Thoughts on McAfee’s acquisition of tenCube

Earlier today, McAfee announced that it would be acquiring Singapore-based mobile security startup tenCube via a press release. SGEntrepreneurs and e27 both broke the news at about the same time.  According to the release, the acquisition is expected to help McAfee:

  1. Further establish itself as the leader in mobile security with the most complete set of mobile technologies—McAfee now has the technology needed for users and their families to locate, lock, encrypt, protect against malware, wipe, filter, manage, back-up, restore and access their data online
  2. Leverage its expertise at the endpoint and in the cloud to broaden its existing mobile security portfolio beyond anti-malware, data protection, Web security and family protection
  3. Expand the addressable device market with best-in-market mobile device platform support, including a wide range of mobile operating systems including Android, Blackberry, Symbian, Windows Mobile, iPhone and Java powered feature phones
  4. Combine the skills and resources of both companies to develop and deliver scalable solutions through global partnerships with mobile service providers and mobile device manufacturers
  5. Expand the breadth of its device management solutions available for enterprise IT administrators to implement policies, assist users and enforce compliance for mobile applications across the enterprise

McAfee dreams of Mobile and the Cloud?

McAfee most likely acquired tenCube as part of a broader corporate strategy to enable it to blend its security practice with the advent of the cloud and mobile connected devices, and stay ahead of its rivals.  The acquisition price tag was (obviously) not mentioned, and while the exact figure will probably never be revealed, I’m guessing the amount could lie anywhere between US$5m to US$35m.

For its FY2009, McAfee reported US$1.92b in revenues, an increase of about 20% over FY2008.  It had cash and other cash equivalents amounting to US$950m.  Its board also authorized up to US$500m in stock repurchase.  Assuming that the entire stock repurchase program was completed, McAfee would still have a sizeable war chest to fund its acquisitions.

To Market, to Market!

The market rate for acquisitions in the Valley where larger companies acquire smaller early-stage startups for their team and/or product are, on average, US$1 to US$1.5m per founder. I arrived at the floor of my “magical” US$5m – US$35m range by taking 4 x US$1.25m = US$5m.

Still, tenCube is no young ‘un, having been around since 2005, won numerous industry accolades, acquired a decent user base and established itself as a serious player in the mobile security space. I’ve also heard nothing but praise for tenCube’s products from a certain telecom operator in Singapore. The team has surely learnt a lot over the past 5 years, and are in a strong position to help drive McAfee’s strategic goals for mobile devices and the Cloud. If I had to nail down a figure, I’d hazard a more precise guess of US$25m.

On a Personal Note

Analysis and hunches aside, I’m really happy for Darius and his team.  I’ve known Darius since we were both 16 going on to 17, back in our junior college days.  We spent a lot of time hanging out during the first 3 months of 1997 and were part of this 4-person clique.  We reconnected in 2002 for a business plan competition at NUS, before I left for my undergraduate at Carnegie Mellon.  I can still recall the details of our plan (an online events management platform).  Even though we didn’t make it to the finals, we had a helluva good time.  I reconnected with him after my return to Singapore in 2006, and have stayed in touch ever since.

Good tidings for Singapore’s Startup Ecosystem

Darius has shown us all that entrepreneurs in this part of the world, like their Silicon Valley brethren, also possess the ability to build tech companies that are of interest to tech incumbents like McAfee.  Aspiring local entrepreneurs and engineers looking to work for startups, who face resistance from their parents because they’d rather their kid work for the government or banks, can now point to Darius and his team as heroes.

It’s been a while since we saw an exit of this nature in Singapore – the last one being Encentuate’s acquisition by IBM.  To me, the most significant difference between Peng Ong’s and Darius’ exit won’t be the price, but the fact that Darius is almost a good 2 decades younger.  I’ve met a ton of quality entrepreneurs and ideas since I joined Neoteny Labs last December, and I’d like to think that tenCube’s exit heralds the start of a new wave of entrepreneurs, not just rising to heed the keening call of entrepreneurship, but also seeing their ventures bear fruit, and having more of them find their pot of gold at the end of their rainbows.

Three cheers for Darius, and for all the entrepreneurs in Singapore and the rest of Asia Pacific!  The floor is all yours.

About James Chan

James Chan is an entrepreneur, investor, geek, photographer and husband/father based out of Singapore. Apart from frequent travels to Vietnam, Myanmar and Indonesia for work, James can also be found online via his trusty 15" Retina MacBook Pro or iPhone 6+.