gridley's guide to digital ny

© 2012 Gridley & Company LLC

January 2012

2© 2012 Gridley & Company LLC

I. Introduction to the Report

II. Digital NY Overview

III. Overview of NY Area Private Digital Companies

IV. Venture Capital and Private Equity Firms with NY Area Digital Investments

V. Overview of NY Area Public Digital Companies

VI. Advice for the Audience

Table of Contents


I. Introduction to the Report


IntroductionWELCOME to Gridley’s Guide to Digital New York. While many of you were out at the beach or on the golf course this summer,

we had a team toiling away on this project. We are very excited to share the results with you.

Gridley’s Guide to Digital New York is a unique and comprehensive report for investors, buyers and entrepreneurs looking for one

place to quickly get up to speed on New York’s exciting, explosive digital ecosystem. In addition to this report, we have designed an

“easy to use” website that lays out the information in this report (and more) in a fun, creative way. You can access this website from

our firm’s home page, www.gridleyco.com, or at www.gridleydigitalny.com.

We decided to put together this report when we were out visiting companies and investors in May/June and people starting asking us

about all of the “digital momentum” in NY. There was a feeling that lots was going on, but people didn’t really understand just what

“it” was and how extensive “it” was. Well, four months later, we can tell you a few things about “it”:

• There has been $4.5 billion of capital invested in Digital NY companies since 2006.

• While the total number of Digital NY private companies probably is well over 500, we have identified approximately 300 to

be included in this report. Companies in our report either have raised at least $5 million of outside capital or are prominent

enough in the Digital NY scene to merit inclusion. The digital sectors we focused on are: Content,

eCommerce, Marketing, Mobile, and Social.

• There are approximately 150 investors with a focused interest in Digital NY. This includes all stages – Seed, Early Stage,

Growth, and Buyout – and includes local firms as well as firms with little or no physical presence in NY.

• There have been five private companies that have raised over $100MM of capital (Tremor Video, ZocDoc, Gilt Groupe,

Tumblr, and Everyday Health) and 15 that have raised between $50MM and $100MM.

• There have been ten $100MM+ sale transactions of private Digital NY companies since January 2008 (Mediamind, Admeld,

Huffington Post, Webloyalty, Hotjobs, Innovation Interactive, Zagat, Register.com, Daily Candy, and Answers.com).


IntroductionThe Digital NY scene is still in its early formation days with lots of growth ahead. We believe that New York’s existing ecosystem

with big traditional advertising and media companies as well as many large data and internet industry leaders all headquartered here

sets the stage for the unique development of the next generation of disruptive digital companies. Nowhere else in the country is there

such a blend of the “old guard” with the “new kids on the block” – all in the same city.

So, whether you are looking to buy, sell, invest, or merely “browse”, we hope this report and our accompanying website will be of

great use to you.

Sincerely,

On Behalf of the Gridley Team

Questions About This Report?

Linda Gridley

President & [email protected]

212-400-9710

Pratik Patel

[email protected]

212-400-9712

Peg Jackson

Managing [email protected]

212-400-9709

About Gridley and Company LLC

Gridley is a boutique investment bank that provides financial advisory services to companies in the Information Services industry

with a specific focus in the following sectors: Marketing Services, Internet Services, Financial Technology, Data Services, and

Outsourcing Services. Our dedicated industry focus, thoughtful strategic insights and extensive relevant transaction experience

differentiate us from other Wall Street firms and lead to successful results for our clients. Gridley & Company LLC was founded

in 2001 and is headquartered in New York City.


Interested in Other Gridley Reports?

• Available at www.gridleyco.com/what-we-think/resources/

Recent Conference Presentations

Comprehensive Industry Overviews Quarterly Newsletter


II. Digital NY OVERVIEW


The Past Four Years Have Shaped Much of NY’s

Digital Media and Technology Landscape• Notable events in NY since 2007:

June

2011

January

2007

/

April

2007

September

2010

November

2007

June

2008

September

2009January

2011

is founded announces spin-offs of:

opens a

Googleplex in New

York City

Mayor Bloomberg

starts up city-funded

business incubator

programs

comes to New York

leads

in tech VC funding and deal

quantity

Mayor Bloomberg offers

$100 million and land to

develop a top

engineering school to

encourage tech

development, to bring

New York City to the

forefront of innovation.

