Tioga Venture Blog

Taleo acquires JobPartners: end of party is near

On June 21st, Taleo, the leading talent management Saas company, acquired JobPartners, a French-UK Saas recruitment company. The deal is interesting for many reasons. It marks the acceleration of the consolidation of the Saas talent management space in Europe. Among the Saas talent management companies that started in the early 2000s (JobPartners, Stepstone, Mr Ted, …) very few are still independent. At the same time, the US companies have gone public and raised massive amount of cash on very high valuation

The diagram above shows the relative revenue and gross margins of the 3 US leaders: Cornerstone On Demand (CSOD), SuccessFactors (SFSF) and Taleo (TLEO). Taleo is worth 1,5bn$ and SuccessFactors 2,7bn$. Of course, no European competitor matches them, neither in size nor in valuation. The revenue multiple varies from 5x for Taleo to 16x for Cornerstone On Demand. The market conditions are dramatically different as few if any of the Saas pure play companies are quoted and not with that kind of multiple anyway. The consequence of the difference in market size and financial market conditions is what we are observing now: the acquisition of European companies by US leaders.

From the 8-K of Taleo, we can get a few numbers on JobPartners: the company will bring approximately 10-12M$ revenue GAAP to Taleo (and approximately double that in non-GAAP). It points to a very high contribution of service to revenue at JobPartners; consistent with their positioning serving large accounts, but not quite worth the same. The acquisition at 38M$ gives a multiple of 3,5x revenue. A good buy for Taleo which is valued at 5,5x its revenue. It also confirms that, in absence of strong public market, it is difficult for European companies to get the same kind of multiples as the ones seen in the US.

For the European Saas talent management companies that are not getting acquired by US vendor, the future is not necessarily bright. The three US leaders are investing heavily in Europe building direct sales force and channel across EMEA. They now have more boots on the ground than many competing startup.

Maybe this is the end of the party and time to find a date.

Frederic HALLEY

Les TIC en Chines : mythes et réalités

Depuis septembre 2010, Tioga Venture anime la commission internationale de l'AFDEL (l'Association Française des Editeurs de Logiciel). L'objectif de cette commission est notamment de répondre aux interrogations des dirigeants sur l'international mais surtout de partager les bonnes pratiques, et parfois les échecs, entre les membres. Lors des premières commissions, nous avons abordé des sujets comme :

• Comment démarrer à l'international
• Les Etats Unis
• La croissance par acquisition à l'international

La prochaine réunion de la commission sera consacrée à la Chine, marché mystérieux qui attire de par sa taille et sa croissance mais d'une grande complexité d'accès pour de nombreux éditeurs français. Cette commission sera co-organisée avec Ubifrance et donc ouverte à tous (y compris aux éditeurs qui ne sont pas encore membres de l'AFDEL). Cette réunion se tiendra le mercredi 22 juin de 9H à 11H dans les locaux de Ubifrance (77 boulevard St Jacques, 75015 France). Au programme, une intervention de l'équipe Ubifrance Chine sur les spécificités et caractéristiques du marché chinois mais aussi des témoignages de dirigeants (Dibcom, Basseti, Sage). Inscription directement auprès de Ubifrance ou de l'AFDEL.

Venez nombreux

Frédéric HALLEY

Skyrock : le problème des blogs

Mardi 14 avril, Pierre Bellanger, PDG fondateur de Skyrock, a été remplacé comme directeur général de la société par son conseil d'administration. Ce changement a une répercussion considérable dans les médias notamment grâce à une campagne politico-médiatique remarquablement orchestrée. A ce stade, il est très difficile de comprendre dans les medias classiques les raisons de ce changement. Fidèle à nos habitudes, nous voudrions apporter quelques éléments factuels au débat.

