There are a number of reasons why a company might want to buy a startup, whether it’s joining forces with the competition or absorbing the talent and the technology.
As for the Australia-based Crowd Mobile, buying one-year-old Hong Kong startup KissHugs was a part of their growth strategy. KissHugs had only started to build their user base and was prepping for their official launch in February when they were acquired. “We first launched in private beta in October, then in invitation beta in November for Hong Kong, Taipei and New York. We had over 10,000 users by the end of 2014 and planned to launch around mid February,” said co-founder Max Vung.
As an app that lets users rate others with a ‘kiss’ or a ‘hug,’ it makes mobile data a lot less impersonal with an added focus on relationship-building. Although the idea for KissHugs was sparked in New York and the wireframe was also built there, Vung said that he and his co-founder Roger Blackstein saw more opportunity in launching a startup in Hong Kong as the big players in the dating app space had already dominated the US market. After making the decision to develop their app out of Hong Kong, Vung and Blackstein picked up HK $50,000 from crowdfunding for equity platform turned seed fund Bigcolors. Besides forking over a little upstart cash, Bigcolors also guided the young startup through their initial growth and eventually their exit.
“[Bigcolors] really helped Roger and I understand Asia – not only Hong Kong but how Asia works. For example, they made me aware of various competitor apps from Korea that have phenomenal traction and other similar apps in Southeast Asia,” said Vung. “They also helped with making the deal happen and helping us understand the implications of the sale.” Although he wasn’t able to disclose more details about the deal, Vung said that Crowd Mobile has fully acquired KissHugs and its intellectual property, team, technology and userbase.
Congratulations are in order for KissHugs, but the question remains – what reasons would a company have to acquire such an early-stage startup?
For Crowd Mobile, buying KissHugs was really about making their foray into the Asian market. After raising about US $3 million in pre-IPO funding, Crowd Mobile announced its plans to use some of the capital to make small-scale acquisitions across Asia. The company’s CEO Domenic Carosa said that making small acquisitions (such as KissHugs) works as a “springboard to branch out into the region.” Crowd Mobile made their debut on the Australian Securities Exchange (ASX) last week and although the five-year-old company operates in 13 countries, going public will help them achieve their growth plans via acquiring startups in Asia and Europe more efficiently.
In the same vein, tech giants such as Facebook have also been shopping around in Asia. In the past, the social network has already made two small-scale acquisitions in Asia – namely Malaysia’s Octazen and India’s Little Eye Labs. Murli Ravi, the co-founder and general partner of Unicorn Venture Capital, speculates that a big company such as Facebook can have a number of reasons for acquiring startups.
Besides a boost to their userbase, which early-stage startups may not have, a large company might be interested in technology that helps acquire new users, access to new content or distribution capabilities on the B2B side.
