Transaction Overview: Telenav Acquires ThinkNear | Street Fight

Transaction Overview: Telenav Acquires ThinkNear

Transaction Overview: Telenav Acquires ThinkNear

Target:      Buyer:

On October 16, 2012, Telenav (NASDAQ: TNAV, market cap: $268mm), announced the acquisition of “context-centered” mobile advertising company ThinkNear for $22.5mm.

Target Description
ThinkNear offers businesses the ability to target their mobile advertising effort toward consumers in specific geographic locations and based on other contextual information.  ThinkNear calls this “Situational Targeting”, which takes into account where consumers are, what they are doing, the time of day or season and what is happening in the environment around them.

ThinkNear aggregates mobile ad inventory from a broad array of mobile ad networks and exchanges, and offers this inventory, in real-time, to clients that can target a geo-fenced geographic area as small as 100 meters from a location.  ThinkSmart offers businesses the ability to purchase the ad inventory and only pay for impressions that directly lead to sales.  This level of location precision exceeds the typical level that businesses are accustomed to from ad networks, which tend to use zip code searches or designated market area (DMA) targeting.  ThinkNear claims to reach approximately 20mm customers who drive seven billion impressions per month and clients enjoy average click through rates of 4x industry norms.

ThinkNear graduated from New York TechStars in 2011, which is a startup accelerator that provides seed funding and mentorship to aspiring businesses.  ThinkNear has 12 employees and is headquartered in Los Angeles, CA and has raised $1.6mm in seed funding from BOLDstart Ventures, ff Venture Capital, Google Ventures, IA Ventures (Ben Siscovick), Metamorphic Ventures, Qualcomm Ventures, Real Ventures, TechStars (Bill Boebel, David Cohen, Ben Sun, David Tisch, Matt Turck) and Zelkova Ventures.

Buyer Description
Telenav is a provider of consumer, enterprise and automotive location-based services.  Services include local search, location tracking, GPS navigation, mobile advertising and mobile commerce.  Telenav offers its services to app developers, advertisers, wireless carriers, automobile manufacturers, OEMs and enterprises.  Clients include AT&T, Bell Mobility, Boost Mobile, China Mobile, Ford, QNX Software Systems, Rogers, Sony, Sprint Nextel, T-Mobile, U.S. Cellular, Verizon Wireless and Vivo Brazil.  Telenav’s technology is available on approximately 1,200 different mobile devices, all major mobile phone operating systems and multiple wireless network protocols.

Upon completion of this acquisition, ThinkNear will be integrated into Telenav’s mobile local advertising group, now called Scout Advertising.  ThinkNear’s location targeting will be able to tap into Telenav’s Drive-To Advertising platform, which enables consumers to experience browser-based turn-by-turn directions that direct them to the location being advertised.

Transaction Parameters
Telenav paid $22.5mm in total consideration, consisting of approximately $18.5mm in cash plus restricted stock  and assumed options.

Transaction Value

$22.5mm

TV/Invested Capital Multiple

14.1x

Comparable transactions within the hyperlocal mobile marketing sector include Esri’s acquisitions of Geoloqi and GeoIQ, Telenav’s acquisition of Goby, eBay’s acquisition of WHERE, Merkle’s acquisition of 5th Finger and Boingo Wireless’s acquisition of Cloud Nine Media.

Strategic Rationale
Telenav is one of the first providers of the software which powered turn-by-turn directions for vehicle based GPS navigation devices.  Telenav’s business has been seriously challenged by the acendency of smartphone based navigation, particularly free to the consumer offerings by Google and Apple.  The revenue model in the industry is rapidly shifting from license or subscription-based revenues to ad based revenues.  While advertising is still a minority of Telenav’s revenue, it promises to be increasingly important in the next several years.

ThinkNear provides Telenav with a product that can drive near-term advertising revenue and is well suited to be integrated with Telenav’s turn-by-turn direction capability.  The ThinkNear team and their mobile advertising knowhow are also an important addition to Telenav’s engineering and product organizations.

Architect Partners’ Observations
While ThinkNear’s product is well positioned, the development of the business is relatively early.  This transaction appears to be as much driven by the talent within ThinkNear as by the product and technology fit.  Telenav has scheduled its next quarterly earning call in October 25th where some of the financial metrics of ThinkNear may become clearer.