Cluep, a Canadian startup that raised just $500K, acquired for $40M

https://techcrunch.com/2018/09/20/cluep-a-canadian-startup-that-raised-just-500k-acquired-for-40m/

by antonmamonov • 8 years ago

44 27 8 years ago

iancarroll• 8 years ago

Can anyone shed some light on that revenue multiplier? Seems pretty low for a growing company.

It's possible they book or publicize revenue like 'ad sales' in which they only take a commission. So their gross margins wouldn't be huge.

siruncledrew• 8 years ago

After reading the revenue figures, the sale is a lot less outrageous than the title makes it sound.

Kpourdeilami• 8 years ago

Unless their product is extremely manual and depends on hiring on a bunch of engineers to train models for each customer

disgruntledphd2• 8 years ago

Firstly, you'd probably want 50% data people, 50% engineers to make that work acceptably. Secondly, that kind of stuff is totally viable to throw automated grid-search at, especially if you've just been acquired by a profitable company.

Finally, I reckon that the comment upstream about GDPR is probably correct. Suddenly facing way harsher terms for 30% of revenue (assuming standard breakdowns) is double-plus ungood, which may have sparked this.

To be fair, if I were them, I'd totally have taken the money and ran.

xevb3k2• 8 years ago

My instinct tells me that this is a much better outcome for founders and many employees than “unicorns”.

It’s possibly not as good an outcome for investors, and they might actually view this as a bad exit.

Am I wrong? Would most investors be pretty happy with this? Would most founders/employees be better of going for creating a unicorn?

keithwhor3• 8 years ago

Given that Cluep is Canadian, I would expect the $500k they raised to be on a $2M Cap convertible note or some similarly valued instrument. That's totally a guess, btw. They could've sold way more or way less of their company. But, ballparking here.

So, ~20x return over 6 years for investors that are likely non-institutional. In short -- it's probably a very good deal for Angels. That's about a 65% YoY compounded return. It's likely that outside of the founders nobody is going to retire, but that's OK. It's only when deep institutional pockets get involved that <$100M exits are considered "weak."

xevb3k2• 8 years ago

For Angels but what about seed funding? YCombinator/Other incubators?

acangiano2• 8 years ago

For context, $500K is a big investment in Canada. Startups here get very little funding. Smart Silicon Valley investors could make bank by investing in Canadian startups for pennies on the dollar.

keithwhor3• 8 years ago

That could be a start, but this is the wrong mentality.

Investors shouldn't back Canadian startups because they're cheap. That's almost a distinctly Canadian view of investment -- get things cheap, undervalued, or with a low risk profile. (Sorry, Canada, somebody in Canadian VC is going to roll their eyes at me here but it's pretty accurate.)

They should back Canadian or Canadian-led startups because talent is undervalued, and with the right mentorship and a good talent aggregator (an ambitious company that can compete on the world stage), the ROI on product development is going to be through the roof. Don't think about it as getting talent on the cheap, think about it as: if you pay the talent what they're worth, they're going to do 10x the job for you.

Note: there's been a huge uptick in Canadian tech $ recently. Both Microsoft and Uber investing $750M combined in Toronto, announced just this month. People are noticing.

... but that's just my $0.02 :).

Edit: First thing you learn when you talk to sophisticated investors / founders in SV is nobody gives a shit about cheap. Bad investors chase "cheap." What's most important is total magnitude of the opportunity space: who cares what we pay today, how big could this be? Because if the answer is "there's a $3T opportunity here over the next decade" then it doesn't matter if you invest $1M or $10M from a $1B fund -- in fact you'd probably rather invest more to ensure the company you're funding stays capitalized.

You're not going to get top SV VCs dumping $ into Canada because they can make a few bucks on cheap deals. You'll get top SV VCs dumping $ into Canada when the collective Canadian psychology changes from, "we're cheap, invest in Canada" to "we're going to be the most technically sophisticated nation on the planet, and a primary home of the next five major $100B technology companies over the next 30 years."

Canada will get there. Already leading in AI. But not by being "cheap."

acangiano2• 8 years ago

I meant cheaper while still offering the same degree of talent. Not just cheaper. But I think you raise very good points about framing the discussion in terms of talent rather than cost.

rajacombinator• 8 years ago

SV investors are not the be all end all. The historical track record of the VC industry is quite bleak.

snaky• 8 years ago

There are many kinds of investors, while SV more interested in unicorns not pennies.

Chinese venture capital firms and technology giants are increasingly taking note of Canada’s technology scene, with artificial intelligence as well as clean technology and life sciences some of the areas attracting interest.
As well as the research capabilities, the lower valuations of Canadian technology companies compared to their US counterparts make them attractive to Chinese investors

https://www.scmp.com/business/article/2130409/canadas-tech-f...

AstralStorm• 8 years ago

Oh boy, another advertising platform, just what the world needs.

radnam• 8 years ago

Not clear what the product really is. How are they getting Instagram data for the users?

lquist2• 8 years ago

“Everyone loves a tale of a bootstrapped startup founder’s journey to an eight-figure exit.”

How is raising $500,000 bootstrapping?

ronilan• 8 years ago

Seriously, how often do you look at a man’s shoes?

frankdenbow• 8 years ago

The point is that they grew their business mostly out of revenue. Yes you can get into a technical discussion of what a self-funded company is, but it generally misses the point. Setting yourself up so that you can be sustainable out of revenue at times requires a different approach and mindset which is at the core of self-funded companies.

lquist2• 8 years ago

But bootstrapping has a binary definition. You have either raised money or you haven't. And there is a huge difference between $500k and $0. And I don't say that in the theoretical sense. I currently run a bootstrapped company that does $10m+ in revenue and $500k is still a huge amount of cash for us that would change the way that we conduct business. I can't imagine how big a difference it would have been in the early years of the business.

willwinger2• 8 years ago

Good for them, with just a 500K investment I would guess the following

1. The founders should own at least 75% of not more which gives them a neat 30M in this deal.

2. As others pointed out, why such a poor multiple on revenue? The possibility is that they had a service heavy business (ie bulk of revenue came from service to customers).

3. From point 2, they mostly had negligible or no IP. If they had significant IP and sold for this multiple then it is a poorly made deal.

4. They raised only 500K, ie equity capital. There is no mention about their debt & other liabilities. This could be another reason for the low multiple.

5. Deal type is key, if it was cash it is good but if it was equity/options, then not so good.

We closed our acquisition beginning of this year as follows:

Value: 9.5M USD Type: Cash Revenue: ~1M USD Valuation: 10X Investment: 300k USD Debt/Liability: nil Status: Profitable Investor returns: 5X Location: India

shbm• 8 years ago

What is the name of the aforementioned acquired Startup?

willwinger2• 8 years ago

It's a private deal and unfortunately I cannot reveal due to the non disclosure terms.

puranjay• 8 years ago

The article states that they're on track to get $30M in revenue in 2018.

At $53M (CAD), that's just a little over a 1.7x multiple

Isn't that a little low? I've seen crappy AdSense websites go for 2x multiples

baybal2• 8 years ago

A little bit about the company

That's a cookie cutter Internet ads DSP shop with few buzzwords painted over on top, namely the alleged "smart AI algorithm." Something now standard.

TomK32• 8 years ago

Lots of people think about the low rev multiplier but maybe a) the founder, all being quite young, just wanted out and do something new, b) the money is all in cash without strings attached or c) they have a sense that with the GDPR in europe and similar laws possibly coming up elsewhere their company and revenue might plateau rather soon.

If someone offered me >10 million, I'd take the money and run.

Cluep, a Canadian startup that raised just $500K, acquired for $40M

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