Google’s Waze Deal Said to Give BlueRun 19-Fold Return

June 18, 2013 Leave a comment

Google’s Waze Deal Said to Give BlueRun 19-Fold Return

Google Inc. (GOOG)’s $1.1 billion acquisition of Waze Inc. produced a 19-fold return for BlueRun Ventures, the biggest investor in the mobile-mapping company, a person familiar with the matter said.

Led by John Malloy, BlueRun had a stake of 15 percent in Waze that was worth more than $165 million at the time of sale, said the person, who asked not to be identified because the information isn’t public. The firm invested a total of $8.7 million in Waze, starting in 2008, Malloy said.

Waze is the first investment for BlueRun that’s fetched more than $1 billion since PayPal Inc., another portfolio company, was acquired by EBay Inc. (EBAY) in 2002. BlueRun, which changed its name from Nokia Venture Partners in 2005, has raised $540 million for its last two funds, Malloy said. About 65 percent of the portfolio is in mobile startups like Waze, which was founded in Israel, he said.“Mobile is really at the epicenter of everything,” Malloy said in a June 13 interview on “Bloomberg West.” It’s “the most global of all technology sectors. It’s also the most horizontal, so it’s impacting many many different vertical industries,” he said.

Out of China

Malloy said BlueRun’s next breakout companies will probably come out of China, where the firm has invested in startups including social-shopping site Meilishuo and mobile-classified service Ganji. He said he’ll be raising additional funds, including one centered around Asian opportunities.

Google’s purchase of Waze, announced on June 11, comes as the world’s largest search engine seeks to recover ground in mobile after its mapping tool was surpassed by Facebook Inc. (FB) as the most popular U.S. smartphone application. The social-networking service had previously been in talks to acquire Waze, according to people familiar with the matter, who asked not to be identified because the discussions were private.

Waze joins a crop of Web-based startups, including Yammer Inc. and Tumblr Inc., that have been acquired in the past year for more than $1 billion. Those deals are poised to help bolster the returns for early-stage funds that have struggled to make money since the dot-com bubble burst in the early 2000s.

As of the end of last year, venture firms had earned 6.9 percent on average annually during the past decade, trailing all of the major U.S. stock indexes, including the average 7.1 percent yearly gain for the Standard & Poor’s 500 Index, according to Cambridge Associates LLC. For early-stage funds, the annual gain was 5.8 percent.

The last time Malloy was part of a such a large transaction was when EBay bought web-payments company PayPal for about $1.2 billion. Malloy backed Confinity, the predecessor to PayPal, while running Nokia Oyj’s venture arm. The firm made about 22 times its money on PayPal, he said.

Mobile Startups

Max Levchin, a PayPal co-founder, raised money from Malloy again in 2005 for his social-media company Slide Inc. BlueRun more than doubled its money from Slide’s $200 million sale to Google in 2010. Levchin said Malloy was bullish on mobile before most Silicon Valley investors.

“He’s got 10 years of experience over anyone else,” said Levchin, who now runs mobile-payments startup Affirm Inc. and is chairman of consumer-review website Yelp Inc. (YELP) “Through the expertise of being a longtime mobile guy, he’s seen everything through the prism of mobile.”

Malloy, whose firm is based in Menlo Park, California, said he first met Waze’s founders in early 2008 at the Mobile World Congress in Barcelona. Soon thereafter, he led the first investment, which included Israeli firms Magma Venture Partners and Vertex Venture Capital. In 2011, Kleiner Perkins Caufield & Byers, an early Google backer, and Li Ka-shing’s Horizon Ventures Hong Kong led a $30 million round.

Malloy has been a board member since his initial investment and said he’s an avid Waze user. Waze, which runs on Apple Inc.’s (AAPL) iOS and Google’s Android mobile operating system, alerts users to potential traffic slowdowns and suggests alternative ways to reach destinations. The app lets users share their location, so others can track their progress.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Emily Chang in San Francisco at echang68@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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