Category: VC

Altera moves into power management with $134m Enpirion buy

Contact: Tejas Venkatesh

FPGA designer Altera has announced the acquisition of power management chipmaker Enpirion for $134m in cash ($141m including the assumption of debt). The deal should bolster Altera’s FPGA systems by reducing board space and improving power management.

Enpirion makes power system-on-a-chip DC-DC converters that enable greater power densities and lower noise performance compared with their discrete equivalent. The 12-year-old target, which originated as a spinoff of Bell Labs, raised $77m in several rounds of funding from Canaan Partners, Columbia Capital and other firms. Enpirion is expected to generate $20m in revenue this year and $35m next year. The transaction values Enpirion at 7x this year’s sales.

The deal comes nearly a year after wireless semiconductor giant Qualcomm bought programmable power management chipmaker Summit Microelectronics for an estimated $100m. The chip world’s constant pursuit of Moore’s Law results in higher performance, but also creates complexity in power management. These acquisitions are aimed at mitigating that problem.

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An infrequent shopper, Box buys Crocodoc to spiff up documents

Brenon Daly

Contact: Alan Pelz-Sharpe, Brenon Daly

Though likely a small deal, Box’s acquisition of Crocodoc is nonetheless significant in that it underscores the heavily funded startup’s ambition to serve as an enterprise platform rather than just product. Crocodoc provides HTML5 (originally it was an Adobe Flash service) rendering, annotation and viewing functionality for the cloud. It’s a very commonly used OEM service boasting more than 100 customers to date, including Facebook, SAP, Yammer, LinkedIn and, intriguingly, Dropbox.

Originally the firm provided free stand-alone tools, but in the past few months began to offer an Enterprise API option that allows developers to embed Crocodoc into Web applications. Traditional rendering tools have been designed with small numbers of on-premises power users in mind. On the other hand, Crocodoc began with ambitions to be a commodity cloud service, making its technology – in theory, at least – a good fit for Box.

Box is one of the hottest startups around at the moment, with huge expectations attached to the eight-year-old company. (In a round of funding late last year, for instance, investors valued Box at $1.2bn, according to our understanding.) The expectations have been fueled in part due to the roughly $280m in funding the company has received to date.

For its part, Box is using the money to pivot from the rapidly commoditizing market of file sync/share to a broader enterprise collaboration platform. To date, Box has done most of that repositioning organically. The company hasn’t announced an acquisition since October 2009. For comparison, in that same three-and-a-half-year period, rival Dropbox has inked seven acquisitions. We’ll have a full report on the transaction in our next Daily 451.

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Checking the pulse of health IT

Ben Kolada

Contact: Ben Kolada

Healthcare IT is alive and well, as evidenced by the emergence of new consumer technologies, exceptionally high valuations and investments by some of the largest old-line technology vendors. New regulations, advances in sensor technologies and ‘big data’ analytics are driving many aspects of this market for both consumers and enterprises.

New devices that track fitness, sleep and other personal health metrics are driving adoption of healthcare IT by consumers. Nearly every new wearable technology product being introduced offers some health-monitoring component. The consumer healthcare IT market is already moving from hopeful hype to valuable reality, with Jawbone recently reportedly paying more than $100m for BodyMedia. BodyMedia is Jawbone’s third acquisition; all were announced this year and all focused on healthcare.

For enterprises, Cerner’s $50m acquisition (excluding $19m earnout potential) of bootstrapped employee healthcare management software vendor PureWellness shows the variety of businesses that can make money in enterprise healthcare IT. And consolidation in the health information exchange (HIE) sector continues to go off for about 10x sales. Meanwhile, ad-supported electronic health record (EHR) startup Practice Fusion is widely expected to be considering an IPO soon. The company’s growth is attributed in large part by government initiatives incentivizing medical practices to adopt EHRs.

As for investments, Oracle recently participated in the $45m second tranche of Proteus Digital Health’s series F financing (which brought the round’s total to $62.5m). Proteus offers an ingestible sensor, used by patients to monitor internal health and by clinicians to monitor clinical trialists’ drug dosing. The plummeting cost of genome sequencing has led to a rise of big-data bioinformatics startups hoping to help make sense of the mountains of genetic data. Startups such as Bina and Spiral Genetics have recently raised capital from traditional VC firms.

Action in API management

Contact: Carl Lehmann, Tejas Venkatesh

The API management market has been bustling, with three acquisitions and one notable funding round announced just in the past week. APIs and their development, management and integration have become important amid the Internet of Things environment, in which a multitude of connected points communicate via the Web.

