public company but its market cap. is $50M only. Today Responsys has better revenues and profits… In a way, Broadvision and Responsys might be The Tortoise and the Hare of the fable.

Also of interest is the fact that id had a unique founder, Pehong Chen, who  was also (and still is) the chairman and CEO.

In between, there is Salesforce.com. The Hare and the Tortoise at the same time. Went public 5 years after foundation. Still had losses at IPO even with good revenues. A market cap. of $1B. But in 2011, it has a market cap. of $19B!!! Explained by revenues of $1.6B even if the profits are below $100M. Not typical in terms of investors though. Mostly business angels and very little ownership.

Four founders at salesforce, Marc Benioff, Parker Harris, David Moellenhoff, Frank Dominguez. The first is a star of Silicon Valley, the last one nearly unkwown to me at least. Apparently, they still all work there…

You can still go public as a web1.0 company: Homeaway and Kayak

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I just had lunch with a friend-entrepreneur and we were looking at the big high tech winners.

– the 60’s was the decade of the Semiconductor and gave Intel,
– the 70’s was the PC/SW, with Apple and Microsoft,
– the 80’s was the Network with Cisco,
– the 90’s was the Internet with Google,
– the 00’s will probably be the Web2.0 and remember Facebook.
Of course, there is more from Fairchild to Oracle, 3com, Yahoo, eBay and Amazon.

Now what about the 10’s? For me it is not clear, I do not beleive enough in green/clean-tech but I see the smart management of data and apps, with the Cloud. But no clue on who would be the decade winner.

Now you can still go public as a web2.0 company has I mentioned in my post The Z IPOs: Zynga, Zillow, Zipcar and … Zuckerberg. But even better you can go public as web1.0 company. here are just two examples, Homeaway and Kayak. So I give you my usual cap. tables and a few comments.

Homeaway went public on July 5 and the stock is doing great. Once again you can see the ownherships of founders, managers, investors, independant directors. What is obviously carzy again is that the company raised $400M and has no profit yet. But this helps be to understand why Index supports HouseTrip, a company in the field, out of Lausanne and now based in London.


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Next is Kayak. A travel company. Can you believe you can still have new companies in the field? Well this is the proof. Similar comments: check the equity of various players such as founders, managers, directors and investors. A lot of money invested but at least profitable. This one reminds me of another very nice Swiss start-up that deserves much more visivilty: routeRank. (I have no personal interest in routeRank neither in HouseTrip!).


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The Z IPOs: Zynga, Zillow, Zipcar and … Zuckerberg

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I do not why 2011 saw three IPOs with companies beginning with Z. I thought that beginning with an A was what mattered (Apple, Amazon, not to say @Home). Maybe this is the Zuckerberg effect!

So I looked at the cap. tables of these three companies. Zipcar went public earlier this year, Zillow today and Zynga filed earlier this month. Zuckerberg might wait until 2011 though. They do not have that much in common, except they are all Internet companies with nice revenues (but not always a profit) and a lot of venture capital too. Zynga being apparently the current star, I begin with it. Of coure the price per share is a guess, as the company is not public yet, it just recently filed at the SEC.


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As the fund raising included sales of existing shares, the following data is also of interest. But I still have to admit there are missing pieces in all this and it might still be a little confusing (in comparison to previous tables, sorry!) Zynga has only one founder, Mark Pincus (check his Wikipedia profile). As with Zillow (and Google in the past), founders have shares of a special class which usually guarantee more voting right.


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Zynga has raised $850M, had about $600M in revenues and a profit of $90M in 2010. Nice! KP and IVP are the two famous VCs and Union Square is the new emerging player (Twitter, FourSquare, Etsy). As a sidenote, Fred Wilson is a partner and has a great blog, avc.com. Reid Hoffman was the seed investor (co-founder of LinkedIn, former VP at Paypal, investor in more than 80 start-ups).

Next is Zillow. Again the 2 founders (with about an equal amount of shares) have also special voting shares. The company is a little older but has raised less cash ($80M), has smaller revenues and not a profit yet. Another element of interest is the equity that independant directors own (you also have this in the Zynga and Zipcar tables). Zillow changed its price again up from $18 uin my table to $20.


