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Cisco Buys Orative… Nobody Cares

Last week Cisco bought Orative for $31 million, and it barely raised an eyebrow.  Russell Shaw wants to know why!  He rightly points out that Orative has some very cool features, and it’s a nice addition to Cisco’s bag of tricks.

So why did so many not comment?

From the publicly available data (and I will caveat this that there may be something I don’t know about here), for entrepreneurs, this looks like a sad story. The company raised a $6 million A round in 2003, and a $12 million B round in 2004.  That means that the company was probably valued at $12 million in 2003, and in the neighborhood of $30 million in 2004.  It looks like Orative sold for not much more than it was valued at 30 months ago.

For the employees, this is a possible scenario: the investors likely owned participating preferred shares, which means that they get to take their $18 million out first, leaving $13 million behind.  Again, I’m speculating, but it’s likely the investors own 65% of the company, the employee stock option pool is another 20% and the founders stake is the remaining 15%.  So the investors got another $8.45 million, all the employees split another $2.6 million, and the founders, after 5 years, receive a little under $2 million.

Not exactly a roaring success. The VC’s earned 46% in 5 years, which is about the rate that mutual funds pay.  The average employee probably earned a down-payment on a house.  And the founders made the equivalent of 5 years of salary at a larger organization.

Orative’s key capability was pushing Cisco PBX features to RIM handsets.  Orative, with a single strong partner in Cisco was a bit of a one trick pony. RIM’s acquisition of Ascendant earlier this year probably forced some soul searching at Orative.   RIM, via Ascendent, will be pushing Orative-like features to every PBX manufacturer.  The writing was on the wall.

And that kids, is a lesson on why it pays to have a broad partnering strategy. 

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