Skyrock a deux business distincts :

• Une radio
• Un site web de blog (skyblog)

Les informations publiques disponibles sur l'activité de la radio ne laissent pas paraitre d'un problème spécifique. En revanche l'activité blog a souffert de manière majeure de l'arrivée en France de Facebook. Ci-dessous, les données d'Alexa montrant la part de pageviews (mondial) réalisée sur le site skyrock.com :

La chute est brutale. La 'part de voix' de Skyrock est passée en deux ans de 0,7% à environ 0,02% soit une division par 30 ! Aujourd'hui Skyrock est classée au 19^e rang en France alors que Facebook, avec 20 millions d'utilisateurs, est au 2^e rang. La décroissance s'est apparemment stabilisée depuis la mi 2010, mais il est vraisemblable que cette décroissance ait changé les équilibres économiques de la société.

Gemalto acquisition of Netsize: looking at the numbers

In January last year, Gemalto acquired Netsize. Back then, we shared our thoughts on the impact of this deal on the mobile payment industry (read details here). A few months afterward, we looked for some detail numbers in the H1 results of Gemalto… and could not find much (analysis of Gemalto H1 result here). Gemalto published last week its results and detailed annual report for 2010. Hopefully, this will give us a little more insight into this landmark transaction.

For the first time in its official document, Gemalto shares with is shareholders some details on the Netsize acquisition: "At the start of the year we took a controlling stake in Netsize, with its under-utilized mobile commerce and mobile marketing platform. This makes Gemalto a key player in mobile application sales, and rounds out the services we provide to operators to bolster their subscriber revenues."

The annual report is actually quite rich in numbers about Netsize:

• In 2010, Netsize's revenue were 61M€ and net profit was -4M€
• Gemalto paid 9M€ in cash for an extra 61,53% of Netsize to increase its stake to 85,65%
• At the time of acquisition, Netsize fair value of net assets was a significant -10,6M€. This situation probably explains the somewhat low valuation reached by the company.
• The net result is a goodwill of 18M€, net of minority shareholders' interest

Since the acquisition, things have also change at the management level. According to Netsize website management page, Stanislas Chesnais the founder and CEO has now left the company. Michel Leger, the first COO under Gemalto's watch has now joined Ingenico.

Intercim acquired by Dassault Systems

After a long engagement period, Dassault Systemes has finally acquired leading MES (Manufacturing Execution Systems) vendor Intercim. Tioga Venture was a strategic advisor to Pertinence for its merger with Intercim in 2007. The combination of the Intercim MES solutions and Pertinence manufacturing intelligence's products was key to deliver integrated solutions to customers such as Boeing, Airbus, Sanofi-Pasteur … The resulting combination was this surprising mix where the French management team had a key role in the combined entity, which is unusual in French – US combination of software vendors. Even in 2007, both Intercim and Pertinence had longstanding partnership with Dassault Systemes and its Delmia business unit. The minority investment of Dassault Systemes in Intercim in 2009 was a clear sign of the future. The vision of the integration from design to shop-floor was already part of the Pertinence management vision in 2005! It just took some time to make it happen.

The valuation is $36,5M for the enterprise value (equity and debt) which is good multiple in the current enterprise software sector (current EV/Sales multiple are between 2 and 3).

official press release is here.

Frederic Halley

L’innovation au profit de l’industrie française : l’acquisition de Vizelia par Schneider Electric

L'acquisition de Vizelia par Schneider Electric est un exemple à méditer pour plusieurs raisons.

Rappelons d'abord le contexte : Vizelia est un éditeur SaaS, qui a construit au cours des dernières années « Vizelia  Green », dont l'objectif est de gérer dynamiquement l'énergie des bâtiments. D'un point de vue technologique, la solution est entièrement développée en technologie Microsoft .net ; le mode Saas apporte une grande simplicité et flexibilité, la gestion d'une multiplicité de capteurs dans une multiplicité de bâtiments, et permet ainsi un benchmarking instantané des performances énergétiques.

Dans cette acquisition, la  première source de méditation est le mariage de l'innovation et de l'industrie « classique » ; Schneider, en tant que spécialiste mondial de la gestion de l'énergie, trouve à travers Vizelia une solution différentiante par rapport à ses concurrents. Vizelia peut maintenant déployer sa solution dans le monde entier grâce à la présence internationale de Schneider Electric.

