The PE Data Center Buzz

Private Company Valuations: Software (Q1 2008)

Posted by Justin Byers, Lead Business Intelligence Analyst on July 10, 2008

The software industry continued its run into Q1 2008 with being one of the top investment focuses for many VC firms. We have analyzed a few of these deals and below are the findings that our staff uncovered:

Automattic, Inc., the developer of WordPress, received just shy of $30 MM from several investors that included The New York Times, Radar Partners, True Ventures, and Polaris Venture Partners. The series B shares were Conventional Convertible and included non-cumulative dividends of 6%. The post-money valuation following this round was $231,579,189.

Another software company receiving new capital was SignalDemand, Inc. headquartered out of San Francisco, California. The company closed a series D round of approximately $20 MM. Some of the investors in this round were Catamount Ventures, L.P., InterWest Partners, and Hummer Winblad Venture Partners. The shares were Participating Preferred and included a Pari Passu liquidation preference with other series preferred. The team found the post-money valuation to be $99,460,006.

Sipera Systems, Inc. brought in additional funds in the amount of approximately $2 MM from the closing of additional series C shares. The participants included Sequoia Capital, Austin Ventures, L.P., and SVM Star Ventures Management. The shares were Participating Preferred and included weighted average anti-dilution protection. This left a post-money valuation of $58,807,660.

After inputting the data into our Cost of Capital Benchmark tool, we see that Automattic, Inc. came out with the most "company-friendly" capital, compared to Sipera Systems, Inc. and SignalDemand, Inc.

Keep in mind, the lower you are on the chart, the more company-friendly the money, the higher you go on the chart, the more investor-friendly the money. If you are a company raising money, you want be lower on the chart. This is a time when it is not best to be on top if you are the company raising money.

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