June 7th, 2013
Now it can be told: Why Meridian’s $26 million all cash exit is incredibly important for the Portland startup scene
When Meridian announced that they had been acquired by Aruba Networks, last month, the terms of the deal were not disclosed. But given that Aruba is publicly traded, those numbers were bound to be revealed at some point. As per usual, Mike Rogoway at The Oregonian was the first to find it.
Meridian Apps fetched nearly $26 million when the Portland startup sold last month to a California company, according to a regulatory filing…
Mike does a great job of breaking down the facts. But I wanted to provide a little context for the Portland startup scene—and why the Meridian exit is important, in my opinion.
1) It was a liquidity event.
One of the things that is going to truly propel the Portland startup scene to the next stage is when entrepreneurs have the wherewithal to invest in new startups and to support their peers with capital. We’ve seen that occur in a more formal way with a handful of angels in town and local groups like Founders Fund, Upstart Labs, Rogue Venture Partners, and the Oregon Angel Fund. And we’ve been lucky enough to have groups from outside of town with strong entrepreneurial foundations—Founders Co-op, True Ventures, Foundry Group—continuing to show interest in the scene here.
But we need more local capital recycling through the ecosystem around here. Exits like this have the potential to facilitate that.
2) It was an all cash deal.
With newer public companies who don’t have buckets of cash laying around, acquisitions are often stock-based deals. Meaning that the acquiree is at the whim of the market to determine the actual value of the exit. Take for example the $1 billion Instagram deal, which continued to fluctuate based on Facebook’s stock price.
In this case—getting acquired by an established public company with cash—allowed Meridian to negotiate an all cash deal. Long story short, you get what you get.
The purchase price was $15.7 million, all of which was paid in cash. In addition, the Company is obligated to make additional cash consideration of up to $10.2 million to certain former Meridian employees who became the Company’s employees, which will be made over a period of approximately three years from the closing date, subject to certain continued employment restrictions. Acquisition-related costs, included in general and administrative expenses, were not material.
3) This was another successful exit for Oregon Angel Fund.
Increasing the strength and confidence of our existing investor base is just as important as minting new investors. And the Meridian exit should have done that. OAF led a $1 million Meridian seed round in November of 2011. As luck would have it, it was also Meridian’s last round. So they weren’t diluted, at all.
And given OAF’s usual levels of investment, I’m going to assume that they realized a pretty healthy return on that investment. Perhaps their best exit ever. And that should only continue to whet their appetite for investing in early stage tech startups. As well as potentially attracting new angels to the fund.
4) It could be one of the best exits in Portland, recently.
While we don’t have numbers from many recent acquisitions, we do have rumors. And most of those exits—while beneficial—have likely been under $10 million. The Meridian exit—should they hit their earn out numbers—is three times that amount. Plus it’s $5 million more than the hyped acquisition of Wifislam by Apple.
5) The time between investment and return is impressive.
Again, Meridian took a $1 million investment less than two years ago. And through their hard work and determination, they managed to return $26 million of value to those investors. That’s no small task. And speaks to the team and the technology they were able to build.
6) We have another big established tech company in town.
While Portland has been struggling to be a headquarter town, we completely kick ass at being a regional office town. Like Intel, New Relic, Google, Microsoft, Yahoo!, eBay, Salesforce, and Jive just to name a few. Aruba now has a footprint here. And that could be a very positive thing.
7) Meridian retains some autonomy.
This wasn’t an acquihire deal. This was the acquisition of a wholly owned subsidiary. That means that Meridian retains some autonomy—while gaining the resources of a publicly traded tech company.
8) It serves as inspiration for other entrepreneurs.
I’m not trying to argue whether “getting acquired” should be a goal for entrepreneurs and startups. I’m just saying that it’s awesome—and heartening—to see the Meridian team rewarded for their efforts. They put a ton of work into this thing. And now they’re seeing some compensation for it.
And if that keeps someone working harder on their startup or inspires one more awesome entrepreneur to take the leap into a startup, that can only be a good thing for us here in Portland.
Congrats, Meridian! Who’s next, Portland?