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:
- 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
- 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
- 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
- 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
- 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.
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{ 3 comments… read them below or add one }
Good point on age difference though of course, Encentuate isn’t Mr Ong Peng Tsin’s first company. Nevertheless, tenCube’s pending exit will hopefully inspire and welcome a new era of entrepreneurs.
Darius & team have worked hard. I have seen them in their nappies and now being big boys-they had the DNA and now proved it.
Ultimately, with the right platform SEA is a great territory to be discovered.
Good news to finally hear that a local tech company has been incubated , developed and sold. We need more success stories like this one in order to inspire and develop our community of technopreneurs.
The only questions I have are about the deal. I hope that Darius and team are keeping enough upside for themselves. My major concern about all these deals is whether the entrepreneurs themselves got a good deal out of the experience. It is easy to get excited about the brand names, the acquisition and of course big press coverage. But when the dust settles, what’s the situation.
To recap, Tencube is a 5 year old company. Revenue is neglible at <$500K for 2009 and I am sure it is still loss making. They have taken in 1M in feb 2010 from Indian firm valuing them about 4-5M SGD. Earlier, they took in 400K from SEEDs and I believe founders prob put in 100-200K. Via all these exercises the key founder is prob diluted to about 14-16% stake max.
My educated guess is that Mcafee paid anything from SGD$5M-10M but I think the guess of 7-8M or US$5M is prob quite accurate. 40% return for Indian firm for ½ year work.
Using US$5M, key founder share is worth about 700K-800 USD. Not bad for a 29 year old but hardly anything to retire with. For 5 years work, it means about 160K US per year. Don’t forget I am sure they probably took low salaries last 5 years. Make no mistake, SEEDS, the Indian fund etc are happy. They get to exit with profit. Eg. Seeds & NUS S$400K now worth about 1.4M SGD that is about 300-400% in 5 years for nonfull-time involvement. Indian fund makes at least 40% for 6 mths work.
Which brings me to the upside bit for founders. If my guesstimate is not too off, then Darius and team should lock in more upside by negotiating performance deals. Mcaffee obviously sees good potential in what WaveSecure has. So why not negotiate to continue working and then take a good cut of future profits from WaveSecure?
Of course, my guesstimate could be wrong and Wavesecure is super valuable and Mcafee paid US$20M for it. Then Darius gets about 3.2-3.5M USD. Almost enough to retire depending on the person but I think a very good deal for 5 years work for one so young!
All in all a great story. I hope to read much more such stories in the years ahead. And perhaps one where the founders gain the lions share!
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