Morning Report: $7.5 billion in Microsoft stock is a lot of money. Here’s how well some of the folks receiving a piece of the lucre have done.
Today the larger technology industry is chewing a story that broke yesterday: Microsoft is the new owner of GitHub, the popular developer hosting and distribution platform.
That Microsoft bought the company has figured larger than the price in coverage so far, it seems. The acquiring company’s former life as a virulent anti-open source market participant is something that its recent history as a booster of Linux and other open source tech has not yet fully ameliorated.
Regardless, here at Crunchbase News, we’re not about to get in the middle of developer fight. We’d rather stick sharp objects under our own fingernails. Instead, let’s work to understand a bit of the math behind the firm’s exit.
Here’s what we know from the companies in question and what Crunchbase has on file:
- Exit price: $7.5 billion in Microsoft stock (source).
- Series A investment: $100 million.
- Series A pre-money valuation: $650 million.
- Series A post-money valuation: $750 million (source).
- Series B investment: $250 million.
- Series B pre-money valuation: $1.8 billion.
- Series B post-money valuation: $2.05 billion (source).
I’m sure that some of the above numbers are at least slightly rounded, but they draw a pretty good picture of the solid exit. From $750 million to $7.5 billion is a 10x result. As always, we don’t know terms on that deal or the later B, so we cannot say “this is the amount of money that Andreessen Horowitz and SV Angel” walked away with. What we can know is that they multiplied their capital and that whichever a16z fund that check came from is now probably breathing easily.
(We may be overstating that slightly. If a16z used its Parallel Fund III, a $1.5 billion fund that started investing in January 2012, a $750 million check would only return half the fund. Still, liquid stock is better than illiquid stock.)
Later investors in GitHub’s Series B also multiplied their invested capital. A16z was back in that round, along with Thrive Capital, Sequoia Capital, and IVP. We don’t know the breakdown of that quarter billion dollar round, but those investors picked up a nearly 4x multiple if we think as simply as we can.
We could do better with more information, but that’s a start.
Update: Recode has notes that a16z picked up “over $1 billion” in the exit. How does that math work out? It seems that a16z did a good job defending its Series A investment at the times of the larger Series B. Presuming that it did the vast majority of the A, a16z would have owned around 13.3 percent of GitHub. Presuming that it kept up that percentage during the B, presumably using pro-rata rights, 13.3 percent of $7.5 billion is a billion. (The math is funny: 100/750*7500, etc.)
From The Crunchbase Daily:
Another unicorn is headed for the exit door. Microsoft will pay $7.5 billion in stock to acquire GitHub, operator of the popular code sharing and collaboration platform. San Francisco-based GitHub, which says it is used by more than 28 million people, previously raised $350 million in venture funding.
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