Interviews

The biggest VC-backed acquisitions of 2014

5 min read

19 November 2014

Investors are toasting some big-money exits this year. Perhaps unsurprisingly, tech companies have flooded the list. From Apple's acquisitions of Beats to Facebook and Whatsapp, here are six VC-backed exits – featuring two UK businesses.

Facebook (Whatsapp)

Valuation at exit: $19bn
VC investors: Sequoia Capital

Facebook’s acquisition of Whatsapp heralds possibly the largest deal in history for a VC-backed start-up, breaking records in February 2014. This included $4bn in cash, $12bn in restricted stock units and $12bn in Facebook stock.

According to PichBook data, “WhatsApp has had a secretive funding history, but new details show the company raised a $257,000 seed round in 2010, followed by its only publicized VC round in April 2011, an $8m Series A led by Sequoia. In mid-2013, Sequoia invested an additional $52m in a Series B round that valued WhatsApp at approximately $1.6bn pre-money.”

Google (Nest)

Valuation at exit: $3.2bn
VC investors: Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners, Shasta Ventures, Venrock

The acquisition of Nest is almost double of what Google paid for YouTube in 2006. It was set to be one of the biggest paybacks to date.

In an article written by Eric Wesoff it is explained that “Nest is estimated to have had a run rate of $100m per year, so Google paid 30 times revenue, and the VC investors got a very, very strong return.”

Kleiner Perkins & Caufiled & Byers gained a 20x return on their $20m investment in Nest in 2010, and Shasta Ventres invested $250m, they got a $200m return.

Apple (Beats Electronics)

Valuation at exit: $3bn
VC investors: Carlyle Group

Apple is hoping that this deal will make the company “cool” again, with Dr Dre and Jimmy Lovine joining the company. This was echoed by Sony CEO Doug Morris, who suggested that “Apple was starting to lose their edge”.

However, in a rare move by Apple, they will continue to sell products under the Beats brand.

“We think these guys have a very rare talent,” said Apple CEO Tim Cook. “We love the subscription service that they built—we think it’s the first subscription service that really got it right.”

Apple paid $2.6bn in cash and $400m in equity to buy Beats Electonics.

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Facebook (Oculus)

Valuation at exit: $2bn
VC investors: Spark Capital, Matrix Partners, Formation 8, Andreessen Horowitz, Founders Fund

Facebook has definitely had a busy year! Incredibly, this $2bn deal was Kickstarter’s first billion-dollar exit.

In 2012, Oculus’s Rift headset actually exceeded its fundraising goal by ten times, and still remains one of the largest Kickstarter campaigns.

The acquisition was met with negative criticism: “My feelings about the buyout are: irritated… The Face acquisition seems 80 per cent likely to kill their momentum, and even in the 20 per cent chance, it’s probably going to get locked down in annoying ways and stop being cool weird tech you can freely hack on,” said game developer George Buckenham.

Google (DeepMind technologies)

Valuation at exit: $625m
VC investors: Founders Fund, Horizons Ventures, and Skype and Kazaa developer Jaan Tallinn

London-based artificial intelligence company DeepMind has recently been acquired by Google for the price of $500m. Co-founder Demis Hassabis has made as much as $100m out of the exit.

This certainly says a lot about the UK’s start-up tech scene.

“My take on [the DeepMind acquisition] is that it showcases the depth of talent in the UK around Machine Learning, we have some of the world’s leading research teams doing amazing stuff in computer vision and deep learning,” said Ian Hogarth, co-founder and CEO of Songkick.

“I think that machine intelligence will gradually start to complement many tasks that have historically been performed by humans. I think Google is probably betting on that trend, and unlike many companies they have a business model that justifies these kinds of acquisitions.”

Zynga (NaturalMotion)

Valuation at exit: $527m
VC investors: Balderton Capital

Zynga acquired NaturalMotion, a British technology developer, for approximately $527m in cash and equity.

At closing, NaturalMotion’s shareholders and vested option holders received an aggregate of $391m in cash and approximately 39.8mn shares of Zynga common stock.

Don Mattrick, CEO of Zynga, said: “We believe that bringing Zynga and NaturalMotion together is the right step at the right time. Our acquisition of NaturalMotion will allow us to significantly expand our creative pipeline, accelerate our mobile growth and bring next-generation technology and tools to Zynga that we believe will fast track our ability to deliver more hit games.”