Friday, December 5, 2008

Paul English, Kayak, Sequoia, and the Triple-Digit Club

My most recent Globe column focused on what I call the "Triple Digit Club" -- companies that have raised $100 million or more in venture capital funding.

The club includes Boston-area companies like E Ink, Kayak, A123 Systems, GreatPoint Energy, and Luminus Devices. (Kayak is the current club president, having raised $223 million.)

My favorite tidbit from the column is that Sequoia, one of the investors behind Kayak, apparently used them at the famous "RIP Good Times" presentation in October as an example of a company that already operates lean and mean. From the column:

    The entire start-up world...took notice last month when several partners of Sequoia Capital, the venture firm that funded companies like Google, PayPal, and Electronic Arts, called a meeting to warn its companies about the coming recession. The text on the opening slide? "R.I.P. Good Times." Spending cuts, the firm advised, are a must, and acquirers will gravitate to profitable companies.

    Sequoia, as it happens, is an investor in Kayak (A123Systems, too). According to [Kayak co-founder Paul] English, people who were at Sequoia's cautionary meeting say that partner Michael Moritz mentioned Kayak several times.

    "They were talking about us as a company with a lean profile," he says. "In their portfolio, we are the skinniest as far as costs." That frugal posture will be an asset if even gloomier times are ahead.

The video features English talking about his approach to hiring and firing engineers.

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Anonymous Anonymous said...

Kayak may be lean and mean but even a starvation diet won't make this a good investment. last round valued the company at $600MM (or was it $700M?)

back in the frothy pre-meltdown market comparables like orbitz and expedia trades at 1.5X or maybe 2X current revenues

today ORB trades at 0.25X and EXPE trades at 1X

Even at 2X kayak's valuation would be maybe $200-250MM

of course kayak's profit margin is so thin its negligible, much more like orbitz (negative earnings per share) than expedia (half decent earnings per share)

small wonder that almost all of sidestep's investors ran for the xist when offered a valuation of $200MM rather than go for the big dream proposed by kayak and their foamy mouthed VC backers

so, even lean and mean, the verdict on kayak: up the creek without a paddle

December 16, 2008 9:04 AM  

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