Educated in Cambridge (UK), Rich in Silicon Valley

Rapportive is sold to LinkedIn for $15million giving a windfall to Cambridge University Alumni.

Rahul Vohra, Sam Stokes and Martin Kleppmann met in Cambridge, UK, and crossed the pond to join Y Combinator to start Rapportive.  Rapportive “shows you everything about your contacts right inside your gmail inbox” by bringing together info from Facebook, Twitter, LinkedIn and others.

Rapportive was started in January 2010, battled through Y Combinator and in August 2010 raised over $1million from an impressive list of investors: “Gmail creator Paul Buchheit, Scott Banister, Jason Calacanis, Gary Vaynerchuk, David Cancel, Dharmesh Shah, Shervin Pishevar, and Roy Rodenstein.  Also participating are Dave McClure’s new fund 500Startups, Nivi & Naval Ravikant’s VentureHacks, Charles River Ventures, Kima Ventures, Zelkova Ventures, and BOLDstart Ventures.”  I think that the founders had to leave the USA to gain their visas – reminds me of the start of Duofertility but this time with the founder having to return to New Zealand to apply for a work visa in the UK.

Not one Cambridge Angel appears in the list of investors despite some of them funding Rahul Vohra in at least one of his two earlier start-ups.

Do you have to go to Silicon Valley to start a social network company?  Should you go?

As I keep saying in these posts, the most interesting fact is the number of investors involved in the round – I count 14 investors.  Spread the risk, crowd the expertise and so offer a high valuation for the talented founders.  Too many people in Cambridge, UK, talk down investors.

Let us try and reverse engineer the Equity Fingerprint.

Round 1: Founders have one third each.

Round 2: Y Combinator invests $20k for 10% – I think that is their normal term – leaving the founders with 30% each.

Round 3: Now for the guessing; what terms did the 14 investors go for?  Y Combinator companies have done well and Martin Kleppmann had already started and sold a business (I think to Redgate Software). I guess for between 20% and 40% so let us go with 30% valuing the company around $2million pre and $3million post investment.

Note: no mention of great number of staff hired so guess that there were no options offered and all was achieved by the three founders.

Payday:  The Founders started with 33% each, diluted to say 30% after Y Combinator and then down to say 20% after the investment round.  So each founder ends up with 20% of $15million, around $3million, for two years work and no doubt lots of pizzas and sleeping on floors!  Let us hope that they remain good friends.

Interesting for me as I suggested to Rahul Vohra that he should finish his PhD as starting companies was a risky business.  So he made it third time lucky – not that I believe in luck except for health.  He upped and off’d to Silicon Valley and the “boy done good” to use a phrase.  Certainly puts the pressure on some of his contemporaries who are still building and some who can only dream of selling.

Also shows the strength of the social network business where you can scale a business with few employees or in this case, zero!

Come back to Cambridge, UK, soon and reveal all the secrets so people can stay in Cambridge, UK, be funded by angels and other investors in Cambridge, UK, and so help pollinate the Cambridge Cluster.

LinkedIn was started by Reid Hoffman, a great supporter and founder of Silicon Valley comes 2 Cambridge.

Where was Cambridge Enterprise?  Supporting entrepreneurs who generously donate to the University or backing patents?

Hat tip: Crunchbase

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