Success comes in cycles: or, some random musings on SoCal M&A
I’ve been having the same discussions with entrepreneurs, venture capitalists, service providers, and others recently about the successful companies in Southern California. Namely, folks always talk about how there has been a lot of recent venture activity, but they’re curious as to what the next wave of successes from startups will be.
I was mulling over the prior history of Southern California, and thinking about the various cycles of M&A exits in the region and whether there has been any theme to them. So, I took a look back through our database of deals (for the uninitiated, we have a very in-depth database of venture capital deals, and exits, in our subscription venture database) and browsed through the exits over the last decade or so to try to see if there might be some patterns.
Looking through 1996/1997/1998 – this is on the way up in the Dot Com boom — it looks like some of the success stories here were CitySearch (acquired by Ticketmaster), Xylan (network switches, IPO) Geocities (home pages, IPO), Cybermedia (security software, acquisition by Network Associates), and Comcore Semiconductor (acquired by National Semiconductor). Themes here: traditional hardware and software, and the beginning of the Internet dot com era. (Most companies funded in the 1995 time frame)
Then, you had a bunch of exits in 1999/2000/2001 — with Homestore (IPO), NetCom Systems (test hardware, acquisition), Sandpiper Networks (CDN, acquisition), United Online (IPO), Pairgain (semiconductors, acquisition), ValueClick (IPO), Trillium Digital Systems (embedded software, acquisition), Ixia (test equipment, IPO), Xircom (acquisition), and Stamps.com (IPO). Still some hardware activity, but starting to see many Internet driven companies.
Next, you have the immediate post-dot com and dot com survivor era in 2003/2004/2005– Linksys (acquired by Cisco), Digital Theater Systems (IPO), Expertcity (acquired by Citrix), Callwave (IPO), Picasa (acquired by Google), PeopleSupport (IPO), Cogent Systems (IPO), Rent.com (acquired), LowerMyBills.com (acquired), JAMDAT Mobile (acquired), GlueCode Software (acquired), Shopzilla (acquired), Provide Commerce/Proflowers (acquired), MySpace (acquired), FastClick (acquired), PriceGrabber.com (acquired), Overture (acquired by Yahoo). A grab bag, but here’s where the most recognizable trait here is a strong shift toward Internet companies, most of whom were initially funded in the 1998/1999 era and survived the crash.
Finally, you have a small batch of more recent exits: Digital Insight (acquired by Intuit), Business.com (acquired), HireRight (IPO). Not a lot to work on, but lots of Internet driven businesses. It feels like we’re due some high profile exits soon (particularly given the levels of venture investment over the last few years), but the question is where will they be? And, what’s the next cycle of M&A that will occur here?
