Some developments for 7digital, the UK-based music platform that powers download and streaming services for the likes of Samsung, HTC, T-Mobile and Pure: it has entered into acquisition talks and a “reverse merger” with UBC Media, a radio program producer, developer of interactive audio technology, and software investor (it's the largest shareholder in Audioboo, a platform where you can make and share audio recordings). As part of the deal, UBC is providing 7digital with a £1 million ($ 1.6 million) loan that can be converted into shares in UBC - which is publicly traded in London on the AIM exchange.
On top of that, 7digital is announcing a couple of expansions of its service - confirmation that it is powering a new streaming service from HMV in the UK and Ireland; and a deal with Apple/Intel-backed Imagination Technologies‘ Pure to power a streaming service in the U.S. to complement its Jongo wireless speakers.
Imagination Technologies, in fact, is both a strategic investor in UBC as well as 7digital. It came on as a backer to 7digital as one of the two undisclosed companies in its last $ 10 million venture round in 2012 (Dolby is the other), with $ 7 million coming from Imaginational. Ben Drury, CEO at 7digital, claims that having Imagination Technologies as a common investor was more coincidental and convenient than it was a part of the original interest between the two companies.
In that context, 7digital has been something of a minnow. Although it has its own consumer-facing service, it has perhaps more importantly played a role in how other, bigger-name companies have been able to build out digitalmusic plays to compete against the likes of iTunes from Apple. By way of an API, 7digital takes on all the infrastructure management, licensing and reporting for these third parties, which include Samsung's MusicHub, BlackBerry's music store, and the Pure Music service. Former partners include Spotify (which used it to power a download service, which it then took in-house and then axed altogether). In total, 7digital says that these wholesale-style services and its own consumer-facing product are growing, with traffic up 225% in the last six months to pass 1 billion requests per month.
Still, given that part of this deal involved a £1 million loan, it's unclear whether that existing business was providing lucrative enough returns, or at least enough to help the company fuel its next stage of growth. UBC notes that in 2012 7digital's revenues were £11 million ($ 18 million), compared to £3 million ($ 4.9 million) in 2009, making it about four times the size of UBC, with a combined valuation of about £50 million ($ 80 million). Before today, 7digital in total raised some $ 18.5 million in venture funding, with other backers including Balderton Capital (formerly Benchmark in Europe) and Sutton Place Managers.
In fact, Drury, who is also a co-founder at 7digital, notes a few reasons for tapping UBC instead of going it alone. First, there is funding: with 7digital founded in 2004, it's not really playing in startup territory anymore. “We may call ourselves that, or others may call us a startup, but we've been around for almost 10 years,” he told me in an interview.
Second, there is speed of execution: “Going on to AIM by way of a reverse takeover of UBC is a way to accelerate our development,” he told me. “This is a faster path.”
Third - and perhaps most interesting for those watching how the digitalmusic space is evolving - is what UBC would bring to 7digital in terms of product. The company owns several patents, it has an extensive catalog of audio archives, and it has infrastructure in place to create original content - “a skillset that could be adapted for the kinds of customers that we work for,” Drury noted.
What could that mean? Right now, he says, the buzzword in digitalmusic is “curation” and how to whittle down and shape the huge mass of music that customers have at the tips of their fingers but without much shape about what to listen to next. (Yes, the old water, water everywhere conundrum.) It sounds like what 7digital might be looking to do is help produce original content, or at least services that help point users to more tailored listening experiences that cut through the 7digital catalog.
His example: UBC currently produces a show for BBC Radio, called “Pick of the Pops,” which picks a year and then runs through music from it. “Imagine that strong editorial role being adapted for the on-demand age,” he told me. Along with that will come an evolution of the streaming music business model to offer more targeted “microsubscriptions” around particular genres or even playlists - not unlike the vision that Deezer is also eyeing up, creating deals that cut up the typical $ 10/month, all-you-can-eat offerings.
“Our platform and partnership roster has been growing steadily over time and we see continued interest in music globally, across online radio, subscription streaming, and downloads. We will continue to develop and scale the platform, and to innovate with new products and features,” Ben Drury, CEO of 7digital, noted in a statement. “Radio, in particular, is an area where we see a lot of future opportunities, and we are thrilled that our new strategic investor and partner, UBC, shares this vision.”
UBC says that the deal will play into a wider strategy that it has to develop more digital services around audio content, with the interactive media market offering “the best opportunity for growth as so-called 'connected' devices became more important for the consumption of content.”
