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Comment by brianbreslin | Hacker News Reader

considering they raised $3.5 or so in funding, what do you guys think of $10M exit. yay or nay? and why?

Call it a chop. The founders will stay as long as they need to vest and move on to something else bigger and better. An exit is still an exit and that's enough cachet to get funding for another project.

What's more interesting to me is whether Yelp wanted in on the action. As they move towards more discretionary data and including menu information while letting people review individual menu items this would have been a no brainer for $10MM.

That's the real buried lede. Something's up, either Yelp fumbled or Foodspotting as a concept and database just wasn't valuable at all.

But "tech journalism" being "tech journalism" we just get reblogged PR puffs. The gossipy comments were more interesting than the article itself.

Off the top of my head, let's do some math (keeping it simple, I have no idea of actual #s):

Before fundraising: 84%: 3 Co-founders @ 28% each 16%: option pool

1st round - $750k @ $3.75M post. No liquidation prefs or ratcheting. Now the cap table looks like this:

67.2%: 3 Co-founders @ 22.4% each 12.8%: option pool 20%: Angels

2nd round - $3M @ 10M post. 1x straight preferred liquidation pref (not participating), no ratcheting.

Cap table:

47.04%: 3 co-founders @ 15.68% each 8.96%: option pool 14%: Angels 30%: Blue Run

A $10M exit looks like this: $3M: Blue Run $4.70M: 3 co-founders @ $1.568M each $896k: option pool payout $1.4M: Angels

Not bad, not great, but that assumes no participating preferred preference, which would have everybody but Blue Run doing a heck of a lot worse.

You have to consider the fact they probably didn't give out all of the optional pool. Depending on how many employees they hired and at what skill level. My hunch is they only gave out 8% of the optional pool. At most.

Interesting perspective from the comments here.

$1.5M per cofounder over 3 years puts them at $500k/year. Pays more than most jobs I can think of. And you can certainly do a lot with $1.5M in the bank (no mega mansion in SV, but endless traveling, comfort, etc). All relative, I guess. Us Hacker News folk have a skewed vision on the world :)

You can't compare a rare successful startup exit to a regular salary. You could, but you need to multiply both by the risk factor.

$1.5M is quite low, in my opinion. Not even close enough to retire in the US.

Who said anything about retiring? These people are 30 years old. I don't think the avg 30 year old has $1.5M cash in the bank (and a comfy position at a tech company). All I'm saying is that it's very respectable.

It's slightly more respectable than someone winning a lottery. For every success story like that there are hundreds of developers who didn't take regular jobs and ended up in debt and bankruptcy.

Two years since their Series A suggests that they were at or very near the end of their runway. An exit is an exit is an exit, but from my perspective it looks like this is a larger-scale acquihire.

edit: oh yeah, I should mention that I was (past tense) a founding engineer at a company that (I guess technically) competes with FoodSpotting. But, FWIW, I haven't worked there in a year.

Massive Yay. Growth was likely stalled or slow, they had no revenue, and were running out of runway. The investors are getting their money back, and the founders are getting checks for $1M+.

Who are we to judge the motivations of the founders and investors? Everyone has different priorities and goals for their careers. We have no basis for saying "yay or nay".

It's a good exit.. don't think they were going anywhere really. They do have have good UI/UX talent, probably worth the acquisition price.

Is a 12 person team [1] really worth a $10M acquihire?

[1] http://www.foodspotting.com/about/team

Is a food-oriented photo app worth anything?

It can be if those photos get you to make a reservation at one of the restaurants in OpenTable's network.

Chances are you won't knowingly spam your friends to tell them to use OpenTable. Maybe you had a great experience with it and you post it once on Facebook. You're not going to continue posting how amazing your experience with OpenTable was. You MIGHT think some/most/all of the dishes you eat at restaurants are amazing. You MIGHT post those dishes on Facebook. If those dishes are tied to restaurants that OpenTable serves, they just landed on an amazing advertising model.

instagram sold for a billion.

Foodspotting reportedly had 2MM users. Depending on the % active, etc. OT is picking up users at $5/per is probably in decent range of what they typically will pay for an active user through other marketing channels.

Add in the talent, the app, etc. and they get a good deal out of it as well.

The general rule is $1mm / engineer, as I've heard colloquially.

According to Crunchbase, they raised $3,750K. http://www.crunchbase.com/company/foodspotting I would roughly guess their 3 mln A round would be around 10 million valuation. So then the exit would be oke, but not super: No raise in valuation since its A round.

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