Questions around the valuation that Topix received continue to swirl in the absence of hard data. Jeff Clavier takes a smart look at the “facts” we do have, and speculates on the meaning of the deal (and valuation) vis-a-vis the venture capital community.
The later is extremely interesting to me (vs. just having fun passing rumors around), as it speaks to the likelihood of entreprenuers/start-ups contining to successfully participate in the build-out of RSS products and services.
To that end, Jeff, I’ll add this, again from a source in-the-know (but not involved in the deal, so get the salt lick out): it sounds like there are significant, multi-year earn-outs. This makes sense to me, as it allows the newspapers to make a small upfront investment ($5MM split 3 ways), and pay the rest based on performance. It’s also nice for the Topix crew, as it gets them working capital now, upside down the line (without an additional exit event) and clarifies upfront what resources the papers will commit to helping Topix succeed.
I suspect these earn-outs are being built into the valuation, which is what’s making the pre/post valuation math funky.