A startup founded in 2020, valued at $1B in 2021, and sold for $450M in 2024 for ~20x sales!
Akamai, a public cloud company trading at ๐ฐ๐
revenues, announced last month to acquire Noname Security, a 200 employee API security company, for ~๐ฎ๐ฌ๐
revenues!
Now, in Dec 2021, Noname raised $135 millionย from VC investors in a Series C round at the ๐ต๐ฒ๐ถ๐ด๐ต๐ ๐ผ๐ณ ๐๐ต๐ฒ ๐ฎ๐ฌ๐ฎ๐ญ ๐๐ฒ๐ฐ๐ต ๐ฏ๐ผ๐ผ๐บ, ๐ฎ๐ ๐ฎ ๐๐ฎ๐น๐๐ฎ๐๐ถ๐ผ๐ป ๐ผ๐ณ $๐ญ๐.
And 2 years 4 months later, the company is sold for less than 50%. What changed:
- High interest rate environment
- Frozen IPO market
- Many late-stage VC looking for liquidity.
๐๐ถ๐ฑ ๐๐ต๐ฒ ๐ถ๐ป๐๐ฒ๐๐๐ผ๐ฟ๐ ๐น๐ผ๐๐ฒ? NO
– Not the early investors – they made high risk investment and got a high return
– But the late-stage investors only got a full return on the capital they put in even when sold for less than peak valuation.
๐๐ถ๐ฑ ๐๐ต๐ฒ ๐ณ๐ผ๐๐ป๐ฑ๐ฒ๐ฟ๐ ๐น๐ผ๐๐ฒ? NO
– Guessing not, as often they retain a portion of equity that can be worth a lot, especially if theyโve negotiated well during funding rounds. Even if the sale price is lower than the valuation, they might still make a substantial profit.
๐ฆ๐ผ, ๐๐ธ๐ฎ๐บ๐ฎ๐ถ ๐บ๐๐๐ ๐ต๐ฎ๐๐ฒ ๐น๐ผ๐๐ ๐บ๐ผ๐ป๐ฒ๐? NO
– They seem to have made over 30+ acquisitions in the past, many being early stage companies, at valuations much higher than their own. And yet their stock has only grown from about $15 to over $100 over the past 20 years. Why? Because these acquisitions demonstrates the ๐ถ๐บ๐ฝ๐ผ๐ฟ๐๐ฎ๐ป๐ฐ๐ฒ ๐ผ๐ณ ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐ถ๐ฐ ๐ณ๐ถ๐ (expand product offering and strengthen its position in the market) in M&A deals. It may not seem immediately apparent, as it takes time and experience to materialize those and Akamai has reputation for successfully consummating acquisition.
๐ฆ๐ผ ๐ถ๐ ๐ &๐ ๐ฎ ๐๐ฒ๐ฟ๐ผ-๐๐๐บ ๐ด๐ฎ๐บ๐ฒ? NO
– Even when price is 20x revenues, ๐ &๐ ๐ฐ๐ฎ๐ป ๐ฏ๐ฒ ๐ฎ ๐๐ฎ๐น๐๐ฒ ๐ฐ๐ฟ๐ฒ๐ฎ๐๐ถ๐ผ๐ป ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐ for acquirors, shareholders, employees, customers and the community.
ย
๐๐ฒ๐๐๐ผ๐ป๐ ๐ณ๐ผ๐ฟ ๐๐๐๐ถ๐ป๐ฒ๐๐ ๐ข๐๐ป๐ฒ๐ฟ๐:
- ๐ฅ๐ฒ๐๐ฒ๐ฎ๐ฟ๐ฐ๐ต ๐ฎ๐ป๐ฑ ๐ง๐ฎ๐ถ๐น๐ผ๐ฟ ๐ฌ๐ผ๐๐ฟ ๐ฃ๐ถ๐๐ฐ๐ต: Understand the buyerโs current offerings and long-term strategy to align your pitch.
- ๐๐ผ๐ฐ๐๐ ๐ผ๐ป ๐๐ฟ๐ผ๐๐๐ต ๐ฎ๐ป๐ฑ ๐๐ผ๐๐ ๐ฆ๐๐ป๐ฒ๐ฟ๐ด๐ถ๐ฒ๐: Emphasize how your company can contribute to the buyerโs growth and create cost efficiencies.
- ๐ ๐ฎ๐ฟ๐ธ๐ฒ๐ ๐ฃ๐ผ๐๐ถ๐๐ถ๐ผ๐ป ๐ฎ๐ป๐ฑ ๐๐ผ๐บ๐ฝ๐ฒ๐๐ถ๐๐ถ๐๐ฒ ๐๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ๐: Highlight how your offerings will improve the buyerโs market position and competitive edge.
- ๐ฃ๐น๐ฎ๐ป ๐ณ๐ผ๐ฟ ๐๐ป๐๐ฒ๐ด๐ฟ๐ฎ๐๐ถ๐ผ๐ป: Consider aspects like cultural fit, technology compatibility, and employee retention early in the process.