UBC and 7digital's non-legally binding Letter Of Intent says that the two will outline terms of a potential acquisition of 7digital by UBC by no later than December 16, 2013, “with a view to entering into a definitive sale and purchase agreement by 30 April 2014.”
UBC says the new publicly-listed company would combine its existing UBC assets, its investment in Audioboo, and 7digital, with 7digital's Drury would become the CEO and UBC's CEO Simon Cole taking on the role of chairman. Customers would include the BBC and Yahoo (two of UBC's current clients) and Samsung and HTC (two of 7digital's), with business operations in 42 countries and covering 5 million registered users and services pre-loaded on 60 million mobile devices. “In content terms, the new company will have an archive of thousands of hours of entertainment programming, producing 1,200 hours of new material a year and have a licensed catalogue of 25 million music tracks and audiobooks,” UBC notes.
Updated throughout with comments from 7digitalCEO Ben Drury.
When EMCCEOJoe Tucciaddressed a crowd of 15,000 attendees at EMC World last year, he made a somewhat startling prediction: a number of today’s computing giants won’t survive the current period of disruption.
The Voxel platform allowsdevelopers to run their apps in the cloud, which in turn allows users to interact with apps without installing them. The company is pitching this as a new way for developers to advertise their apps (so a user can play a game before being asked to download it). The technology could eventually be used for other purposes, such as virtualizing enterprise apps to protect sensitive data.
Co-founder and CEO David Zhao (formerly the CEO of ZumoDrive-maker Zecter, which was acquired by Motorola Mobility) told me that since the initial launch, Voxel has attracted interest from a number of ad networks and publishers, though he couldn't announce any new deals. (The company has already announced partnerships with RTB.com, AppSponsor, PlayHaven, and Quixey.)
Zhao did say that the initial interest made it clear that it was important to support both iOS and Android apps: "Everybody that we're working with has a presence on both iOS and Android." He argued that most developers prefer to try new ideas on Android first, since they don't have to wait for Apple's App Store approval process.
Voxel now says it can both virtualize Androidapps and, through a new Android software development kit, allow developers and ad networks to stream the virtualized apps on Android. Apparently, the main challenge was dealing with the fragmentation of the platform - the fact that Android is running in so many versions on so many different types of devices.
"It's a slightly higher latency on Android than iOS," Zhao added. "That's mostly due to the architecture of the two operating systems and how they handle video and audio. But it's not that noticeable to the end user."
Zhao demonstrated a few apps for me (via Skype), and it did look liked they'd achieved the same speed and responsiveness that the the company had already shown on iOS.
Tel Aviv-based website builder Wix successfully debuted on the Nasdaq today, raising $ 127 million by selling 7.7 million shares at $ 16.50 each, the top end of its intended pricing range. The stock popped briefly above $ 17.50 before settling back down $ 16.46.
That price values the company at about $ 750 million.
“It feels amazing,” CEO and cofounder Avishai Abraham emailed me from the floor of the exchange. “It’s a great day for Wix and I’m so grateful for our amazing team and the hard work that’s led to this day.”
Wix, which has 346 employees in Israel and 59 in the U.S., makes site templates and small, modular web apps that individuals and small businesses use to build inexpensive websites without coding. It has a freemium go-to-market strategy, and currently has over 40 million users in 190 countries, 680,000 of which are paying customers.
The company has had 14 consecutive quarters of growth, but has yet to turn a profit, with a loss of $ 17.8 million in the first nine months of 2013 on revenue of $ 55.5 million.
“It’s important to think long term,” Abraham said. “Wix is a market leader with a great team, and amazing products. We’ve had tremendous growth over the last year, and considering that our 40 million users amount to less than one percent of the potential market, we have incredible growth potential.”
In spite of the fact that the sites are built with pre-made components, this is no Geocities — Wix sites can be elegant and usable, if somewhat formulaic. The company publishes with the latest HTML5 technology, and offers free hosting, which users can upgrade to their own custom domain.
Most of the company was primarily owned by its investors, with Bessemer Venture Partners, Mangrove Venture Partners, Benchmark Capital, and Insight Venture Partners owning more than 75 percent of Wix.
“Wix is hugely significant. It demonstrates that you don’t need to be in Silicon Valley to build a great company and validates once again the ‘high risk/high return’ nature of European Venture Capital,” Mark Tluszcz, CEO at Mangrove Capital Partners, said in a statement.
