Expedia to acquire HomeAway for $3.9B

Austin, Texas-based vacation home rental service HomeAway today announced that it will sell to travel company Expedia in a deal worth $3.9 billion in cash and stock.
HomeAway makes it easy for people to rent out their homes to folks that would otherwise be forced to book their stay at hotel rooms. It’s business also grew to include rental management services via VRBO and vacation rental search. The company indirectly competes with the likes of Airbnb and a slew of others across the globe.
Both of the company’s boards of directors have approved the purchase, which is still subject to regulatory approval that’s expected to happen in Q1 of 2016. As terms of the deal, Expedia is offering $38.31 per share and offer to buy outstanding shares of common stock for $10.15 + 0.0265 Expedia shares.
“With our expertise in powering global transactional platforms and our industry-leading technology capabilities, we look forward to partnering with them to accelerate their shift from a classified marketplace to an online, transactional model to create even better experiences for HomeAway’s global traveler audience and the owners and managers of its 1.2 million properties around the world,” said Expedia CEO Dara Khosrowshahi in a press release.
Obviously the move makes lots of sense, considering that Expedia is primarily focused on providing a portal (well, several) for people to book all their travel plans. Properties available through HomeAway will likely benefit from the added visibility. For Expedia, the move almost certainly has to do with Airbnb creeping up as a potential competitor in travel booking services, having just recently launched Airbnb Journey.

Update: Google expands venture fund to $300 million

Google has expanded the size of Google Ventures’s annual fund from $200 million to $300 million annually, which will allow the firm to expand the scope of its deals and increase its presence as a major venture capital firm since its founding in 2009.

EQAL Now Wants to Compete with Ning

EQAL, aka the online studio created by the lonelygirl15 guys (but now focusing on derivative rather than original content), today announced a new hosted social platform. The product, called Umbrella, is aimed at other web series creators as well as celebrities and web stars who want to provide content and connect with fans. A private beta has yet to launc, and pricing has not yet been announced.
EQAL said in a press release that the advantage of its platform will be its simplicity and close links to existing Facebook, Twitter and YouTube accounts. Users will be able to create profiles, discuss topics among each other in forums, and view episodes. Around the time it raised $5 million in funding last year, EQAL had acquired a white-label social-networking platform. It used the platform most recently for Harper’s Globe, its companion web series for CBS’ (s CBS) Harper’s Island. The idea is to move the community that builds around a show out of the free-for-all on sites like YouTube (s GOOG) and MySpace (s NWS) and onto a platform that’s dedicated to it.
EQAL said Umbrella will be a simplified version of this enterprise service, giving site owners the ability to harness information about their users drawn from them connecting up their Facebook, Twitter and YouTube accounts.
But while being able to control the environment around its shows has been good for EQAL, it’s now putting itself into competition with heavyweights like Ning that have serious amounts of funding and have sunk large amounts of time into building easy-to-use white-label social sites for celebrities and entertainment properties. Making original content might have turned out to be an exceedingly difficult business, but white-label social networks are not exactly an open frontier.

Entrepreneurs Ask VCs for Cash Back

homeaway This week’s $250 million funding for vacation home rental listing company HomeAway Inc. was the largest web-related venture capital investment since the bubble days at the turn of the millennium. But it also contained a provision that signals how the lack of venture exits may be causing some entrepreneurs to ask for cash now, rather than waiting for an initial public offering or sale that may never come.
As part of the HomeAway financing, a portion of the money will go toward repurchasing some of the shares held by employees and early investors in the Austin, Texas-based company. CEO Brian Sharples wouldn’t disclose how much money, or what percentage of shares, affected employees would be able to exchange for cash, but traditionally such deals are fairly rare. However, in the last few months I’ve talked to a growing number of entrepreneurs who have negotiated such deals. The fact that they’re becoming more common, especially in younger companies, shows how for some, the economic downturn is spurring a lack of faith in the venture model.
That model is one that rewards entrepreneurs and investors for building up a solid business over a 5- to 10-year period, then selling it, either to the public through a stock offering, or to an acquirer for a sum that makes those years of work worthwhile. It’s the American dream, Silicon Valley-style. But what if entrepreneurs aren’t willing to wait that long? And what if the exit markets aren’t open?
As deals like HomeAway’s show, that’s precisely the environment we’re in now. When a venture-backed company does such a deal it’s generally because employees who have taken a lot of equity in it want to exchange that equity for cash. Usually equity holders get cash after a company exits, via either an IPO, merger or acquisition. With the IPO window shut (so far the total number of IPOs are down by 81 percent this year), and M&A slowing, that’s looking less likely.
Sharples explained the decision to offer shareholders the ability to cash out as a reward for the work employees have put in. The company had planned to go public in 2008, but given the appetite for IPOs, have shelved the idea for at least two more years. This would disappoint any shareholder, but HomeAway is only three years old. For early investors or founders to expect an exit in three years is ridiculous. Other than back in the bubble years, most venture-backed startups don’t achieve an exit for seven years, and in some cases, such as with clean technology, investors are looking at 10 years before a payday.
HomeAway is more of a private equity business model (the company is buying up Internet properties that list vacation homes available for rent in the U.S. and potentially worldwide cities), so perhaps that explains the short time to a planned exit. But HomeAway isn’t alone. Facebook has allowed its early employees and shareholders to sell some of their shares for cash, despite being only four years old. Digg, the news ranking and aggregation service founded by Jay Adelson and Kevin Rose, raised $28.7 million in September, a deal that rumored to have involved Rose taking some cash.
It’s a win when employees can cash out, especially in such dismal times, but raising money in order to buy back shares has the potential to set a lower fair market value for the startup, as well as to dilute the value of shares held by existing shareholders. These sorts of deals are a sign of stress in the venture model, and we’re likely to see more of them if it remains difficult to take a company public in the coming year.
This article also appeared on Businessweek.com.