What a pair of startup sales tells us about the recession

Contact: Brenon Daly

If there was any doubt that the M&A climate has warmed since the beginning of this year, consider the relative exits for a pair of database-monitoring startups. Back in February, when venture funding was hard to come by and wind-down sales were plentiful, Tizor Systems sold to Netezza for just $3m. Fast-forward nine months, and Guardium sells to IBM for an estimated $230m. Viewed another way, Tizor returned just one-tenth the amount of venture funding it raised, while Guardium returned more than 10 times the funding it raised.

Granted, the relative returns of Guardium and Tizor probably have more to do with the business performance of the two rivals than what was going on in the economy. After all, Tizor was limping along with just $2m in sales, while Guardium was sprinting along at around $40m. (Both companies were founded in 2002.) That said, we’re pretty confident that the fact that the US is no longer (officially) in a recession certainly didn’t hurt the valuation of Guardium, a company we have thought has been in play for some time.

Indeed, as we look down our list of recent IT security deals, we can’t help but notice that the three largest transactions – all of which saw marquee tech companies paying above-market multiples – have come in the past four months. In addition to the sale of Guardium to IBM at an estimated 6x trailing sales, we’ve also seen Cisco Systems pay the same multiple for ScanSafe and McAfee pick up MX Logic for an estimated 4x trailing sales. A few more of these types of deals and we may start to believe that we are indeed out of the recession.