Gridley's Guide to Digital NY November 2012

November 2012

© 2012 Gridley & Company LLC

Table of Contents
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

© 2012 Gridley & Company LLC 2

I. Introduction to the Report


Introduction
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 of last year 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, now we can tell you a few things about “it”:

• There has been $5.6 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 308 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 seven private companies that have raised over $100MM of capital (Fab.com, Fotolia, Tremor Video, ZocDoc,
Gilt Groupe, Tumblr, and Everyday Health) and 18 that have raised between $50MM and $100MM.
• There have been twelve $100MM+ sale transactions of private Digital NY companies since January 2008 (Buddy Media,
Mediamind, Admeld, Huffington Post, Webloyalty, Hotjobs, Innovation Interactive, Zagat, OMGPOP, Register.com, Daily
Candy, and Answers.com).


Introduction
The 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?

Peg Jackson Linda Gridley Pratik Patel
Managing Director President & CEO Director
peg.jackson@gridleyco.com linda.gridley@gridleyco.com pratik.patel@gridleyco.com
212-400-9709 212-400-9710 212-400-9712

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/

Comprehensive Industry Overviews Quarterly Newsletter


II. Digital NY Overview


The Past Six Years Have Shaped Much of NY’s
Digital Media and Technology Landscape
• Notable events in NY since 2007:
Development of brand
names across broad set of
verticals

/
/ ($275 million)
($3.1 billion) Closes deal and announces
Mayor Bloomberg
announces HQ move acquisition of
leads
/ to NY in September
Raises series A
opens a
starts up city-funded
business incubator
Googleplex in New in tech VC funding and deal
($680 million) round programs
York City quantity
April December June September For $183 million
July
January March
2007 2007 2007 2008 2009
2011 2011

January September November September June June
August December
2007
2007 2007 2008 2009 2010 2011 2012
Raises series
Mayor Bloomberg
A round
Raises series A offers $100 million and
Acquires land to develop a top announces
is founded round announces spin-offs of: Announces
engineering school to acquisition of
October 2007 For $125 million acquisition of
encourage tech
comes to New York development, to bring
New York City to the
forefront of innovation. for $745 million
Raises Series B Raises series Raises Series A for $30 billion
round A round round

announces
acquisition of
Raises series A round


NY’s Emergence as a Tech Hub
• New York City has become a true digital media innovation center

Q3 2012 Internet VC Funding by Top Cities Q3 2012 Internet VC Deals by Top Cities
Total of Top Cities = $1,853 million Total of Top Cities = 175
Total including Others = $2,672 million Total including Others = 372

San Francisco, 69
Others San Francisco
31% 31%

Bay Area
Palo Alto, 13 98
Bay Area San Mateo, 9
$1,171M
Sunnyvale, 6
Palo Alto Los Altos, 1
3% Others, 197
San Mateo New York, 52
Los Angeles
3%
5%
Boston Los Altos Sunnyvale
7% 2% Boston, 16
New York 5%
Los Angeles, 9
13%

Source: CB Insights “Venture Capital Activity Report”


NY’s Emergence as a Tech Hub
• New York City has become a true digital media innovation center

NY Tech Investments Over Time

$1,200 $1,141

$1,000

$791
$800
$688
$608
$600
$453
$400

$200

$0
2007 2008 2009 2010 2011
Source: PriceWaterhouse Coopers “MoneyTree Report 2012”, 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

549

185 171

41

1995 2011
NYC Silicon Valley

Source: PriceWaterhouse Coopers “MoneyTree Report 2012”, Media & Entertainment and Software deals


NY Ecosystem has Very Different Roots and Growth
Opportunities than Silicon Valley
Internet Services Wall Street

Leadership
Talent

Operational Engineering
Data Services Efficiencies Talent Advertising

Key Creative
Customers Talent

Strategic Strategic
Acquirers Partnerships
Fashion Business Media
Development


Major Disruption is Happening Across All Sectors
Advertising / Marketing Commerce Content