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And finally Zipcar. Again two founders, but not much info on them as they are not active anymore. A lot of money raised, good revenues but no profit. Much older (11 years old). Benchmark again is a VC (just as in Zillow).


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A word of conclusion: Zynga will be the big winner if it goes public at the mentioned valuation until Zuckerberg goes out (you can still have a look at my “tentative” Facebook equity table).

When Wavecom was surfing

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I just published a post on the French version of my blog about Wavecom, one of the European success stories. This is coming again from my reading of old Red Herring articles. You can at least check there the RH scan as well as my typical cap. tables. I do there something unusual, I also give the cap. table at the secondary which followed the IPO one year later. The secondary is an important event (even if lesser known than an IPO) where shareholders can find some liquidity. Just check here.

Robert Swanson, 1947-1999

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This is again one of my recent readings from old Red Herring. I had already published a post on Bob Swanson, the co-founder of Genentech. This RH article is not that different and I thought it would be important to mention the story again of Boyer and Swanson and the beginnings of the biotech industry. Here it is.

The cofounder of Genentech also founded an industry.

ON THE OCCASION of their deaths, the founders of technology companies can take some satisfaction that they started something From nothing. The best will be able to claim they founded companies that changed the world, and a lucky few will have built organizations that lasted. But almost no one will be able say they founded a company that created an entire industry. Robert Swanson, who died from brain cancer at his home in Hillsborough, California, on December 6, would be very justified in claiming to have started the biotechnology industry.

DREAMS 0F GENIES

Mr. Swanson was a 29-year-old venture capitalist with the firm that today is Kleiner Perkins Caufield and Byers when he collared Herbert W. Boyer, a scientist at the University of California at San Francisco who was researching recombinant gene therapy. Recombinant DNA is formed when DNA from different sources is combined to create new DNA molecules. Dr. Boyer thought that combining DNA—or gene splicing—would allow scientists to design the proteins necessary to treat particular diseases, and would liberate scientists from trial-and-error methods of protein testing. In 1976, venture capitalists, and even most academics, did not believe in the immediate commercial value of such research. Dr. Boyer himself was uncertain when gene-splicing would be a business. Nevertheless, Mr. Swanson convinced Dr. Boyer to grant him a ten-minute interview. “Here cornes this brash young entrepreneur filled with enthusiasm and ideas and ready to go,” Dr. Boyer says today. “I recognized right away that he had the drive and the understanding.” They formed Genentech, which is generally thought to be the first biotech company, later that year. Twenty-three years later—and in the very winter of Wall Street’s discontent with biotechnology—it is difficult to remember how revolutionary Genentech was. In 1977, Genentech produced the first human protein by splicing a gene with bacteria. Later Genentech created human insulin, the first drug produced by genetic engineering, which it licensed to Ely Lilly for the treatment of diabetes. It was the first biotechnology company to sell a drug it had developed on its own: human growth hormone, for children whose bodies do not produce enough of the hormone. And Genentech was the first biotechnology company to offer its shares in an initial public offering—which, until the Internet boom, was among the most spectacular Wall Street had ever seen. Genentech’s example made biotechnology possible by demonstrating to venture capitalists, entrepreneurs, and scientists that a sustainable business could be based on genetic engineering. Today, there are more than 1,000 biotechnology companies in the United States, and Genentech remains one of the most successful.

INGENEOUS

Mr. Swanson was born in Brooklyn, New York. He attended the Massachusetts Institute of Technology, receiving an undergraduate degree in chemistry and a graduate degree from MIT’s Sloan School of Management. Before becoming a partner at Kleiner Perkins, Mr. Swanson was a VC at Citicorp Venture Capital. He was Genentech’s chief executive from the company’s founding until 1990, and was its chairman from 1990 to 1996. After retiring from Genentech in 1996, Mr. Swanson formed K&E Management, a private investment – management firm. He was also chairman of Tularik, a biotechnology firm that was preparing to go public in mid-December. As an entrepreneur he was courageous, ingenious, stubborn, and slightly crazy. “If you told him that doing something violated the rules of physics, he’d tell you the law must be wrong and you’d almost believe it,” said Arthur D. Levinson, the current chairman of Genentech. Friday afternoons at Genentech were devoted to theme parties, called Ho-hos—on Hawaiian theme days, Genentech’s chairman would invariably don a grass skirt and dance the hula for his employees. Mr. Swanson wished to change the world by commercializing, and therefore making widely available, new drugs based on gene splicing. He got his wish. Last year new pharmaceuticals developed by Genentech scientists (that is to say nothing of established drugs still being sold) earned more than $4 billion in revenues, according to MIT, and saved countless lives—if not, sadly, Mr. Swanson’s own.

