Monster Venture Partners has acquired Israeli startup BitWine and replaced the CEO. Will VC exits become a new trend?
Monster Venture Partners, an early-stage venture capital firm based in Seattle, has completed the acquisition of a majority share in the Israeli startup. Ronnie Gurion, a former Director of Business Development at Expedia, was hired as CEO, replacing founder Elad Baron who will remain President and CTO of Bitwine. The terms of the deal were undisclosed, but rumoured to be around $20M.
BitWine was founded in 2006 by Elad Baron and Alon Cohen, both veteran Israeli entrepreneurs who previously founded VocalTec, one of Israel’s first VOIP companies, and Whale Communications, an online security company swallowed by Microsoft in May 2006.
BitWine started with a simple concepts: 2 APIs provided by eBay. The Skype API, enabled ‘high quality’ voice and video communication (I’m using the term loosely here) and the Paypal API which facilitated secure instant payments online. Voila, a business was created, providing a platform for P2P consulting, paid by the minute.
When I met the founders in New York in 2006, my first instinct was that this could be a great application for porn and for fortune telling, the two categories that made keen.com rich in the ninetees. But they had different plans – similar to Gerson Lehrman Group, Kasamba (later acquired by LivePerson) and other expert networks, they wanted to focus in building an expert network, ranging from yoga teachers and professional nutritionists to life coaches and business gurus. In retrospect, sticking with porn and tarot would have probably been more profitable in the long run because the site never really took off. In the peak days, traffic reached 14K unique users a month despite attempts to create hubs in Nutrition and Tech.
To date, the company had raised $1.5 million from CrossBar Capital in series A.
According to TechCrunch, MVP will use Bitwine’s technology to power online consultation capabilities across its portfolio companies, including Questions.com, Careers.org, Patents.com, Traveler.com and Slideshow.com.
The New Exit Strategy?
Q3 was the weakest Quarter since 1977. Silicon Valley is going through a terrible drought of exits. IPOs are long gone, and M&A deals in tech are being published further and further apart. According to the latest quarterly exit-poll report by Thomson Reuters and the NVCA, only one venture backed company filed for IPO in Q3 of 2008. It was hosting service provider Rackspace back in August, and since going public the company’s shares lost 30% (from over $11 to under $7.29).
As money become less available, startup valuations will start going down. Will VCs take advantage of the situation and quickly transform into private equity shops? Will entrepreneurs settle for lower valuations and sell out early? I’m wondering whether the Bitwine model is the new exit strategy. Why should a venture fund invest a million for a share of the milk when they can spend two million and buy the whole cow? These questions remain to be seen.
P.s. Coincidentally, I had dinner with Ronnie Gurion in San Francisco last year and we talked about the large number of promising Israeli startups. I’m sure he’ll do a great job leading Bitwine. So if this reaches you- good luck Ronnie!