Enterprise Social Media Startups Struggle for Exits But Attract VCs

Social media startups catering to the business market have had a mixed reception from IPO investors but more success finding M&A exits.

And they have brought a load of venture capitalists along for the ride, according to a study conducted by Jeremiah Owyang, a partner at the research firm Altimeter Group.

Owyang looked at 55 social business startups, including widely known players Jive Software, Bazaarvoice and Buddy Media, and found that 69%, or 38 companies, received venture funding. The average amount raised was $14 million, though most collected less than $10 million.

Interestingly, about a third of the companies did not receive venture funding. And this willingness to sidestep the venture circuit didn’t close the door to an exit.

Of the 55 companies, 10, or 18%, had exits. Four of the outcomes were not supported by venture funding.

Of the exits:

  • Three were IPOs, including Jive, Bazaarvoice and Liveworld. Results are mixed. Jive is trading above its offering price while Bazaarvoice is trading below its.
  • Seven were mergers or acquisitions, including deals for Buddy Media, Radian6, Context Optional, Vitrue and Involver. Buddy Media and Radian6 were bought by Saleforce.com, Context Optional went to Efficient Frontier and then to Adobe Systems, and Vitrue and Involver were swallowed by Oracle.

Six of the startups that achieve a “material” outcome averaged funding of $26.3 million, the study found. The largest round among them was Buddy Media’s $54 million Series D.

Photo courtesy of Shutterstock.

Take your pick!

  • Buyouts delivers exclusive news and analysis about private equity deals, fundraising, top-quartile managers and more. Get your FREE trial or subscribe now.
  • VC Journal provides exclusive news and analysis about venture capital deals, fundraising, top-quartile investors and more. Get your FREE trial or subscribe now

Sign up to our Newsletter

Receive updates from our PE HUB Wire and Top Stories of the Week newsletters:

We will not send you spam, and we don't share your email address with 3rd parties.