CardMunch Acquired by LinkedIn—An Investor’s View

Well, that was quick, wasn’t it? Today it was announced that CardMunch, which just did its seed round of funding in late November, (see my writeup on why I invested here,) has been bought by LinkedIn. Here’s a standard news release on the deal here.

A whole flood of thoughts come by, in this order:

*The deal is a perfect match. LinkedIn, the cloud-based business network, acquires a cloud-based service which instantly converts paper business cards into data that can automatically generate a LinkedIn invite, among other things. CardMunch makes LinkingIn as easy as taking a picture on a cell phone. For the CardMunch team, there is no platform better for building on than LinkedIn. Business cards/business network. No brainer.

*The acquisition is a tribute to a great team. A team of just 3 guys built this thing from the ground up, aided by the vision of Manu Kumar, the initial investor and co-founder.  Guys, if you get the urge to start something new, you know how to reach me!  (As an aside, although I spoke with CardMunch CEO Bowei Gai many times, he never leaked to me that LinkedIn was in talks with CardMunch.  That increases my respect for him. Furthermore, with so few people at the company, a deal could have been structured that rewarded the employees and left the angels in the cold–I saw this from the inside first hand when my company eSecLending was receiving acquisition offers.  The CardMunch team did the right thing by investors, and, again, gain big points here for how they looked after shareholders throughout the acquisition.)

*This market is getting frothy! The excitement is not limited to the GroupOns and Facebooks, activity is running all the way throughout the system. Another portfolio company was approached in the last month by an even bigger tech company than LinkedIn, and they turned down the offer. Even going down the food stream from big company to little company to concept of a company,  pure startup deal flow is coming through to angels than any time since 2007. I need to remember that New Year’s Resolution concerning valuations before getting too carried away here. The press is broadly noting the signs of the bubble.  What does this mean to entrepreneurs? If you are fundable, think hard of how you could grow your business if you had access to capital. If you have solid uses for funds, now is a great time to raise capital. Carpe diem.

*Sorry, can’t tell you anything about the returns. Needless to say, time-weighted returns look great when you’re talking less than two months.  But never believe the hype:

*To Sell or Not to Sell Regardless of your opinions, the entrepreneur’s got the call. In spite of the contractual rights that certain classes of investors can negotiate for blocking rights, in the end you’ve got to go with the entrepreneur’s desire.  If you’re an entrepreneur struggling with the sell/no sell decision, read these posts from entrepreneurs turned VCs who have wrestled with the question. Click through for words of wisdom from Eric Paley and more good observations from Jeff Bussgang.

Once again, thanks Bowei and the gang for letting me invest, and here’s to you continuing to do great things on a bigger platform.

PS: Here’s the official letter that came out to stakeholders on the announcement.

Dear Ty:

We started CardMunch in December 2009 to solve a very simple problem – converting business cards into electronic contacts on your phone. At CardMunch, we recognized that business cards are an essential part of doing business, and that they serve a practical purpose by being the most frictionless way of exchanging contact information. We also recognized that the world is now mobile – the phone needs to be the center of our contact universe.

CardMunch for iPhone launched on the AppStore in August 2010 and we have been blown away by the response from our users. It is as if we touched a nerve for a truly unsolved problem. Since August we have been steadily adding new users, working on scaling our service, and adding new product features. CardMunch 2.0 launched in December 2010 and included CardFlow™ – the mobile rolodex that lets you flip through all your cards right on your iPhone, full-text search to search any field in your contacts, and LinkedIn integration that allows one-touch connecting on the premier professional network.

Our long-term vision for CardMunch has been to help manage business contacts and help you to leverage your contacts and connections for doing business. With that in mind, we are thrilled to announce today that CardMunch is now a part of LinkedIn! LinkedIn is the world’s largest professional network and as such, provides the perfect platform for us to execute the CardMunch vision.

That’s not all; we have even more good news! Starting today, the current version of the CardMunch app will be completely free! Yes, you heard right, the current version of the CardMunch app is now a free service, which means that you can capture and transcribe as many business cards as you like, free of charge. The CardMunch app on the AppStore has been updated to reflect this, and we encourage you to update the application by clicking on this link: http://lnkd.in/cardmunch

As an added bonus for CardMunch’s paying customers, we will be offering a free upgrade to a LinkedIn Premium Business account for three months! This upgrade is valued at $74.85 at LinkedIn’s current Premium Service pricing, but will be available to CardMunch customers absolutely free. It does not require any payment information from you (LinkedIn does not have access to any payment information you may have provided to CardMunch). To upgrade your LinkedIn account to the Premium Business Account, please click on this http://lnkd.in/cardmunchupgrade. The upgrade offer will expire on April 25, 2011.

Please note that as a result of the acquisition, LinkedIn’s terms of service and privacy policy will now apply to your use of the CardMunch service and the handling of your data. If, for any reason, you are not comfortable with CardMunch’s new ownership, Terms of Service, or Privacy Policy, you may cancel your account by emailing cardmunch-support@linkedin.com.

The CardMunch team remains committed to providing the best product and service for managing business cards. Now with the strength of LinkedIn behind us, we will continue to do exactly that, but do it better, faster, and for free. We have prepared a list of frequently asked questions http://lnkd.in/cardmunchFAQ to address any questions or concerns you may have. We are always happy to hear from our users, so if you have any questions, please feel free to contact us at cardmunch-support@linkedin.com.

Thanks for using CardMunch!

Cheers,
The CardMunch Team


9 thoughts on “CardMunch Acquired by LinkedIn—An Investor’s View

  1. Trying to figure out the economics on this deal. I met with the team and liked them a lot more than I did the business. I generally only invest when I can think of at least half a dozen potential acquirers off the top of my head. In this case, Linked-in was the only logical one that came to mind and didn’t see a viable business model short of that result….

    -Ty’s note: I’ve edited the rest out, as Professor VC asked specific valuation questions, posing some questions I can’t discuss. Sorry, but as is the case often in sales where the buyer has bigtime legal counsel, I’m precluded from giving out details.

    On to the next exit!

  2. Congrats Ty !!

    This kind of an early exit doesn’t come very often and hence was great from everyone’s point of view.

    Hope it was a good exit in terms of financial numbers to you investors.

    Cheers,

    Venugopal
    Vengo Ventures.

  3. Congrats, Ty. Very good news – that was so fast. I remember posting a skeptical comment on your original, “I’m investing” post. 🙂 Guess you proved me wrong!

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