The recent acquisitions of Mashery by Intel and Layer 7 Technologies by CA Technologies signal the opening round for an API land grab by all IT vendors that rely on integration to add value to their respective offerings. Players likely to seek similar deals include Software AG, TIBCO, Information Builders, Informatica, Fujitsu, Talend and OpenText. Oracle and SAP could also benefit from having API management capabilities as part of their integration technology portfolios.

In the future, successful API management providers will possess tools and techniques that simplify and automate how APIs are designed, coded and documented, and will also control distribution and use by a community of developers. In addition, these companies will allow existing APIs to be customized, thereby extending their value without having to design new APIs.

The week in API management

Date Company Event
April 24 3scale Networks Raises $4.2m in funding from Javelin Venture Partners and Costanoa Venture Capital
April 23 ProgrammableWeb Acquired by MuleSoft
April 22 Layer 7 Technologies Acquired by CA Technologies
April 17 Mashery Acquired by Intel

Source: Source: The 451 M&A KnowledgeBase, 451 Research

Undressing demand for wearable technologies

Ben Kolada

Contact: Ben Kolada

Still in the fad phase, wearable technology is gaining market interest, driven by new devices being introduced both by tech companies and old-school consumer goods firms. The advent of these new Internet-connected form factors, such as ‘smartwatches,’ fitness and health devices, will spur the creation of new application markets in the technology industry.

Demand for wearable technology is specifically being seen in interest for an Apple iWatch, a smartwatch that many expect will be released later this year. According to a recent report by ChangeWave Research, a service of 451 Research, prerelease demand for the iWatch already matches what the iPad and Intel Mac saw before their respective debuts.

The likely launch of the iWatch and overall emergence of new wearable technology devices, such as Google’s Glass, Nike’s FuelBand, Jawbone’s UP and various devices from Fitbit, will create new markets in application software. For example, there’s already an investment syndicate, called Glass Collective, made up of VC firms Google Ventures, Andreessen Horowitz and Kleiner Perkins Caufield & Byers, that are ready to fund companies building new ways to use Google’s Glass device.

Our senior mobile analyst, Chris Hazelton, believes these devices will create extremely tight bonds between users, the cloud and very likely new technology players. For example, unlike smartphone and tablet apps that are used infrequently or once and discarded, Google Glass apps will be persistent, following and advising a user throughout their day.

If you already own a wearable tech device, or are planning to buy one, let us know what you think of this sector and which applications you think will become most valuable. You can tweet us@451TechMnA or contact us anonymously.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

FireEye eyes an IPO

Brenon Daly

Contact: Brenon Daly

Many tech IPO underwriters are spending this week trying to catch the eye of FireEye. The advanced anti-malware vendor is currently baking off for an offering later this year that will likely create the next publicly traded information security company valued at more than $1bn.

FireEye has been tracking to the public market for some time, making moves earlier this year – such as adding several executive heavyweights and raising a ‘top-off’ $50m round of funding – that indicated an IPO may be close at hand. Further, it has the financial profile that will undoubtedly find buyers on Wall Street. According to our understanding, FireEye generated some $130m in bookings in 2012, about double its bookings from the previous year.

The company, which has more than 1,000 customers, has made huge strides since it emerged from stealth in mid-2006. It has pivoted from its initial focus on the network access control market to botnets to a broader advanced anti-malware platform. Along the way it has raised some $95m in backing from investors including DAG Ventures, Goldman Sachs, Jafco Ventures, Juniper Networks, Norwest Venture Partners and Sequoia Capital, which incubated FireEye.

However fitful FireEye’s evolution has been, the company has drawn fans in the information security market. According to a late-2012 survey by TheInfoPro, a service of 451 Research, FireEye was ranked as the second ‘most exciting’ infosec company. It trailed only Palo Alto Networks, which went public last summer and currently commands a $3.5bn market capitalization.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

A big market for small IPOs

Brenon Daly

Contact: Brenon Daly

The IPO market is getting bigger by going smaller. Investors have shown they are ready to step in and buy shares of unprofitable companies that are still only generating revenue in the tens of millions of dollars. That has drawn a number of companies onto the IPO path that might have been termed ‘sub-scale’ in the recent past.