($3.1 billion)

($680 million)

July

2007

/

/

($275 million)

Closes deal and

announces HQ move

to NY in September

Raises Series B

round

Raises series A round

Acquires

For $125 million

August

2008Raises series

A roundRaises series A

round

September

2007

October 2007

Raises series

A round

Development of brand

names across broad set of

verticals

Raises Series A

round

December

2007

Raises series A

round

announces

acquisition of

December

2009

Announces

acquisition of

for $30 billion


80

53

71

62 60

2007 2008 2009 2010 2011

Over 300 NY Digital Start-Ups Founded in the Last

Few Years…

Sources: CapIQ and Gridley estimates

Digital Start-Ups Founded in NY


NY’s Emergence as a Tech Hub

• New York City has become a true digital media innovation center

Source: CB Insights “Venture Capital Activity Report”

Total = $3,431 billion

1H2011 Internet VC Funding by Top Cities 1H2011 Internet VC Deals by Top Cities

Total = 289

San Francisco

21%Washington, D.C.

12%

New York

18%San Mateo

2%

Mountain View

4%

Redwood City

6%

Palo Alto

11%Chicago

17%

Boston

6%

Los Angeles

3%

San Francisco,

103

Los Angeles, 13

New York, 81

San Mateo, 7

Redwood City, 9

Mountain View,

19

Palo Alto, 29

Chicago, 18

Boston, 9

Washington,

D.C., 1

Bay Area

$1,534 bn Bay Area

167


NY’s Emergence as a Tech Hub

• New York City has become a true digital media innovation center

NY Tech Investments Over Time

$541

$642

$493

$775

$947

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2007 2008 2009 2010 Q1-Q3 2011

Source: PriceWaterhouse Coopers “MoneyTree Report 2011”, Media & Entertainment and Software investments


NY is a Major Contender for Tech Dollars Now

• New York City has gained much ground against Silicon Valley in the past 15 years

VC Funded Deals

37

172186

385

1995 2010

NYC Silicon Valley

Source: PriceWaterhouse Coopers “MoneyTree Report 2011”, Media & Entertainment and Software deals


NY Ecosystem has Very Different Roots and Growth

Opportunities than Silicon Valley

Operational

Efficiencies

LeadershipTalent

Engineering

Talent

Creative

Talent

Strategic

Partnerships

Strategic

Acquirers

Key

Customers

Internet Services

AdvertisingData Services

Wall Street

Business

DevelopmentMediaFashion


Major Disruption is Happening Across All Sectors

Advertising / Marketing Commerce Content

TVFinance Social


Source: Capital IQ, TechCrunch, public filings, and press releases

$0

$800

(Enterprise Value

in $M)

$200

$400

2007 2008 2009 2010 2011

$1,000

Top 25 Private Digital NY Sale TransactionsJanuary 2007 – December 2011 (Disclosed deals / rumored pricing available)


III. Overview of NY Area Private Digital Companies


Digital Sector Categorizations (298)

Commerce

Content Curation

Dating

Enterprise Social

Funding

Local

Social Network

Other

Social

(31)

Brand Storefront

Daily Deals

E-Commerce

Infrastructure

Marketplace

Private Sales

Third Party

Retailer

Other

E-Commerce

(48)

Content

E-Commerce

Marketing

Social

Mobile

(32)

Audio & Video

Advertising

Digital Agencies

Display

Advertising

Email Advertising

Lead Generation

Local Advertising

Search

Advertising

Social Marketing

Management

Digital

Marketing

(112)

Content Enabling

Family &

Education

Finance &

Professional

Games

Health & Fitness

Lifestyle

Music

Tech

Video & Images

Digital

Content

(82)