Wix is significant, in part because Israelicompanies often get acquired rather than IPO’ing, as founders de-risk and take the cash offered by large American corporations such as Google, Apple, Intel, and others. Abraham didn’t know if Wix was going to start a new trend, however:
“We’re proud to be part of the Israeli start-up community and of the tech creativity and innovation it’s known for. There are many amazing Israeli companies, and if we can help provide a model for how to scale and go public, than we’d be thrilled. But what’s more important is that each company choose the path that best suits its own particular needs.”
As it approaches its fifth birthday, Kickstarter's star continues to rise, as the indie crowdfunding goliath announced yesterday that five million people have now collectively pledged nearly one billion dollars to its crowdfunding projects.
Today, in a somewhat surprising turn after yesterday's milestones, it appears that an impromptu version of the “Management Shuffle” will be rolling into Kickstarter. In a blog post today, Kickstarter co-founder Perry Chen announced that he will be stepping down from his role as CEO and will instead assume the role of chairman beginning January 1st.
Chen explained that the move will give him more time to pursue his own creative projects: “I'm looking forward to stepping away from the day-to-day to consider our path from a new perspective … [and] I'm also looking forward to having time to work on creative projects of my own, after all these years working on an engine to support them.”
But Chen isn't the only co-founder to depart as part of the company's management shuffle. Charles Adler, who “has long been itching to move with his family back to Chicago,” is also planning to leave his day-to-day role at the company and will assume the role of an adviser.
In Kickstarter's version of the management dance (we're still waiting for the music), when two co-founders step back, one must step forward. With Chen and Adler set to depart, Yancey Strickler, who has held a number of roles within the company, with community, communications and customer service among them, will be taking the reins as Kickstarter's second CEO.
Considering that its leadership has remained largely unchanged over the years, the Management Shuffle represents a significant change for Kickstarter. Usually, when companies undergo signficant changes to its founding leadership team, it's not a good sign. These kind of moves always produce speculation and a few worried looks, but Chen assured readers in his post today that the move shouldn't have any impact on the company itself - or its mission.
In fact, Kickstarter PR Chief Justin Kazmark tells us that Chen plans to stay involved, both in company projects and by supporting Yancey in his transition to CEO. Instead, by assuming the role of Chairman, Chen is looking to use the position to gain a new perspective on the company's trajectory and plans to spend a significant chunk of time focusing on the big picture and keeping Kickstarter close to its core mission.
In fact, Union Square Ventures co-founder and early Kickstarter investor Fred Wilson sees Chen's fingerprints all over the impromptu management shuffle. Reflecting on the changesin a blog post today, Wilson quipped, “like all things that involve Kickstarter, this is a classic Perry move.”
The company and its CEO have always marched to their own drummer, and Kickstarter's Management Shuffle is yet another example of this freewheeling mentality, Wilson explains. While its expected that the company's investors would look to temper speculation and air on the side of its founders, Kickstarter has given them plenty of very legitimate reasons to do so. To illustrate the point, Wilson described the long-timeCEO as an entrepreneur that was very “wary of taking money from VCs … and had no intention of taking the company public and no intention of selling it,” and was determined to put creators first.
Although he was initially skeptical of the founder's motivations, they decided to invest anyway. Over time, the investor said that Chen ended up proving him wrong, and his perspective ultimately led to just as much, if not more, value creation - a model which remains in place today:
Four and a half years after launch, Kickstarter is a very important and sustainable business. It will continue to grow, it will continue to fund creativity, and it will continue to do things its own way. Kickstarter was built in Perry's mold and the unique culture and mission of the Company are derived from him. I suspect his decision to step up to Chairman and allow the team to run the business day to day is Perry's way of saying to the team that they have his confidence to lead Kickstarter into the future. Kickstarter will always be Perry's work and we are very happy to be a part of it and be inspired by it every day.
Ultimately, considering Kazmark also tells us that Kickstarter is in the process of expanding to Canada, Australia and New Zealand, as long as the company can continue to represent the interests of creatives and creatively-inclined entrepreneurs as the shift to a Maker Model (and its own expansion into new markets) continues, it will be on the right track. Assuming these managementchanges go as advertised, of course.
