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 Alwyas On Summit at Stanford 2008 Tech Startups Entrepreneurship
Quattrone recently co-founded a new tech M&A investment advisory firm Qatalyst.
The startups were:
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Teemu Huuhtanen, EVP Sulake. Sulake - a social networking and virtual world play.
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Lance Tokuda, CEO RockYou - a social networking site with 90M unique users.
- Phillip Alvelda, CEO MobiTV - a mobile content broadcasting company.
Frank reported that Quatalyst's first assignment was to advice Google
during on the Microsoft-Yahoo! deal (Google did an advertising deal
with Yahoo! as a defensive measure, which helped to blunt Microsoft's
momentum in the thwarted acquisition).
RockYou was very keen on OpenSocial. Their target is "average people"
online, they study mainstream press as a source of ideas for new
features. Their applications are getting a 0.14% click-thru rate, which
is about 3x the average for social networks. Lance alluded to several
times, how he has to "dumb himself down" in order to think at the level
to come up with new ideas for the site. You can't argue with their success in attracting heavy traffic
-- RockYou claims 90M unique visitors per month.
Philip, the founding CEO (now board member) of MobiTV explained that
the company was started as a software company (in 1999) that morphed
into a completely different type of business: a video-streaming mobile
content company.
Some skepticism in the Q&A about the usefulness of
pushing live video to the tiny cell phones of today, and the continued
viability of a subscription model for this type service.
Quattrone pointed out the painful but true fact that public (IPO)
markets have essentially been closed to tech IPO's for some time, and
the lack of a public exit puts downward pressure on the M&A
valuations for startups. The public markets are looking for $150-200M
top-line revenue with 25% growth Y/Y, as candidates for IPO vs the
$40-50M in the past. He challenged the panelists to explain how they
will bring value to stockholders and how they will sustain their
business model as independent companies.
Frank did a good job of
contrasting the fundamentally transformational innovations made by
Google, to today's more point-solution oriented startup environment. He
challenged the panelists to figure out where they are in the game of
musical chairs (acquirers), and to think how they can become more
valuable to those acquirers.
I asked Frank what he thought the prospects were for the tech IPO
market over the next 2-3 years, given that there have only been about
30 tech IPO's of venture-backed startups since 2002. He was not
particularly optimistic, and sees the IPO market as very tight for the
next 3-5 years, with only the very strongest startups able to get
public during brief windows of opportunity.
On the break I asked Frank a few more followup questions, while a couple of reporters did the same and took notes. He made generous use of "no comment" but did get in some good shots about the over-regulation of investment banking analysts which occured after the dot com bust. I was a little disappointed that he does not foresee a major re-opening of the tech IPO market during the next five years; but that may be reserved for paying clients:)
This session was very interesting, but I felt it fell far short of Frank "the Doctor of IPO" (which he undoubtedly is) providing advice to three deserving startups. Frank did make some requests of each of the three startups, in terms of how they should make their case, which none of them followed; so it made it harder for him to provide that advice. The title of this panel did end up making for a good panel session headliner; but is tough to pull off in under an hour. It would likely require a different roster of startups, with more conditions and preparation, to pull off in a panel format.
However, despite that - this session did not disappoint. The M&A / IPO Doctor *is* back "in" the valley.
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