Today France Telecom / Orange announced that it had entered into exclusive negotiation with DailyMotion to take a minority stake in the business and potentially grow its share over time.
I have been an investor since 2005 and my wife has nicknamed DailyMotion “my second wife” so this is an ambivalent if generally positive moment for me!
Under the proposed transaction, Orange would acquire 49% of the company from existing shareholders on a current enterprise value of EUR120M ($165M) and a flexible agreement to grow ownership in the company in 2013 or for the parties to agree on other strategic shareholders in that timeframe for a total enterprise value that would fall within a range of EUR120M to EUR200M based on performance.
The company has been widely reported to have revenues of EUR18M in 2010 and to have reached breakeven. It’s audience has continued to grow in the face of aggressive competition from YouTube and our latest ComScore numbers put us at 93MM UU and a top 35 global slot (including the Chinese). Not bad for a company started by two young guys in their mum’s flat..
If you speak French there is a great interview of CEO Cedric Tournay on FrenchWeb.fr. where he goes through much of the detail and industrial logic.
The company is a survivor, it came through some testing times including
- managing hypergrowth in the early days (growing from 8 to 50 people and 2 to 40M uniques in the first year I joined the board)
- maturing into a “real” business that was forced to monetise to survive (unlike our more famous YouTube brethren)
- raising money in face of aggressive litigation, in the process establishing the Disney Principles
- getting through the downturn and the hardest ad market in memory, and raising more money when everyone gave us up for dead
There’s a lot of fairly typical talk in France of:
- state control (Orange and DM share the FSI or Strategic Investment Fund as shareholder)
- end of Net Neutrality
- DailyMotion becoming a paid service
- And so on …
Let’s be clear:
- As far as I can see, our investors at FSI had absolutely no input on the discussions between the company (being conflicted, that’s how it should be)
- The deal is the result of the strategic vision of Stephane Richard and the excellent working relationship that developed between the operating teams on both sides
- DailyMotion remains an independent company with current shareholders and management in control of the board and owning the majority of the company
- We would have walked away if we did not think the financial metrics made sense as we have not entered a period of “virtuous growth”
You can also read the writeup of Business Insider.
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