Write to jason@redherring.com.

Going public when you are not a US start-up – part 5/4: India

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As my stupid “part 5/4” shows, I had not planned to add two other non-US companies, this time with Indian roots (to my previous 4 posts on Europe and China). I am currently reading The Startup Game by Bill Draper. It is a very interesting book by one of the most famous Silicon Valley venture capitalists and I will write soon a post on what I liked (as soon as I am finished with reading it).

Bill Draper founded a fund specialized in Indian start-ups in the mid-90s. He was not the first VC to leave the USA (some had done it in Europe in the 60s and 70s) but he was probably the first one to be succesful with such a venture.

Rediff and Selectica went public in 2000, both were founded in 1996. They are very similar to US start-ups, indeed Selectica was founded as a California start-up. Rediff is stranger as it is an Indian company and because it was not (and is not yet) profitable, it is still private in India.

Here is Rediff Cap. Table when it went public

and here is Selectica’s:

As a short conclusion, Bill Draper certainly had higher hopes for both companies which individual revenues were less than $50M in the last 3 years. There is no doubt that being an overseas company is not optimal both for customers and perception by investors…

Going public when you are not a US start-up – part 4/4: Baidu

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Baidu ends my small series of non-US start-ups. What is interesting is that there are some anecdotal differences. At least for the European ones, it was not an easy adventure with many tough financing rounds. Alibaba was not totally clear. Now Baidu…

As a first word of conclusion, the value creation of the two Asian companies is much larger than the European ones. It might be linked to the fields (Transmode and Envivio are more in the high-tech infrastructure, where as the two Chinese companies are internet services). It might also be the perception of different dynamics in both continents…

Baidu was founded by two Chinese citizens, Robin Yanhong Li and Eric Yong Xu. Li “went to SUNY-Buffalo in the US to study computer science towards a Doctoral degree. He received his Master of Science degree in 1994 after he had decided to discontinue his PhD program work” (Wikipedia). Xu “received his Ph.D. degree from Texas A&M University, post-doctorate from University of California at Berkeley, and his B.S. and M.S. degrees in Biology from Beijing University. Dr. Xu was also a candidate of the Stanford University Sloan Masters program”. (Bio on Bioveda Fund website).

Baidu is quoted on Nasdaq. Is there a link between the background of the founders and/or the fact they have investors such as Draper, IDG and Google? (Remember that Alibaba has Yahoo as a major shareholder – even if the relationship was quite tensed recently).

PS: I may come with a fifth story soon, an Indian startup quoted on Nasdaq I read about just yesterday…

Going public when you are not a US start-up – part 3/4: Alibaba

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I leave Europe with two recent filings (Envivio, Transmode) to China. There would be much to say about China, my recent post on venture capital shows the growing role played by the country in high-tech. At the same time, I don’t know many Chinese success stories, with the exception of Alibaba and Baidu.

I should add Foxconn, the famous computer company which produces Dell and Apple machines, but I have not much about it. Alibaba was founded in 1999 and went public on the Hong Kong stock exchange in 2007, even if its major shareholders are Yahoo and Softbank.

It was tough to build the capitalization at table. There is about 30% of the company shares which I could not link to individual or institutional stockholders. It could be linked to that fact that the Chinese entitity owns these shares. I cannot avoid adding that just like in Europe, the filings of non-US companies are sometimes more cryptic than for American companies. But it might be just because I did not spend enough time on the documents. It might be also that I made a confusion between the quoted company and the mother company which is not quoted (check this 2009 newsrelease that I discovered while writing the post!)

