Meltwater, which originally built a reputation for itself in media monitoring and subsequently expanded into corporate intelligence utilizing AI and big data analytics methods, has found a new backer. Verdane, a Norwegian private equity firm that created a $1 billion+ fund earlier this year to invest in expanding technology firms, is purchasing an 11% position in Meltwater at a company value of €542 million ($592 million), pricing the holding at roughly $65 million. However, it is not the only transaction that is taking place as a result of this transaction.
Verdane is making the investment via Fountain Venture, the investment entity managed by Meltwater’s creator and current chairman, Jr. Lyseggen.
Meltwater was publicly listed on the Norwegian stock market until early this year. Lyseggen handled the company’s re-pricing earlier this year with two private equity companies, Altor and Marlin, and kept his residual stake via Fountain. (The take-private agreement was the most recent stated value, and that is the one Meltwater is presently citing.) Verdane chose Fountain Venture over Meltwater because the objective is to collaborate with Fountain on future investments in firms working in areas such as artificial intelligence.
Verdane partner Joakim Kjemperud said the transaction also provides his business with a share in an HR firm, Jobylon, although Meltwater is by far the larger asset.
“The deal here is that it’s very much a portfolio transaction,” he went on to say. “We’re buying into Jørn’s investment company and acquiring an implied direct stake in Meltwater and Nordic HR firm Jobylon, but Meltwater is the biggest asset in the portfolio.” Jobylon’s ARR is now approximately €5 million, whereas Meltwater’s ARR, which was created in Norway but now has its headquarters in San Francisco, is over €500 million, he noted.
The transaction highlights a handful of key issues in the worlds of European technology and venture capital.
The first is that the valuations of technology businesses continue to be under enormous pressure. Meltwater’s current market worth of just under $600 million is less than what the business raised as a privately held startup over the years (about $700 million, according to PitchBook statistics) and less than half of its valuation when it goes public in December 2020 at over $1 billion.
The second is the current style of dealmaking and the efforts that investors are making to de-risk. The market is particularly tight in Europe at the moment: according to VC firm Atomico’s annual deep dive into the European funding landscape (which it puts together with a number of third-party research firms and participation from others in the ecosystem), funding in 2023 will be cut in half to just $43 billion, and private equity firms will play a much larger role in deals to make up for some of the drop from VC.
In this perspective, it’s worth noting that Verdane chose to invest in Fountain Venture rather than Meltwater directly. This will give Verdane a stake in not just Meltwater but also Jobylon and anything else Fountain and Lyseggen deem intriguing. This, in turn, will de-leverage a single-business emphasis. Verdane has just recently begun to extend its wings and invest in companies throughout Europe and beyond. Partnering with a partner to help lead is a very low-risk strategy to take while attempting to be more ambitious.
Companies like Meltwater are at a technological crossroads right now. The company’s beginnings would have come from firms where workers would physically go through stacks of newspapers every day, clipping mentions of a company’s name, collating them, and sending them to customers to help them better monitor how they were being reported in the media.
With the collapse of print media, that effort was digitized, and with the emergence of social media, it became a larger game; sentiment analysis and words became organized, and more often, unstructured data. The introduction of a whole new set of tools for extracting information from that data transformed a media problem into a technological one. Meltwater developed AI in-house and has purchased a number of companies in an analytics consolidation play. (The most high-profile acquisition was certainly DataSift, the pioneering startup that was an early buddy of Twitter’s in monetising its firehose, only for the relationship to soured.)
However, it now faces a far larger competitive threat: businesses like OpenAI and other generative AI breakthroughs will transform the game once again in terms of search—both consumer and corporate—and how any sort of business intelligence work is carried out.
Unsurprisingly, Lyseggen believes that, although Meltwater’s emphasis seems like a throwback to an issue that has now effectively been addressed—and may possibly be made more efficient by would-be rivals—he believes there is still more possibility for his firm.
“I consider OpenAI’s ChatGPT the ‘Netscape moment’ in ushering in this new era,” he went on to say. That’s an important point to make. Netscape altered the way the world searches for information, although it’s still not widely used today. ” Artificial intelligence is changing the game for players to challenge the old guard.” Meltwater’s tech stock, in my opinion, is already the most contemporary and AI-focused in its class. We will continue to invest in AI, which we are really pleased about. We are working quite hard.” Meltwater claims to analyze 1 billion documents every day for customers in communications, marketing, and public relations.