Finance Social TV


Top 25 Private Digital NY Sale Transactions
January 2007 – October 2012 (Disclosed deals / rumored pricing available)
(Enterprise Value
in $MM)

$1,000

$800

$400

$200

$0
2007 2008 2009 2010 2011 2012
Source: Capital IQ, TechCrunch, public filings, and press releases


I. Overview of NY Area Private Digital Companies


Digital Sector Categorizations (313)
Digital Digital
Content Marketing eCommerce Mobile Social
(85) (114) (52) (34) (28)
Content Enabling Audio & Video Brand Storefront Content Commerce
Advertising
Family & Daily Deals E-Commerce Content Curation
Education Digital Agencies
E-Commerce Marketing Dating
Finance & Display Infrastructure
Professional Advertising Social Enterprise Social
Marketplace
Games Email Advertising Funding
Private Sales
Health & Fitness Lead Generation Local
Third Party
Lifestyle Local Advertising Retailer Social Network

Music Search Other Other
Advertising
Tech
Social Marketing
Video & Images Management

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


NY Area Private Digital Companies by Sector
Digital Digital
Content eCommerce Mobile Social
Marketing
FashionStake

SpotOn

Electric Sheep

Note: More companies illustrated on the following sector breakdown pages


NY Area Private Digital Content Companies (85)
Content Family & 6 Finance & 9
12 Games 5 Lifestyle 25
Enabling Education Professional

Electric Sheep

Health & 4 Music 3 Tech 4 Video & 17
Fitness Images


NY Area Private Digital Marketing Companies (114)
Audio & 7 Digital 32 Display 28 Email 5 Lead 5
Video Agencies Advertising Advertising Generation
Advertising

Local 10 Search 11 Social 16
Advertising Advertising Marketing
Management

Cloverhill
Enterprises


NY Area Private eCommerce Companies (52)
Brand 2 Daily Deals 12 E-Com 6 Marketplace 11 Private Sales 7
Storefront Infrastructure

Third Party
Other
Retailer 11 3

FashionStake


NY Area Private Mobile Companies (34)
Content 9 eCommerce 4 Marketing 17 Social 4


NY Area Private Social Companies (28)
Commerce 2 Content 8 Dating 2 Enterprise 1
Curation Social

Funding 1 Social 12 Other 2
Network

SpotOn


NY Area Private Digital Companies by Equity
Raised (185 )
$5M-$10M 58 $10M-$20M 48 $20M-$30M 33 $30M-$50M 28
$30-$50 $50M-$100M 18
$50-$100

Electric Sheep

Ryzac

>$100M 7

FashionStake

Sources: Capital IQ and TechCrunch, November 2012


Private Digital NY Sale Transactions >$100 million
Since January 2010 (Disclosed deals / rumored pricing available)
Transaction
Date Acquirer / Target Value ($MM)
6/4/2012 salesforce.com, inc Buddy Media, Inc. $745
6/16/2011 (NYSE:CRM)
DG FastChannel MediaMind 524
6/3/2010 The Hearst Technologies Inc.
iCrossing, Inc. 425
6/13/2011 Corporation
Google AdMeld 400*
2/6/2011 AOL Huffington Post 315
1/19/2011 Affinion Web Loyalty 296
8/26/2012 IAC Search & About.com, Inc. 300
11/1/2011 Media, Inc.
Yahoo! Inc. interclick, inc. 264
2/3/2010 (NasdaqGS:YHOO) HotJobs.com, Ltd.
Monster 225
1/25/2010 Worldwide, Inc.
Dentsu Innovation 200*
3/21/2012 Zynga, Inc. InternactiveInc.
OMGPOP, 183
11/12/2012 (NasdaqGS:ZNGA) Ziff Davis Media
j2 Global, Inc. 165
9/8/2011 (NasdaqGS:JCOM) Inc. Survey, LLC
Google Inc. Zagat 151
6/17/2010 (NasdaqGS:GOOG) Register.com, Inc.
Web.com Group, 135
Inc.
Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value