Note: Several companies have distinct business units that place them in multiple categories


Note: More companies illustrated on the following sector breakdown pages

NY Area Private Digital Companies by Sector

Social

SpotOn

eCommerce

FashionStake

MobileDigital

Marketing

Digital

Content

Electric Sheep


NY Area Private Digital Content Companies (82)

Video &

ImagesTechMusicHealth &

Fitness

LifestyleGames

Electric Sheep

4 3 3 15

Content

Enabling14

Family &

Education4 Finance &

Professional9 5 25


NY Area Private Digital Marketing Companies (112)

Social

Marketing

Management

Lead

Generation

Local

Advertising

Search

Advertising

Email

Advertising

Audio &

Video

Advertising

Display

Advertising

Digital

Agencies5 31 29 5 6

9 11 16

Cloverhill

Enterprises


NY Area Private eCommerce Companies (48)

E-Com

Infrastructure

Third Party

Retailer

FashionStake

Marketplace

Other

Brand

Storefront

Private SalesDaily Deals2 12 4 10 7

10 3


SocialMarketingeCommerceContent 9 4 15 4

NY Area Private Mobile Companies (32)


Enterprise

Social

Local

DatingContent

Curation

OtherSocial

NetworkFunding

Commerce

SpotOn

2 7 2 2

1 2 11 4

NY Area Private Social Companies (31)


NY Area Private Digital Companies by Equity

Raised (148 )

Sources: Capital IQ and TechCrunch, December 2011

>$100M

$30-$50$30-$50

5

$50-$100$50M-$100M 15$20M-$30M

Electric Sheep

FashionStake

$5M-$10M 43 $10M-$20M $30M-$50M 2537 23


Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value

Date

06/15/2011

06/13/2011

02/06/2011

01/19/2011

02/03/2010

01/25/2010

09/08/2011

06/17/2010

08/05/2008

09/07/2010

Acquirer/Target

Transaction

Value (in $M)

$524

400*

315

296

225

200*

151

135

125

120

1)

2)

3)

4)

5)

6)

7)

8)

9)

10)

Top 10 Private Digital NY Sale TransactionsJanuary 2008 – December 2011 (Disclosed deals / rumored pricing available)


IV. Venture Capital and Private Equity Firms With NY Area Digital Investments


BuyoutGrowth Equity

($10M-$50M)

Seed

(<$2M)

Early Stage

($1M-$10M)22 27 20 7

Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases

“The Locals” - Digital Focused VC/PE Firms

Headquartered in NY Area (60)



Seed

Early Stage

Growth

1-3 4-10 >10

Buyout

1-3 4-10 >10 71820

“The Locals” - Digital Focused VC/PE Firms

Headquartered in NY Area

• By Number of NY Area Digital Investments January 2008 – December 2011


BuyoutGrowth Equity

($10M-$50M)

Seed

(<$2M)

Early Stage

($1M-$10M)10 11 12 5

“The Satellites” - Digital Focused VC/PE Firms

With a NY Office (25)



“The Satellites” - Digital Focused VC/PE Firms With a NY Area Office


Seed

Early Stage

Growth

1-3 4-10 >10 286



Growth Equity ($10M-$50M)

Seed (<$2M)

Early Stage ($1M-$10M)

6 28 25


“The Outsiders” - Digital Focused Non-NY VC/PE

Firms (42)


“The Outsiders” - Digital Focused Non-NY VC/PE Firms


Seed

Early Stage

Growth

4-101-3 >101-3 4-10 >10 21127



“The All-Stars” - VC/PE Firms with at Least 5 NY Area Digital Investments


“The Locals” “The Satellites” “The Outsiders”

Seed

Early Stage

Growth

10720

• January 2008 – December 2011


V. Overview of NY Area Public Digital Companies


Public Companies with a NY Area Presence by

Industry (47)

