Enterprise Security: So Hot Right Now!

IT Security = Hansel?  We think so!

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With the recent onslaught of Enterprise Security investments (25 in February alone!), we decided to turn to our friends at Crunchbase to see just how hot this market really was.  Let’s just say, the numbers did not disappoint. Below are the key takeaways from the study:

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Rising Round Size:   Average round sizes are up almost 50% since this time last year which we hope translates into companies receiving higher valuations (and not higher founder dilution…).

The Rich Get Richer:  Follow on funding rounds have been increasing in both size and quantity in the past year. This bodes well for the industry because it means more firms are putting good use to earlier rounds and leveraging that success into future investment.

If You Can’t Beat Them, Buy Them:  There have been 10 acquisitions this year alone so there seems to be a theme of consolidation at work (Looking at you Bit9…).

Finally, we couldn’t write an entire piece about Enterprise Security and NOT mention the darling of 2013; FireEye. After their successful IPO last fall and recent purchase of Mandiant (bonus points for it being a majority stock deal and limiting the cash impact!), they have clearly revealed their plans on how to take share in this market.  Now if only they would do the same for profitability

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Facebook buys WhatsApp – How do you like me MAU?

It’s only fitting that we take a page out of Ben Horowitz’s book and begin our foray into the blogosphere with a Rap Lyric…

“How you like me now, when my pinky’s valued over three hundred thousand” – Usher, “Yeah!”

Pretty sure if you add a few zeroes on the end of that number that is EXACTLY what Jan Koum, Brian Acton, and the rest of the team at WhatsApp  were thinking last night when Facebook announced they had acquired the Mobile Messaging app for an astounding $19B.

A lot of the tech media has covered the deal in various forms today (see here, here, here, and here) but for those who want the spark/cliff notes version then you have come to the right place!  Here are the key takeaways from the biggest VC-backed exit yet:

Cash vs. Stock  This is a split Cash/Stock deal where the company receives $4B in Cash and $12B in Facebook Stock with $3B in RSU’s (Restricted Stock Units).  Smart move by Zuck/Ebersman to use shares as currency and limit the cash outlay.

MAU – MAU (Monthly Active Users) is a widely used metric for consumer-facing companies and WhatsApp has over 400M of them and they seem to be growing exponentially every day.  Needless to say, if you can get to that many active users in such a short time period, then you will be the belle of the ball at the consumer-facing company Prom.

Location, Location, Location – As the old real estate saying goes, “the only thing that matters is Location, Location, Location!” and WhatsApp has plenty of that.  They have a dominant position on mobile messaging services in a lot of the growing areas that Facebook wants to expand its reach.

There are plenty of other reasons why the deal makes sense given Facebook’s overall mobile first strategy and letting WhatsApp operate Instagram-style (i.e. as its own entity) must have been a deal-clincher for Jan and team.

Finally, big props to Sequoia and Jim Goetz for basically doubling their fund size with this one exit (their stake was rumored to be in the high teens). Pretty sure you have just secured over-subscription for all future funds and made a few LP’s extremely happy in the process.