La deuxième source de méditation est la nationalité de l'acquéreur,  à une époque où l'on a tendance à penser qu'un acquéreur de solutions technologiques ne peut être que de l'autre côté de l'Atlantique. Nous avons ici l'illustration d'une forte création de valeur, grâce à la forte présence internationale de Schneider. Cet exemple est une source de réflexion pour d'autres acteurs mondiaux du CAC40, qui pourraient renforcer leur position dans le monde à travers des acquisitions de technologies innovantes.

Tioga, qui a conseillé Vizelia depuis plus de 5 ans, souhaite un grand succès à Vizelia et à Schneider Electric dans la création d'une position de leader mondial sur la gestion de l'énergie dans les bâtiments.

Julien MAZEROLLE

Paris bars : updating the movers and shakers

A month ago, we introduced our first ranking of the bars in Paris, based on Foursquare users feedback and check-ins. As this was very popular (some other topics we cover are not as popular!), we decided to post an update. The idea is simple: same methodology and tools and we have also highlighted the changes vs last month. Note that the scope has increased dramatically the scope of the analysis as the number of bars covered jumped from 1500 to 2300. Interestingly, the number of check-ins jumped from a cumulative 76k to 122k illustrating from the dramatic rise in foursquare usage. For the record, foursquare should use 4M users worldwide very soon. Interestingly, the fad is not rescinding.

 
As we did for the restaurant guide, we have also included a google mashup, allowing you to locate the bars and obtain directly the related tips from foursquare

Enjoy the read and let us know what you think : [email protected]

 

AFDEL : A la conquete de l’Amerique

Dans le cadre de la commission internationale de l'AFDEL, la prochaine réunion animée par Tioga Venture aura lieu le lundi 6 décembre à 14H sur le thème : « Les Etats Unis, rêve ou passage obligé de l'expansion ». Pour les éditeurs français, l'expansion en Europe est souvent une étape naturelle du développement. Les Etats Unis représentent en revanche une étape majeure tant par son potentiel (le plus grand marché du monde) que par sa difficulté. Sans compter le mythe de la Silicon Valley, très présent dans notre industrie.

Pour débattre et partager les expériences sur ce sujet, le panel d'intervenants comprendra :

• Philippe Collombel, associé de Partech International, fonds franco-américain bien connu pour avoir accompagné de nombreux éditeurs dans leur développement aux Etats Unis
• Alain Baritault, Journaliste Economie et Technologie et Directeur du Founder Institute à Paris, qui habite dans la Silicon Valley depuis plus de 20 ans et connait parfaitement le milieu de la tehcnologie aux US.

Comme d'habitude, la commission est réservée aux adhérents de l'AFDEL. Inscription directement auprès de Fabrice Larrue de l'AFDEL.

Frédéric HALLEY

Paris bars: the foursquare guide

You have always wondered where the latest up and coming bars in the city of Light ? We'll tell you all you need to know based on Foursquare crowdsourcing.

Foursquare is today the social network with the highest relative growth, moving from 3 Million to 4 Million users in the last 2 months. Tioga developed a crawling technology to understand the check-in activity in bars in Paris. More than 76000 checkins in 1500 bars having 810 mayors combined with hundreds of tips will definitely impact future bar activity and attractiveness. Everything is summarized in a one page dashboard, outlining the most popular bars (highest total checkins), the trendy bars (highest recent checkins), the wanted bars (those with the toughest competition to become a mayor), the easy mayorships (a few check-ins will make you a mayor) and the tough mayorships (very well defended by the existing mayor). Tioga will publish the "Bars in Paris" dashboard on a monthly basis.

 
 
 

If you want to know more on the 'Bars in Paris' index, you can contact us at [email protected]

Julien Mazerolle.

Mobile Operators hypnotized by Apple

 

I love Mobile Operators: they are some of the richest companies in the corporate world. In a little more than a decade they became behemoth weighting heavily on all economies across continents. Their services, mostly unknown 15 years ago, are used by billions of people. These companies are packed with many smart people who changed the way we work, interact and communicate.

