I don’t have any special insight into the big Google-AdMob acquisition today. The closest I get is that my neighbor’s daughter was one of the first 50 hires for AdMob in the Bay Area – so congrats to the whole Kirsch family!
My big achilles heel at my first startup was a collection of youthful and naive assumptions about how the venture game works, and an overly sentimental attachment to my “baby” (my business) that I didn’t want to sell when my exit opportunities peaked. I’ve learned a lot since then, so I figure it might be worth sharing how I look at a deal like Google-AdMob as a entrepreneur typically chasing venture capital.
First, I remind myself that deals like this one are extremely rare.
AdMob is the third biggest deal (behind DoubleClick and YouTube) for Google – the ultimate dream acquirer in many startup business plans. Before champagne popped over this past weekend, AdMob had to be one of the 100 blips on investor radars that warranted a casual glance. Then they had to be one out of one hundred from among this original one in a hundred to make it from “glance” to full partner presentation.
If you’ve pitched a full gathering of partners at a major venture capital firm, congratulations. You’re already 1 in 10,000 among startups just like AdMob in late-2006.
Assuming that the typical VC probably only funds less than 20% of the Series A deals that come to full partner presentation, AdMob is at 1 in 50,000 by landing their initial $4mm. If pitching for funds has seemed like a long, frustrating process to you as an entrepreneur, it’s because the odds against you getting funded can be staggering.
And forget about the odds of a big exit. AdMob has been executing brilliantly since they left the gate with a Series A check in hand, and gone on to be profitable with near $100mm in gross revenue. (They keep 40% in a 60/40 split with publishers according to TechCrunch.)
This execution is what’s landed them a near one billion dollar exit in a sea where only one in ten Series A-funded companies exit for a gain at all, and 90%+ of those that do go for between $30-100 million according to a Wilson Sonsini slide deck that I used in my second funded startup.
On Wednesday, I’ll follow-up this post with a look at how the Google pot of gold likely broke down for the founders and employees. Every time I do this kind of pencil math on a deal, I’m reminded again why chasing an exit should always be second to building your product and revenue – something that I’m sure the AdMob team knows despite this Google icing on the cake AdMob has baked in just over three years.