Data Traditional MediaMarketing

eCommerce

Digital Media9 10

7

10 11


Note: Market cap calculated on 12/30/2011. Source: Capital IQ and public filings

$5B-$15B$2B-$5B<$500M $500M-$2B >$15B14 8 8 6 11

Public Companies with a NY Area Presence by

Market Cap


Public Companies <$1 Billion Valuation

0.0x 4.0x 10.0x5.0x

$300

Ente

rpri

se V

alu

es

3.0x2.0x1.0x 11.0x

$100

$60

$40

$20

$1,100

$900

$700

$500

($ in millions)

LTM Revenue MultipleSource: Capital IQ and public filings as of 12/30/2011


Public Companies >$1 Billion Valuation

Ente

rpri

se V

alu

es

($ in billions)

LTM Revenue MultipleSource: Capital IQ and public filings as of 12/30/2011

0.0x

$250

10.0x

$100

$50

3.0x2.0x1.0x

$200

$150

$40

$30

$20

$10

5.0x 6.0x4.0x


Public Acquirers with a NY Area Presence By Number of Acquisitions January 2008 – December 2011

Acquirer # of AcquisitionsSelect Acquisitions

(in $M Enterprise Value)

4)

3)

2)

1)

65

69

50

41

405)

ITA Software – $700 – 06/01/2010

AdMob – $675 – 11/09/2009

Admeld – $400* – 06/13/2011

Zagat - $151 – 09/08/2011

Rosetta – $575 – 05/17/2011

Razorfish – $530 – 09/09/2009

Big Fuel Communications – NA – 07/18/2011

Clemenger – $138 – 09/01/2010

Communispace – $100*– 02/07/2011

Saffirio.Tortelli.Vigoriti – $24 – 03/18/2011

Netezza – $1,730 – 09/20/2010

Sterling Commerce – $1,400 – 05/24/2010

SPSS – $1,122 – 07/28/2009

DemandTec – $422 – 12/08/2011

Pangea3 – $95 – 11/18/2010

Hugin Group – $60* – 09/21/2009

Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value, bold represents New York deals


VI. Advice for the Audience


• LOTS of exciting stuff is happening in Digital NY right now. Ignore it at your peril!

• Opportunities come in all shapes and sizes.

• The Digital NY entrepreneur network is tight – get connected.

• There is an increasing depth of NY engineering talent – tap into it.

General Advice


• Digital NY is getting crowded with lots of startups. Be sure of your objectives and how to

achieve them.

• There is a quality group of NY-based technology focused lawyers, accountants and

recruiters – network into them.

• Not everyone will be able to sell for $100MM+ valuations. Be realistic about where you

stand on your chances.

• The scope of what is "strategic" to a buyer is constantly expanding. Make sure to keep as

many lines of communication open to large organizations.

• There are LOTS of outside capital. Think through what is the

right amount for you.

• Choosing a VC is as important as choosing a co-founder. It

could be a 5+ year relationship, so get as much outside

perspective on them as possible.

� Focus on the partner involved, not the firm overall.

Advice for the Entrepreneur


• Digital NY is getting crowded with lots of startups. Make sure your deal filter is clearly

understood.

• Not everyone will be able to sell for $100MM+ valuations. Keep the cap table in check.

• Leading VCs have common characteristics today – honesty, preparedness, respect and

insight. Make sure to understand an entrepreneur’s expectations before investing your

time or theirs.

• The "West Coast is coming". They are aggressive and highly persuasive to

entrepreneurs. Be prepared.

Advice for the Investors


• Tremendous value being created, competitive dynamics are changing.

• There is a new generation of "Digital Leaders" among the emerging CEOs in the NY

startup scene. Make sure you know who they are.

• Market leadership is a fungible thing these days. The traditional leaders today won't stay

that way if they don't pursue digital growth strategies.

• If some of the "new billion dollar babies" (i.e., Facebook, Zynga, LinkedIn, Groupon,

etc.) enter the M&A game in a meaningful way, you can forget about "winning" hot

companies that are being sold.

Advice for the Public Companies

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