What else? The founders have similar ownership to US start-ups. Another thing which puzzles me is the fact that Alibaba is not quoted on Nasdaq or NYSE and that in parallel, some major stockholders are from the western world… But the founding team has strong chinese roots which balances the overall picture.

Next: I will compare the situtation with Baidu, the other Chinese success story I studied.

Going public when you are not a US start-up – part 2/4: Envivio

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Envivio follows my recent post on another start-up with European roots, Transmode. Envivio has similarities and differences. Both have roots in the Telecom industry, Transmode with Ericsson and Envivio with France Telecom. Both were founded in 2000, 11 years before the IPO or filing.

Both had complex financing rounds, including “down rounds”. You can see that in the Transmode case, the price per share went from $5.5 in the B round to $1 in the C round. These down rounds are usually terrible for founding teams. And indeed, there is not much info about Transmode founders.

Envivio had raised $41M until 2008 and the price per share increased steadily to $2 per share. Difficult to give precise dates for the rounds, but the investors were a combination of corporate investors (France Telecom, Intel, Bertelsman, Philips), and financial (Global Accelerator, Crédit Lyonnais – now Crédit Agricole). Then the G round in 2008 was a down round at $1.25 and the H round, less than 2 years later, even lower at $0.34. With such events, it is not surprising to discover that the investors own 87% of the company before the IPO. Obviously, this would have been very dilutive to the founder, Julien Signes, without the possibility of granting new (stock option) shares that you discover in the right column.

There is another interesting difference with Transmode: Envivio is filing to go public in the USA, it is indeed an American start-up, and not much shows its French roots (the R&D is based in Rennes, Britanny though). Even if Julien Signes studied and worked in France initially, he worked also for France Telecom in San Francisco and I would be curious to know if this had an impact in his entrepreneurial path. I asked him and am waiting for an answer, but it is possible that Envivio is not allowed to communicate in the pre-IPO period.

It is one my thesis that Europeans who had a US experience have digested better the start-up dynamics (whether they moved to the USA and became entrepreneurs there – De Geus, Bechtolsheim, Brin – or they became entrepreneurs in Europe but had lived in the USA – Liautaud, Borel, Haren). This does not prevent European high-tech start-ups to exist and succeed, but I have to admit, the numbers are not exactly the same.

Again, because the company is not public yet, I had to guess what the price per share might be at IPO. I have put a small price, using multiples of market cap. to revenues of 7x. I will make an update when I know more…

Next: Alibaba

NB: an explanation from the filing on the issuance of incentive shares: “In September 2008, we sold 1,532,372 shares of Series G1 convertible preferred stock and 13,359,323 shares of Series G2 convertible preferred stock for $1.25 per share and received total consideration of an aggregate of $15.9 million. Also in September 2008, we converted the outstanding principal balance of our outstanding convertible promissory notes in the amount of approximately $8.9 million plus accrued interest in the amount of approximately $0.2 million into 467,628 shares of Series G1 convertible preferred stock and 6,829,154 shares of Series G2 convertible preferred stock simultaneously with our Series G financing. In June 2010, we sold 895,502 shares of Series H1 convertible preferred stock, 18,487,298 shares of Series H2 convertible preferred stock, 7,775,801 shares of incentive Series 1 common stock and 87,170,915 shares of incentive Series 2 common stock for $0.3351 per unit and received total consideration of approximately $6.5 million. In connection with this Series H financing, all outstanding shares of Series B, C, D, E and F convertible preferred stock converted into shares of common stock. Also in June 2010, we converted the outstanding principal balance of our outstanding convertible promissory notes in the amount of $1.0 million plus accrued interest in the amount of approximately $4,800 into 2,998,571 shares of Series H2 convertible preferred stock simultaneously with our Series H financing. The number of Incentive Shares to be issued was based on the series of the outstanding convertible preferred stock held by each Series H participant as follows: at a rate of 107.430618 shares of common for each share of the Series B, 77.588779 shares of common for each share of Series C, 1.492092 shares of common for each share of Series D, 1.865115 shares of common for each share of Series E, and 3.073709 shares of common for each share of Series F. As a result, the Company issued 94,946,716 Incentive Shares with the shares of Series H convertible preferred stock issued during the Series H financing.”