About this time last year I wrote about a great company I was advising called Condaptive. They were acquired by Millennial Media on May 6 of 2011 for mostly stock compensation. I wrote a little bit about it here: http://bullpencap.com/2011/05/25/condaptive-first-exit-of-the-bullpen-era/

There are a few comments to make now that the MM stock offering has been an opening day success.  It was originally priced at $9-11 and then upped to $11-13. Priced at $13 and closed at $25! NY times covered it here: http://dealbook.nytimes.com/2012/03/29/another-good-day-for-i-p-o-s-as-millennial-media-nearly-doubles/

The lessons:

(1) Taking stock when selling your company is a gamble and sometimes it pays off. In this case the guys at Condaptive made approximately 4x based on today’s close vs. if they had taken a cash offer.  I remember going though the pros and cons of this with the CEO when the offer was made. As a small shareholder I was given the same choice of cash or stock and I (in this case wisely) chose the stock.

Let me give you another example of deal like this where the multiple was massive. Remember when Google bought Blogger? It was about 1 year before the IPO of Google. At that time Google was awarding common options with a strike price of $5 – my wife joined the company right around then so I remember the price.

So now that Google trades regularly in the $500-600 range, how smart does Evan Williams look for taking pre-IPO stock? Let’s say Google did some sort of interpolation of its common price $5 and preferred (I don’t know what it was) but let’s guess it was about $15. So Evan got the stock at $10. How does a 50x return on your sale sound. So if he sold Blogger for $20m in Google stock, that turned out to be $1B. Even for the Twitter founder, this is some real money.

(2) When you are quick flipping, avoid or minimize dilution. The Condaptive team did this masterfully as well. They never raised a penny of outside money and sold the company to MM about 16 months after its founding.

Let’s go through the math in terms of how many times more money Hemang, the CEO, made as the result of his shrewd moves.

(A) 4x on the post-IPO performance of the stock
(B) 2x (estimated) from not taking on an investor, the pre-money optional pool etc

In my math that’s 8x more he made.  My kind of guy. Congrats and let’s hope that stock price stays high when the lock up comes off!

Paul