Microsoft buys Berlin's 6Wunderkinder: some thoughts, and some facts

(From Tech.eu):

Microsoft has seemingly made yet another acquisition that makes sense (what is it with the software giant lately?), picking up Berlin-based 6Wunderkinder and its well-designed, popular productivity appWunderlist for a reported $100 million to $200 million.

While pundits – myself included – have taken to Twitter to debate whether this is a good deal for Berlin or not (it is, and it isn’t), here are some thoughts and facts about the deal to give you some context.

First of all, the acquisition has not been confirmed by either party yet. I have no doubt The Wall Street Journal’s Amir Mizroch’s source is solid, though, or it simply wouldn’t have been published yesterday.

Also worth noting: the German-language Manager Magazine reported that Microsoft was in late-stage negotiations for the acquisition of the Berlin startup on the 20th of May, more than ten days before the WSJ report, albeit without mentioning a price point. In fact, the word on the street was that 6Wunderkinder was on the block for $300 million only a few weeks ago. Either those were totally unsubstantiated, or the price has come down fast during the negotiations.

Second of all, the purchase price range reported by the WSJ is very broad. There’s a world of difference between selling a company that has raised around $25 million in capital for $100 million or for $200 million – for the founders and its financial backers, no matter what stage they’ve invested in.

Thirdly, there seems to be some confusion about 6Wunderkinder’s current cap table. In a blog post, the very bright Gil Dibner (formerly a VC with Index Ventures and DFJ Esprit and now primarily an angel investor) speculates about the importance of the acquisition and the return for the investors involved.

Dubbing the deal a “triple wake-up call”, he did some math and concluded that this deal is likely insignificant in terms of returns for 6Wunderkinder’s late-stage investors, notably Sequoia Capital.

To wit, the latter led the last ($19 million Series B) round for the Berlin startup, and likely put up the bulk of the cash. Dibner pegs 6Wunderkinder’s valuation at the last round at $76 million; reports indicate it was more something like $60 million.

Either way, it doesn’t look like Sequoia is making out like a bandit with this transaction.

Also note that Tech.eu has learned, and confirmed, that two of 6Wunderkinder’s early investors, High-Tech Gründerfonds (HTGF) and T-Venture (previously the venture capital arm of Deutsche Telekom) sold all of their shares to Earlybird VC and Atomico in secondary transactions, respectively.

Does that mean Earlybird, Atomico and Sequoia were the only investors in 6Wunderkinder left on the cap table? No, it does not. In fact, E42 Ventures – a small investment firm founded by German entrepreneurs Alex Koch, Frank Thelen and Marc Sieberger – was the first financial backer of 6Wunderkinder back in late 2010 and remains a shareholder.

Very likely, they’re the ones – along with the founders – who will be celebrating the deal the most. As Dibner says, this is the way it’s supposed to work, and it’s healthy for the ecosystem.

HOW BIG A DEAL IS THIS?

Then there’s the debate whether this is a Good Deal?. Personally, I’m on the fence.

I agree with people who said this is a great deal for the early investors, the company’s founders, and theBerlin startup ecosystem in general. There’s absolutely no question that it is.

At the same time, I can’t help but think 6Wunderkinder could (should?) have been bigger and bolder.

SWINGING FOR THE FENCES

Almost a year ago, our own Charmaine Li interviewed Christian Reber, co-founder and CEO of 6Wunderkinder. Allow me to copy-paste from the interview:

“When we started, there was kind of a wave, lots of new companies were started – especially in 2010 and 2011 – I remember Gidsy, Amen, Readmill,” he recalled. “It was quite easy to raise money at the time, as a young startup. And then 2012 and 2013 were kind of the years where everyone had to prove themselves – some survived and some didn’t.”

For those who didn’t following the unravellings of the three aforementioned (and über-hyped) companies, this is what happened: in short, Gidsy was acquired by Berlin-based travel experience platform GetYourGuide, opinion app Amen was taken over by Berlin social music streaming startup Tape.tv and e-book reading app Readmill was acquired by Dropbox.

Now, Reber sees another wave of new startups and businesses cropping up in the German capital.

“I think what’s happening is that the startup industry is becoming far more professional. That’s really good, of course, but still the massive businesses are kind of missing,” he said.

“You have a few huge businesses, but they’re still not globally as relevant as we’d hope they’d be,” Reber posited. “I think that’s the next big milestone for every entrepreneur. As long as as we don’t try to sell our companies too quickly and try to really create large, lasting businesses with lots of talent, we can achieve that.”

Fast forward one year, and Reber has (reportedly) sold 6Wunderkinder to Microsoft, rather than swinging for the fences and creating that mystical ‘large, lasting business’. That is not to criticise him – who knows what happened in the 12 months that passed since then – but calling this deal an outright fantastic outcome for the startup is clearly only true to a certain degree.

What really interests me is what happens next. With 6Wunderkinder, but also with Reber, his early investors and with the Berlin tech startup ecosystem in general.