Every single startup’s dream is to get acquired or go public for big bucks. In the fintech world, the acquirers are the large financial institutions like Fidelity, BlackRock, JP Morgan, and Bank of America with billions of dollars on their balance sheets. To them, spending a few hundred million is chump change. If they can find the right technology, they can easily market the product across their respective enormous platforms.
BlackRock did just that recently by announcing the acquisition of FutureAdvisor, a robo-adviser based out of San Francisco. You may recall I invited Bo Lu, the co-founder to play tennis at my club a year ago to learn more about his company and whack a few balls. Here’s the post with my Q&A. Since the hit, I didn’t hear too much about FutureAdvisor until this big acquisition.
Only the insiders know the exact price of the sale, which is to be finalized by the end of 2015. But according to The Financial Times and RIABiz, the price is somewhere around $152M. That’s a very nice 100% jump since their Series B round in 2014 where they raised $15.5M at a $75M capitalization. Their overall funding is estimated at $21.5M.
My initial reaction was one of excitement for everyone at FutureAdvisor. I believe we’re in a private company bubble and I was beginning to wonder, as I do for most money-losing startups, whether or not they’d make it. Finding a gorilla to sell to is exactly what every startup should be doing now.
A 2X return on capital in one year is pretty good for the venture capitalists, especially compared to the return of the S&P 500 during the same time period. If the two co-founders own 20% of the company, that’s a cool $30M each.
But most of us are not founders. Most of us are just employees with tiny shares in a company looking to partake in the technology boom. Let’s look at the acquisition from an employee’s perspective and learn why getting acquired might not be such a great idea.