Yelp, the local online business and restaurant guide that has become the web's go-to resource for reviews of localbusinesses since launching in 2004, announced its 2013 third quarter earnings after the market closed this afternoon. For the second straight quarter, the company beat expectations, with revenue coming in at $ 61.2 million in the thirdquarter and a per-shareloss of $ 0.04.
Considering Yelp posted a greater-than-expectedloss of $ 2.3 million, it wasn't a categorical victory, but it was a win nonetheless, with revenue increasing 80 percent from the same period in 2012, while cumulative reviews grew 42 percent year-over-year to over 47.3 million, average unique visitors grew 41 percent year-over-year and local business accounts grew 61 percent to 57,000.
Wall Street expected Yelp to announce a loss of $ 0.01 per share on revenue of $ 59.40 million for the quarter. Yelp passed muster in revenues, but saw an uptick in its net losses in the thirdquarter of $ 2.3 million, or $ 0.04 per share, compared to a net loss of $ 2.0 million in the thirdquarter of 2012.
Thanks to a fairly consistent performance in recent quarters and solid progress from its local ads business, Yelp's stock price has bounced back significantly over the last six months - 180 percent in all. This is a strong signal that investor confidence has returned for Yelp, even if many analysts believe that the market is a little too bullish on the company at the moment.
The company's stock price had been hovering around $ 68 per share on Tuesday, but is currently down 6 percent in after-hours trading on the higher-than-expected loss, though it continues to vacillate.
Reflecting on his company's third-quarter performance, YelpCEO Jeremy Stoppelman highlighted the company's renewed focus on its mobile experience as a continuing source of growth and opportunity. The CEO also expects its new “Yelp Platform,” which launched in July and allows localbusinesses to interact directly with customers via its portal, to provide additional value for businesses while increasing engagement among consumers. The company also saw continuing growth in its unique user base over the last quarter, which now stands at 117 million.
In its earnings statement today, the YelpCEO continued:
We saw another quarter of strong momentum thanks to the high-quality, authentic content contributed by Yelpers around the world … and our focus on connecting consumers with great localbusinesses continues to drive our success. In the third quarter, we improved the user experience by adding the ability to write and post reviews from mobile and launched new features such as the customer activity feed for business owners. Looking to the rest of the year and beyond, we are well positioned to capture the large local opportunity ahead of us through our innovation around mobile, geographic expansion and closing the loop with local businesses.
Other than that, after adjustments, Yelp's EBTIDA came in at $ 8.1 million for the third quarter, compared to $ 2.2 million for same quarter in 2012. The company showed 46 percent of its advertisements on mobile devices in Q3, which represented a 6 percent increase from the prior quarter. However, Yelp's performance here will need to be stronger going forward, considering companies in its class, like Facebook, have been able to drive significant increases in revenue by way of mobile advertising.
Again, the 46 percent figure is only a 6 percent improvement from last quarter, which takes on a greater significance considering the company doesn't break out mobile revenue as many other companies do, instead limiting its report to mobile advertising share.
Yelp's cash position grew slightly over the last three months, increasing by about $ 5 million to $ 101 million at the end of the thirdquarter. Its acquisition of SeatMe in early July for $ 12.7 million was announced at the time, but recorded as part of this quarter's financial statements.
The company also said today that it has finally integrated Qype's French and U.K. portals after acquiring the European startup last year. The total cost of restructuring and integrations in Q3 was $ 2.8 million, compared to $ 1.8 million in Q3 2012.
All in all, Yelp booked a mixed performance in the third quarter, just beating revenue expectations, while keeping firm hold of its cash and growing traffic. However, the company's loss widened in the third quarter, thanks in large part to the cost of acquisitions and integrations mentioned above.
During the third quarter, Yelp took its first steps into Latin America, for example, beginning with Brazil. Yelp will likely look to Brazil to act as a gateway to the region, helping it to secure a foothold in Latin America. Looking forward, the company will likely continue to accelerate its international expansion and, while this could be a drain on profits in the short-term, Yelp could see significant gains in local ad revenues in the long run as it launches in new markets.
As a result, the company expects revenue between $ 66 million and $ 67 million in the fourth quarter, slightly above analysts' forecasts, which tentatively pegged the company's sales at $ 64.9 million.
Finally, the company separately announced a $ 250 million follow-on share offering, with an over-allotment of $ 37.5 million, which Yelp will reportedly use for "general corporate purposes."
Soon, common folk like you and me will be able to invest in the startup (or small business) next door.