What is very interesting is how these supposedly smart companies got hypnotized by Apple. If you remember the Jungle Book, you'll get the picture the same picture that I have of Kaa with his rolling eyes hypnotizing Mowgli. The whole story of Apple with mobile operators over the last 4 years is really how Apple managed to hypnotize the operators. Before getting to today's news which prompted this post, let's get back a few years ago at the launch of the IPhone. Back in 2007, Apple was a much smaller company producing Mac and IPod. The first version of the IPhone was a good product, different from existing solutions but with many limitations (weak camera, no multi-tasking, short battery life …). The genius of Steve Jobs was to convince Operators across the world to subsidize the handset at an unprecedented level and share part of their revenue. Operators were fine: cool products, very small volume for very high end customers. Not great for the bottom line but good for the branding. Interestingly, they made sure there was no direct competition on the market. In 2007 and most of 2008, Orange France would sell unlimited data plan only if you had an IPhone. When I asked the service agent why I couldn't buy unlimited data plan with Nokia, HTC or any other phone, the answer was approximately: "buy an IPhone". Not surprisingly, mobile browsing statistics were showing back then that IPhone users were using mobile internet much more ; well, having an unlimited data plan vs. paying 1€/Go does play a role too! Clearly, beyond product quality, operators were major players in the success of IPhone.

The IPhone was a success and the shipment went way beyond what the operators had in mind. Momentum set in, consumers got hooked on the products and its apps, as well as to deep subsidy Volume started picking up. What became apparent very quickly to all players in the industry is that the mobile operators were getting disintermediated from the payment value chain. They had created the most successful micro payment scheme with Premium SMS and later with other billing technology (IP Billing, Direct billing…). Of course, all that went away for IPhone users: you put your credit card in ITunes and you're done: no more billing through operators. Operators had kept their haircut on very high on operator billing: between 20% and 40% depending on country and many other factors. Of course, that significant tax limited, and still does, the growth and potential of operators billing. I remember interviewing an executive at a major European operator in 2008 on that topic. He was clear and disillusioned on the matter: yes they understood they were getting disintermediated but no they were not going to do anything as IPhone sales were helping the presentation of quarterly results. That is when I realized the hypnotization factor: the operators understood Apple's strategic objective was to transform them in dumb pipes subsidizing their handset but they wouldn't react and let Apple take the ball and run. I actually think most operators underestimated Apple and thought they were the ones in control. Actually, they were already under the spell and hadn't realized they had lost the customer relationship, the payment, the brand,… In one word, they had lost control.

The collision of news and announcement of the last 2 weeks is fascinating. Orange communicated how happy they were to be the number 2 sellers of IPhone in the world and that they'll want to continue pushing it. I would really challenge that this is good news for Orange. Considering how deeply subsidized the IPhone is, I wonder how long it will take them to break even with a modest increase in monthly ARPU. If you factor in, the added burden on the infrastructure due to mobile data traffic explosion, I really doubt this is good news for Orange's shareholder. Today, the French newspaper Les Echos published a great story on how Apple is ready to launch the sales of simcard and subscription directly via ITunes in partnership Gemalto. The bundled sales of handset with subscription would transform Apple in a MVNO pushing the disintermediation idea to its limit. Mobile Operators can focus on the maintenance of their antennas! The journalist ponders how and if the operators are going to resist. I think it is too late now: the momentum of Apple in mobile phones is amazing. The consumer awareness and demand is great. I am ready to bet that at least one operator per country will go with the new Apple model, forcing all the markets to go in this direction. It is a little late to wake up and realize what has been going on for the last 4 years. By the way, they have one great idea to counter Apple : push Google and Android. I am not sure Google is going to be soft and fuzzy and bow to their traditional ways… The mobile operators were the key winners of the 1995-2005 era, they won't be the winner or the decade to come.

