Frank Quattrone moderated a panel featuring three startups
With the premise being he would give each of them his sought-after merger and acquisition advice. Quattrone recently co-founded a new tech M&A investment advisory firm Qatalyst.
The startups were:
- Teemu Huuhtanen, EVP Sulake. Sulake – a social networking and virtual world play.
- Lance Tokuda, CEO RockYou – a social networking site with 90M unique users.
- Phillip Alvelda, CEO MobiTV – a mobile content broadcasting company.
Frank Quattrone reported that Quatalyst’s first assignment was to advice Google during on the Microsoft-Yahoo! deal. Google engaged in an ill-fated 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 contrasted 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 occurred after the dot com bust.