The Securities and Exchange Commission (SEC) on Wednesday voted unanimously to propose regulations for equity crowdfunding, which will enable unaccredited U.S. investors to invest in startups and small businesses.
The long-overdue rules, which the JOBS Act called for by no later than Jan. 2013, will likely undergo a lengthy comment period before they go into effect. The SEC is seeking input on 295 questions, according to SEC commissioner Dan Gallagher. The full set of rules is a bureaucratic 585 pages.
Crowdfunding industry experts are still digesting the various regulations and their ramifications, but their initial reaction is largely positive.
The rules “seem like they’re sticking very closely to the intent of the [JOBS Act],” said Sherwood Neiss, a principal at consulting firm Crowdfund Capital Advisors, referring to the legislation that legalized equity crowdfunding when it was signed into law April 2012. “I feel optimistic that the rules won’t be burdensome for small businesses.”
While critics of the JOBS Act have largely focused on the potential for fraud, very few startups defraud their investors, but most do end up failing for legitimate reasons. Thankfully, the SEC rules protect new investors from losing more than $ 5,000 a year as a result of their own inexperience.
“It’s important to note that the SEC is taking a calculated approach to protect these new investors, in part by dramatically limiting how much they can invest by capping annual investment at around $ 2,000 to $ 5,000 per year,” said Chance Barnett, CEO of Crowdfunder, a crowdfunding platform that currently offers equity crowdfunding to accredited investors.
IndiegogoCEO Slava Rubin agrees that the proposed rules adequately protect investors — though like the aforementioned experts, Rubin and his company stand to benefit from the new regulations.
“I think the SEC did a good job balancing investor protection and allowing innovation to keep moving forward,” Rubin told VentureBeat. “I think there’s a lot of nuance and interpretation that still has to happen, though, which is why the comment and feedback period will be very important.”
Asked if Indiegogo will eventually offer crowdfunding for equity, Rubin offered a tacit yes.
“We’re definitely interested, definitely moving forward,” he said, noting that he’s wanted to allow Indiegogo users to profit from crowdfunding campaigns since its inception in 2008, but that regulation has held him back until now.
One revelation from the proposed rules is that startups will be able to solicit investment from accreditedinvestors (through Title II of the JOBS Act) while simultaneously raising a round from the unaccredited crowd (through Title III).
Companies have been unable to sell shares to unaccredited investors without first registering with the SEC. That will remain true until these proposed rules are approved and enacted.
beRecruited, the “LinkedIn for high school athletes” looking to be recruited by college teams, was secretly acquired by private equity firm The Raine Group, sources tell me and beRecruited now verifies. Sources with knowledge of the deal confirm Raine paid between $ 17 million and $ 22 million for beRecruited because of its growth momentum and lucrativepremium features.
I got a tip a few days ago about the acquisition and price, and found another source to confirm. When pressed, beRecruitedCEO Vishwas Prabhakara told us “I can confirm that the RaineGroup owns beRecruited.”
When asked why the deal was kept secret, he said “We were growing in a broad market and there was no benefit to announcing the deal. This is the beginning, not the end of the journey.” Tactically, the goal of keeping the deal a secret may have been to prevent other entrepreneurs from realizing and investing in the sports recruitment space. Well, the cat’s out of the bag now.
Specifically, beRecruited lets athletes create profiles highlighting their verified academic and athletic scores, research universities they might want to attend, and connect with collegerecruiters. beRecruited monetizes with premium features for students, such as the ability to see which recruiters are viewing their profiles, appear on coaches’ home pages, and contact them with a letter of interest.
beRecruited has over 2 million registered student athletes hailing from over 20,000 high schools in the United States. It also saw 25,000 collegerecruiters log in over the last year, which is more than half of the estimated 40,000 to 45,000 collegerecruiters in the country.
When it was bought by RaineGroup it had six employees, making the $ 17 million to $ 22 million price tag that sources confirm a big win for its team and investors. Now beRecruited has 14 employees and continues to hire.
beRecruited says RaineGroup decided to buy it based on its fundamentals, including revenue growth, profitability, team and the market. With such a large user base in a network effect-based business, beRecruited could be tough to disrupt and have plenty of runway.
Looking at more macro trends, you could say that technology is allowing people to more closely follow sports, so sports will keep making more money, and playing sports will become more lucrative. That means scholarships and recruitment will be more competitive for high school students, and they’ll be more willing to pay sites like beRecruited to get an advantage.