Frederic Halley

AFDEL : Comment démarrer à l'international

Dans le cadre de la commission internationale de l'AFDEL, la première réunion de la commission aura lieu le 22 octobre 2010 à 16H30 dans les locaux de l'AFDEL. Le thème de cette première rencontre sera double :

1. "Comment démarrer à l'international" avec le témoignage de Jean Noël Grandval, cofondateur de Instranet (éditeur franco-américain racheté par salesforce.com en 2008). Jean Noël reviendra sur son expérience d'entrepreneur face au développement international en Europe, aux US et dans le reste du monde.
2. Zoom sur le Vietnam avec une présentation de Sylvain Biard, conseiller export filière NTIC Ubifrance Vietnam.

   

Comme toutes les commissions de l'AFDEL, cette réunion est réservée aux membres de l'association ; mais il n'est pas trop tard pour adhérer.

Frédéric HALLEY

Gemalto H1 Results analysis

Earlier this year, we commented on the acquisition of Netsize by Gemalto (read details here). As this post generated strong interest from our readers, we thought we'd followed up by looking at the Gemalto H1 results just published (available here).

The read is very interesting as Netsize is the elephant in the room in these H1 results: It is not mentioned once in the 17 pages document, however the overall financials of Gemalto seem to have been impacted materially by the acquisition. First the Software and Services group, where Netsize now reports, has grown by 48% to 110M€. That is an increase of 36M€ vs. 2009. Based on the latest information published by Netsize as an independent company, Netsize's revenue were either 90M€ (registre du commerce 2008) or 160M€ (press release). That means that the biggest part of the growth of the software and services revenue was driven by the Netsize acquisition. The Gemalto document also mentions that the acquired businesses contributed 38M€ to revenue in H1 and a loss of 2M€ to operational profit. As Netsize was, revenue wise, the biggest acquisition of Gemalto in H1, these numbers are mostly driven by Netsize. These numbers are also consistent with the information available on Netsize as an independent company.

What's the takeaway :

• Gemalto is incredibly shy for an acquisition that is clearly affecting their overall P&L
• Netsize does not seem to have benefited yet from the acquisition, as the results are in line with the last one published in 2008, even with a possible decrease of revenue over the last 2 years.

We'll see in 6 months what Gemalto will share on Netsize in its annual report.

Dassault Systemes vs Google?

Yesterday, the top news in the French high-tech community was the acquisition of Exalead, an enterprise search company, by Dassault Systemes, the leading PLM software vendor, for 135M€. The good news was a significant exit for a French Startup. If the VC market has been flushed by money driven by tax loopholes, the exit market has been going through a much drier spell. It also means that Exalead leading technology can accelerate its distribution through Dassault Systemes and its customer base.

However, this is a very surprising deal. The rational of the acquisition as described in the official press release is very light. The core market of Dassault Systemes is still in the discrete manufacturing space (Automotive, Aerospace) and the complementarity between their PLM suite and a search engine is not that obvious. Yes, Dassault Customers can benefit from Exalead technology but a distribution agreement would do the same. If it is a pure technology diversification, Exalead is small (16M€ revenue allegedly) and will not impact materially the EPS.

The more surprising comments on the deal both official and on the web are about Exalead. There is no doubt that Exalead has a good technology and has been fairly successful. However, presenting it as the French Google is a major distortion of reality:

1. Exalead is not a consumer search engine driven by advertising. It is mostly an enterprise search company. Its real competitor are indeed Google and Microsoft but mostly Autonomy. Autonomy is a UK company worth about 5Bn€ (close to Dassault Systemes' market cap of 6Bn€) with revenue that should be close to 800M€ this year.
2. Exalead has relied on significant state financing from the French state via Quaero, the ill-fated state initiative to build a French competitor to Google. Exalead was the number 2 recipients of state subsidies with 19M€ behind Technicolor. We are very far from the Darwinian model of innovation of Silicon Valley

The undisputed winner of the day is Qualis a financial holding which owned 69% of Exalead. Congratulation to them! And good luck to Dassault Systemes in their diversification and their future fights against Autonomy, Google and Microsoft.

