[credit provider=”True Ventures” url=”http://www.trueventures.com/tony/”]
About.me, a super-simple make-your-own-pretty-looking-homepage tool, just launched last week, and today the company announced that it had already been acquired by AOL. (Actually, the company signed a letter of intent in November, while it was still in beta testing.)Why did cofounder and CEO Tony Conrad sell so quickly? Why not raise some money and see how big About.me could get before selling?
We just got off the phone with Conrad, and there were two basic reasons why he was willing to sell About.me so quickly.
First, because while he had already had profitable “exits” before, and doesn’t need the money, other members of the About.me team had not. While Conrad isn’t disclosing the size of the deal, it’s apparently enough money to be an amazing Christmas bonus for his teammates.
And second, while About.me had investment offers from multiple top-tier venture capital firms (according to Conrad), that would have dramatically increased the pressure and expectations for the company to do something really, REALLY big. And it would have required a much bigger exit to make its investors happy. And it would have diluted existing shareholders.
Let’s assume that AOL bought About.me for somewhere between $15 million and $20 million. Based on the fact that it had raised $425,000 from its investors (including AOL), assuming a roughly $2 million valuation, that’s a quick 7-10X multiple.
But imagine instead that About.me had instead raised a couple of million dollars from VC firms, and then maybe more money down the road. Then, all of a sudden, you’re going to need a huge deal — more than $100 million, perhaps — to get a good return for everyone.
Hey, maybe that’s possible, but let’s be realistic — this is a company that’s helping people design splashy personal homepages. It could have become huge, but there were no guarantees.
The payoff for a little more than a year of work, in this case, was too much to pass up.
We’ve also confirmed with Conrad that he will be going to work at AOL (with the rest of his management team), but in a way that lets him do his VC work as well. Conrad is founding partner of True Ventures, which has invested in WordPress, Meebo, etc.
Here’s how Conrad sums it up in his own words:
“I think we do have a hit on our hands but selling the business doesn’t have anything to do with that sentiment. It’s important to think through capitalisation needs and it’s impact on future exits. Given how little capital we raised and the acquisition price, our entire team does very, very well in this outcome. This was a total win for everyone involved. While I am a large shareholder, there is a team to think about and not everyone has been fortunate to have participated in an accretive exit in the past. Our team does very well. As do our investors and Advisors. As does Aol. I’m excited about the scale implications of full integration with AIM and Aol Mail — they provide a stickiness to the back end experience that is going to be a focal point in our future development roadmap. I know Tim, Jon, Brad and the senior management team very well, so this is a partner I trust that will empower us to scale the opportunity.”
Earlier: AOL Buys About.me