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


“The Locals” - Digital Focused VC/PE Firms
Headquartered in NY Area (72)
Seed 30 Early Stage 33 Growth Equity 23 Buyout 7
(<$2M) ($1M-$10M) ($10M-$50M)

Upstage
Ventures

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
• By Number of NY Area Digital Investments January 2008 – October 2012

1-3
1-3 25 4-10
4-10 27 >10
>10 7

Seed

Early Stage

Growth

Buyout



“The Satellites” - Digital Focused VC/PE Firms
With a NY Office (27)
Seed 9 Early Stage 13 Growth Equity 12 Buyout 5
(<$2M) ($1M-$10M) ($10M-$50M)



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

1-3 9 4-10 7 >10 2

Seed

Early Stage

Growth



“The Outsiders” - Digital Focused Non-NY VC/PE
Firms (50)
Seed 11 Early Stage 34 Growth Equity 30
(<$2M) ($1M-$10M) ($10M-$50M)



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

1-3
1-3 34 4-10
4-10 15 >10
>10 2

Seed

Early Stage

Growth



“The All-Stars” - VC/PE Firms with at Least 5 NY
Area Digital Investments
• January 2008 – October 2012

“The Locals” 28 “The Satellites” 7 “The Outsiders” 12

Seed

Early Stage

Growth



V. Overview of NY Area Public Digital Companies


Public Companies with a NY Area Presence by
Industry (47)
Data Digital Media Marketing Traditional Media
9 10 11 11

eCommerce
6


Public Companies with a NY Area Presence by
Market Cap
<$500M 12 $500M-$2B 7 $2B-$5B 7 $5B-$15B 5 >$15B 12

Note: Market cap calculated on 10/31/2012. Source: Capital IQ and public filings


Public Companies <$1 Billion Valuation
($ in millions)
$1,100

$900

$700
Enterprise Values

$500

$300

$100

$60

$40

$20

0.0x 1.0x 2.0x 3.0x 4.0x 5.0x NM
LTM Revenue Multiple
Source: Capital IQ and public filings as of 10/31/2012


Public Companies >$1 Billion Valuation
($ in billions)

$250

$200

$150

$100
Enterprise Values

$50

$40

$30

$20

$10

0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x
LTM Revenue Multiple
Source: Capital IQ and public filings as of 10/31/2012


Public Acquirers with a NY Area Presence
By Number of Acquisitions January 2008 – October 2012
Select Acquisitions
Acquirer # of Acquisitions (in $M Enterprise Value)

Wildfire - $400 – 07/31/2012 (a)
1) TxVia – NA – 04/02/2012 (b)
82 AdMob – $675 – 11/09/2009
Admeld – $400 – 06/13/2011 (a, b)

FX Alliance -- $680 – 07/09/2012 (b)
2) 78 Global Objectives Limited – $530 – 05/16/2011
Pangea3 – $95 – 11/18/2010 (b)

LBi International - $582 – 09/20/2012
3) 64 Rosetta – $575 – 05/17/2011
Razorfish – $530 – 09/09/2009
Big Fuel Communications – NA – 07/18/2011 (b)
Kenexa - $1,397 – 10/27/2012
4) TeaLeaf Technology – NA – 05/02/2012
49
Netezza – $1,730 – 09/20/2010
Sterling Commerce – $1,400 – 05/24/2010
Adam & Eve Group – $78 – 05/24/2012
5) 44 Clemenger – $138 – 09/01/2010
Source: Capital IQ, TechCrunch, public filings, and press releases. Communispace – $100 – 02/07/2011 (a)
(a) Rumored value,
(b) New York deal.


VI. Advice for the Audience


General Advice
• 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.


Advice for the Entrepreneur
• 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 Investors
• 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 Public Companies
• 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.


Gridley's Guide to Digital NY November 2012

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