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© 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
© 2012 Gridley & Company LLC
I. Introduction to the Report
4© 2012 Gridley & Company LLC
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).
5© 2012 Gridley & Company LLC
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 & CEO
212-400-9710
Pratik Patel
Director
212-400-9712
Peg Jackson
Managing Director
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.
6© 2012 Gridley & Company LLC
Interested in Other Gridley Reports?
• Available at www.gridleyco.com/what-we-think/resources/
Recent Conference Presentations
Comprehensive Industry Overviews Quarterly Newsletter
© 2012 Gridley & Company LLC
II. Digital NY OVERVIEW
8© 2012 Gridley & Company LLC
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
9© 2012 Gridley & Company LLC
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
10© 2012 Gridley & Company LLC
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
11© 2012 Gridley & Company LLC
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
12© 2012 Gridley & Company LLC
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
13© 2012 Gridley & Company LLC
NY Ecosystem has Very Different Roots and Growth
Opportunities than Silicon Valley
Operational
Efficiencies
Leadership
Talent
Engineering
Talent
Creative
Talent
Strategic
Partnerships
Strategic
Acquirers
Key
Customers
Internet Services
AdvertisingData Services
Wall Street
Business
DevelopmentMediaFashion
14© 2012 Gridley & Company LLC
Major Disruption is Happening Across All Sectors
Advertising / Marketing Commerce Content
TVFinance Social
15© 2012 Gridley & Company LLC
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)
© 2012 Gridley & Company LLC
III. Overview of NY Area Private Digital Companies
17© 2012 Gridley & Company LLC
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
18© 2012 Gridley & Company LLC
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
19© 2012 Gridley & Company LLC
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
20© 2012 Gridley & Company LLC
NY Area Private Digital Marketing Companies (112)
Social
Marketing
Management
Lead
Generation
Local
Advertising
Search
Advertising
Advertising
Audio &
Video
Advertising
Display
Advertising
Digital
Agencies5 31 29 5 6
9 11 16
Cloverhill
Enterprises
21© 2012 Gridley & Company LLC
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
22© 2012 Gridley & Company LLC
SocialMarketingeCommerceContent 9 4 15 4
NY Area Private Mobile Companies (32)
23© 2012 Gridley & Company LLC
Enterprise
Social
Local
DatingContent
Curation
OtherSocial
NetworkFunding
Commerce
SpotOn
2 7 2 2
1 2 11 4
NY Area Private Social Companies (31)
24© 2012 Gridley & Company LLC
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
25© 2012 Gridley & Company LLC
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)
© 2012 Gridley & Company LLC
IV. Venture Capital and Private Equity Firms With NY Area Digital Investments
27© 2012 Gridley & Company LLC
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)
28© 2012 Gridley & Company LLC
Source: Capital IQ, TechCrunch, public filings, and press releases
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
29© 2012 Gridley & Company LLC
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)
Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases
30© 2012 Gridley & Company LLC
“The Satellites” - Digital Focused VC/PE Firms With a NY Area Office
Source: Capital IQ, TechCrunch, public filings, and press releases
Seed
Early Stage
Growth
1-3 4-10 >10 286
• By Number of NY Area Digital Investments January 2008 – December 2011
31© 2012 Gridley & Company LLC
Growth Equity
($10M-$50M)
Seed
(<$2M)
Early Stage
($1M-$10M)6 28 25
Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases
“The Outsiders” - Digital Focused Non-NY VC/PE
Firms (42)
32© 2012 Gridley & Company LLC
“The Outsiders” - Digital Focused Non-NY VC/PE Firms
Source: Capital IQ, TechCrunch, public filings, and press releases
Seed
Early Stage
Growth
4-101-3 >101-3 4-10 >10 21127
• By Number of NY Area Digital Investments January 2008 – December 2011
33© 2012 Gridley & Company LLC
“The All-Stars” - VC/PE Firms with at Least 5 NY Area Digital Investments
Source: Capital IQ, TechCrunch, public filings, and press releases
“The Locals” “The Satellites” “The Outsiders”
Seed
Early Stage
Growth
10720
• January 2008 – December 2011
© 2012 Gridley & Company LLC
V. Overview of NY Area Public Digital Companies
35© 2012 Gridley & Company LLC
Public Companies with a NY Area Presence by
Industry (47)
Data Traditional MediaMarketing
eCommerce
Digital Media9 10
7
10 11
36© 2012 Gridley & Company LLC
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
37© 2012 Gridley & Company LLC
Public Companies <$1 Billion Valuation
0.0x 4.0x 10.0x5.0x
$300
En
terp
rise
Val
ues
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
38© 2012 Gridley & Company LLC
Public Companies >$1 Billion Valuation
En
terp
rise
Val
ues
($ 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
39© 2012 Gridley & Company LLC
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
© 2012 Gridley & Company LLC
VI. Advice for the Audience
41© 2012 Gridley & Company LLC
• 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
42© 2012 Gridley & Company LLC
• 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
43© 2012 Gridley & Company LLC
• 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
44© 2012 Gridley & Company LLC
• 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
© 2012 Gridley & Company LLC
