Valleywag reports that ValueClick is considering buying Revenue Science. I have blogged extensively about the challenges in raising a lot of capital and exiting appropriately. This would be a great example. As Valleywag notes, Revenue Science has raised more than $70 million dollars. If investors owned 90% of the company, the business would have to sell for $770 million dollars to achieve 10x returns. If investors own less, the company would need to sell for far more in order to achieve those kind of returns.
What are the odds that the company sells for a price like that? Well, today VLCK is trading for $940 million. So even if they sold the business for $250m, they would be getting 20% of a publicly traded company. That strikes me as unlikely. A $250m exit, if the investors owned 100% of the business is less than 4x returns. On an absolute basis, not too bad, but it strikes me as aggressive. What if they exit for $100m? They are getting 10% of a billion dollar publicly-traded business. Pretty good exit! Probably the investors take basically all of the money and feel like they barely got out.
Bad outcome for all concerned.
Contrast that with Tacoda, raising ~$30m and exiting for $270m. Huge victory for all concerned by being more efficient with capital and selling out to someone much bigger than the $1b VLCK.