There clearly is some kind of earn-out, meaning that the founders get the whole money only if they stay long enough and/or if the business remains healthy.
On stage, Mike Arrington mentioned that he'd stay for sure on board for 3 years, due to "incentives."
So it's possible that the sale price is $25M upfront, with another $25M in 3 years. That would make both sources (one that says the price was only $25M, and one that says it was in the $40 or $50M) correct.
It wasn't Arrington who said that. He was quoting VC's who had said that.
There’s a worry among venture capitalists, [Arrington] said, that angels are training “an entire generation of entrepreneurs who are building dipshit companies” that sell to Google for $25 million. In fact, that criticism might be extended to Y Combinator as well, which could be seen as “the king of the dipshit companies.”
Arrington said he isn’t on-board with all of that criticism, but that it holds a “kernel of truth.”
Point taken; he was quoting an unnamed VC who said that and he believes there's a kernel of truth in it. He's also been characterised as supporting that point of view; on stage yesterday Chris Sacca straight out placed "his" words feet and he didn't take the opportunity to refute it:
MA: No one is talking about the entrepreneurs.
CS: That’s not true. You call some smaller companies “dipshit” companies, but they’re not.
Another quote from VentureBeat:
"TechCrunch Editor Michael Arrington, who moderated the panel, had previously criticized some angels for funding “dipshit companies” that think too small and aim to be acquired by Google for around $20 million"
Arrington has never claimed to be building a company in the vein of those he covers as a journalist. It's more of a "very successful media outlet" than a "dipshit tech company."
50% is quite standard for team acquisitions to my knowledge. However, for TechCrunch earn-out sounds quite high.
I'm also surprised of the price, it seems low compared to many tech acquisitions. TechCrunch has a lot of eyeballs, even if it doesn't have main stream audience.
Midsize Finnish regional newspaper companies have market caps around €180M. TechCrunch, a major international tech publication with millions of readers, is worth of only 10-25% of a local newspaper with audience of 300000 people? WTF? Either newspaper valuations are absurd, or internet advertising and tech events are a failure as a business model.
It's a lot harder to get ads for an international media. I'd guess most of the ads on www.techcrunch.com are payed by US marketing budgets. The people who manage those only care about US viewers. So question N:1 is how many US viewers, without ad blockers the site has. N:2 - for how long is it gone keep them.
A regional Finnish newspaper is very likely to keep it's audience in one form or another for a long time. That audience has high purchase power and is less likely to go online and research cheaper alternatives to advertised products/services.
A regional Finnish newspaper is very likely to keep it's audience in one form or another for a long time
That's the gist I think. TechCrunch is making $10M revenue in a year (http://www.businessinsider.com/aol-is-close-to-buying-techcr...). It's hard to say how much of that remains as a profit, but I would expect that with AOL helping with ad sales and infrastructure, they can bring costs down considerably. Let's say $5M in profits.
It's a competitive market and there is not yet enough experience how long web properties can retain their audience, thus valuation of future revenues drop quickly.
Now, it seems that if AOL doesn't expect significant growth for TechCrunch, $25-50M is in a right ballpark.
However, I still think that $180M for a regional Finnish newspaper with 300K audience is a risky bet. Time to read their financials to understand this.
This is probably not uncommon, and I've always thought that it's a bit of a value theft from shareholders who don't have leverage via large ownership or active employment. It's also a good reason to not exercise startup options unless you think the company will be a hit (medium and low value acquisitions tend to have relatively large payouts to employees staying on board).