Consider the offerings – both planned and actual – from Rally Software Development, Marketo and ChannelAdvisor. All three companies finished 2012 with less than $60m in sales. Further, all three companies continue to run in the red – deeply in the red. (For instance, Marketo lost $34m in 2012 on sales of $58m. Rally doesn’t even turn an operating profit and ChannelAdvisor still runs at a negative ‘adjusted’ EBITDA.)

Not that the diminutive size or red ink hurt Rally on its Friday debut. The agile software development shop not only bumped up the size and price of its offering, but then shares, well, ‘rallied’ in the aftermarket. The stock changed hands at about $18 in mid-session trading, after pricing at $14 each.

When Rally set its range last week, we noted that the small-cap company wouldn’t necessarily be trading at the discount that typically gets assigned to that class of stocks. On a back-of-the-envelope (not fully diluted) basis, Rally has secured a valuation of roughly 6x trailing sales and 4x forward sales. With a healthy multiple like that, it’s small wonder that other small companies are lining up to hit Wall Street.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA

Tableau’s IPO ‘book’ is tech’s next bestseller

Brenon Daly

Contact: Brenon Daly

The prospectus a company files with the SEC in order to go public is nothing more than a book. And like other books, some of them languish on the shelves, collecting dust. Most attract only a little interest, with a handful of curious readers cracking open the covers. But every once in a while, a book so compelling comes along that it literally flies off the shelves. Readers can’t wait to get their hands on it.

Tableau Software, which revealed its IPO paperwork on Tuesday afternoon, is the tech industry’s next bestseller.

The data-visualization vendor had been expected to put in its prospectus about now. If anything, however, the anticipation has increased for Tableau’s offering because of the financials in its filing. The company doubled revenue in 2012 to $127.7m. Last year’s growth rate is notably higher than the mid-80% range Tableau put up in the two previous years, even though it is operating on a much larger revenue base. Its sales in 2012 were nearly 10 times higher than in 2008.

And unlike other hyper-growth tech vendors, Tableau turns a profit. Even on a GAAP basis, the company has been in the black since 2010. It has an accumulated deficit of just $1.5m. That’s pocket change compared with most other IPO wannabes, some of which have burned through tens of millions of dollars – or even more than $100m – to make it to the public market.

When Tableau does hit the market in about a month, we figure it will command a valuation of roughly $2bn. That would put it, rightfully so, on the same shelf as the bestselling IPOs from 2012: Workday, Splunk, Palo Alto Networks and ServiceNow. On average, those companies trade at about 20x trailing sales.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

The gains — and declines — in the tech IPO market

Brenon Daly

Contact: Brenon Daly

After a four-month drought, the enterprise tech IPO market saw its first new debutants warmly welcomed onto Wall Street this week. Both Model N and Marin Software priced above their expected ranges and traded higher in the aftermarket. Collectively, the two offerings created almost $1bn in market value.

While the strong debuts by Model N and Marin Software may help draw other companies – and their underwriters – to the public market, the IPO market is still running behind where it was at this time last year. In the first three months of 2012, we saw five enterprise tech vendors go public, including ExactTarget, Demandware and last year’s unexpected top-performing offering, Guidewire Software. Altogether, the class of early 2012 is now valued at about $5.5bn on the public markets.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Springtime stirrings in tech IPO market

Brenon Daly

Contact: Brenon Daly

With US equity markets hitting all-time highs and volatility sinking to post-recession lows, Wall Street appears ready to embrace new issues. Even the fitful offering of smart grid vendor Silver Spring Networks, which had been collecting dust as the company’s revenue declined over the past year, found buyers earlier this week. However, few observers would put Silver Spring forward as a ‘tech’ IPO, much less an offering that should necessarily be emulated.

But we won’t have to wait long for a bellwether for the sector. Both Model N and Marin Software are expected to price their IPOs next week, a pair of offerings that could create a cool $1bn in market value. And coming behind those debutants are a host of companies hoping to hit the market this summer, including Violin Memory, SilkRoad Technology and Tableau Software. (Of the trio, data-visualization provider Tableau looks to be the next ‘hot’ enterprise IPO, and will almost assuredly command a double-digit valuation when it begins trading.)

The rumored offerings by all three of those enterprise tech vendors have come through a so-called ‘confidential filing,’ a recent regulatory change by the SEC that allows companies to put in their IPO paperwork – and work through the inevitable revisions – without disclosing the filing until they are ready to hit their roadshow. Most companies are opting to file on the quiet – but not all of them. Somewhat confusingly, for instance, Marketo publicly announced that it had privately filed. And earlier this week, agile development shop Rally Software Development put in its paperwork for all the world to see.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.