Frederic HALLEY

Microsoft European Bizspark summit : B2C vs B2B

Last tuesday was the 6th Microsoft Bizspark European summit on growth and entrepreneurship. It was located in the Microsoft campus in Paris and was hosted by Guy Kawasaki. Among the different presentations, the major one were :

• presentation on innovation by Guy Kawasaki
• a keynote of Jean Philippe Courtois, president Microsoft International. Presentation videos here.
• a startup competition featuring 18 companies
• a presentation on Web Api by Douglas Purdy
• A general discussion with Bernard Liautaud

Comments were unanimous : the event was a major success! Great organization (maybe except the food that was a little scarce), good networking with many of the European Venture Capitalists present, as well as many entrepreneurs and Bizspark network partners. The different Microsoft presentation illustrated the amazing scope and network that Microsoft has developed to push and support innovation and startups. In a few years, what started as Idees in France with 40 startups, has become a worldwide program covering 30 000 companies.

Among the startup presenting, a few standout by the quality of the presentation of the business momentum they already have. I am fully in line with jury on the two best companies of the day :

• kobojo, a social gaming company in the line of Zynga and Playfish. Great execution on an extraordinary market.
• Artesian, a Saas solution complementing traditional CRM solutions to provide relevant data to salespeople.

Among the other companies presenting, here a couple of personal pick :

• Captain Dash, with a great demo on visual mining, data analysis,
• moneydashboard, a UK me-too of Mint
• Sordu, a turkish elearning platform
• Time cockpit, a time management software

Overall, few stellar breakthrough new ideas or concept but a group of solid companies with interesting ideas or technologies.

Most interestingly is the split of the companies between B2B and B2C companies. Most companies driving innovation, and getting funding, are B2C companies. Social media and gaming have first taken up as B2C play before getting into the B2B space. That is what we call "the consumerization of innovation". This trend started several years ago and has continuously accelerated since that. At the Microsoft Bizspark summit, only 4 out of 18 companies were B2C companies. This is probably representative of the Bizspark companies where B2B are predominant. This also reflects the current Microsoft business which is heavily tilted to B2B with B2C a somewhat a lesser business. It is also clear what B2B startups would gain from being in Bizspark : access to technology, credibility toward prospects and customers, being part of the Microsoft ecosystem. For B2C startup, the value is much less clear.

For more information, here are a few fellow bloggers reporting on the event :

• Olivier Ezratty, Opinions Libres (FR)
• Pierre Olivier Carles (FR)

Frederic HALLEY

Gemalto acquires Netsize and shakes the mobile payment sector

On January 5th, Gemalto (Euronext NL0000400653 - GTO) announced the acquisition of Netsize, the European leader in mobile payment and messaging. This event is quite significant for the industry but also for TiogaVenture. It is quite rare to see two of our major customers merge!

For the mobile payment and messaging industry (aka aggregators), it is finally a change in a landscape that had been expected to move for many years. As this sector matured over the mid 00's, consolidation was expected to reach the critical scale in a platform business with high fixed costs. The international leaders Netsize, Mblox, Sybase 365, Verisign and Ericsson IPX have been fighting for key customers across Europe and the US with a myriad of small players entrenched in one or two countries. 

M&A activities started last year with Verisign selling its mobile assets. However, the mobile messaging part of Verisign (formerly known as m-Qube) was left in the cold after the acquisition of the other mobile assets of Verisign by Syniverse. The acquisition of Netsize by Gemalto probably marks the end of independent companies and the era of the big technology group. All key players in this field are now part of a major technology group serving the mobile telecom industry - except Mblox.

In spite of some early comments, the acquisition of Netsize by Gemalto is not that surprising for a couple of reasons : 
- Gemalto was one of the initial investor of Netsize (though Gemventure, the then VC arm of Gemplus) and was still a significant investor in the company
- Gemalto's number one business is the mobile telecom industry. It falls in a related category to the Ericsson, Syniverse and Amdocs who are now the key players in the mobile payment and messaging space.

The open question for Gemalto, and the other major players, is how they are going to innovate and change the game in a field where the SMS domination is fast eroding. The new dominance of Apple in this market is strongly challenging established player by dis-intermediating the payment role of the mobile operator.

To see the official press release, you can check the Netsize website here (English version) or the Gemalto website here (French version).