Big Tech Buyouts
How 10 Internet startups cashed in big, and what their founders will do with the loot
By Douglas MacMillan
Silicon Valley angel investor Jeff Clavier expected August to be a slow month for acquisitions. To his surprise, two of the seven companies in his portfolio got bought within weeks of each other. Kaboodle, a site that combines shopping and social networking, sold to Hearst. Maya’s Mom, an online parenting community, sold to Johnson & Johnson (JNJ). “It’s a good time to be an investor because there are tons of opportunities out there that are interesting,” says Clavier, who put some of his returns toward starting a $12 million early-stage venture fund.
What’s good for investors is an outright bonanza for entrepreneurs. Not only are established Internet acquirers such as Google (GOOG), Yahoo! (YHOO), and News Corp. (NWS) spending lavishly on budding properties, companies such as Hearst and Getty Images (GYI) are placing smaller, strategic bets.
But what changes when these company founders see their handiwork snapped up by the highest bidder? Sure, some of these lucky ducks will plow proceeds into the next big thing. But many opt to stick around, keeping a hand at the tiller long after the ownership changeover.
In this slide show, BusinessWeek.com highlights the founders and venture capitalists behind some of this year’s biggest tech buyouts to learn how they got their seat at the negotiating table with millions on the line, and what it’s like to be among Silicon Valley’s nouveau riche.
Founders: Eric Lunt, Steve Olechowski, Dick Costolo, Matt Shobe
Acquisition Price: $100 million, according to TechCrunch
Funding: $8 million from Mobius Venture Capital, Draper Fisher Jurvetson, Portage Ventures, Sutter Hill, and Union Square Ventures
When FeedBurner launched its free RSS feed management tool for bloggers and other Web publishers in 2004, its sleek design won high praise and attracted hundreds of thousands of users, but it was unclear how the technology could be monetized. The answer was syndicated advertising, or targeted text links much like Google’s AdSense, but served within an RSS reader, which the company began testing in 2004 and started charging for in 2005. Google announced its mostly cash acquisition in May.
As part of the deal, FeedBurner’s co-founders and 30-person staff will work for Google for at least a few years, but they get to stay put in their Chicago headquarters. The search company hasn’t announced formal plans to tap FeedBurner’s vast pool of user data, but a note sent to account holders shortly after the acquisition hinted that this was in store: “If you take no action by June 15, 2007, the rights to your data will transfer from FeedBurner to Google,” the message said.