DataXu

DataXu Investors Urge 2012 IPO But CEO “In No Rush”

Courtesy of MergerMarket

DataXu, a digital marketing software company, has been urged by investors to target an IPO in 2012, according to CEO and founder Mike Baker. However, Baker told this news service he is in no rush as he looks to build through partnerships and acquisitions.

The Boston-based company on Monday announced the acquisition of Mexad, a UK-based real-time bidding service provider with offices in Germany, France, Italy, Spain, Poland and Brazil, as part of its strategy to take its technology to a global market.

Baker said he envisaged more acquisitions ahead of an IPO in a bid to provide a full offering in data and analytics for mobile, video and online advertising in countries around the world. The company is commercializing an algorithm developed at the Massachusetts Institute of Technology to enable real-time decisions on digital advertising.

Competitors include Google, through its 2010 purchase of Invite Media, as well as [x+1], Baker said.

Big Internet and technology companies have approached DataXu consistently ever since it launched its digital advertising product two years ago, Baker said. But the plan is “to build something with enduring value” in an emerging category, he added. “We think there’s a different category that we can create. Our head is much more around an IPO [than a sale].”

In fact, investors have urged him to become familiar with the Sarbanes-Oxley Act in a bid to take the company public, possibly in 2012.

“We have some of our current investors trying to accelerate [an IPO] into 2012. Because we’re a technology company, we always need sufficient R&D capital to continue to invest,” he said. “But we’re not in a rush.”

Baker argues that his transactional experience at previous start-ups entitles him to “a little deference” from investors on any decision regarding the timing of a DataXu IPO. “I’m not a first-timer,” said Baker, who was CEO of mobile advertising company Enpocket, which sold to Nokia for USD 150m in 2007. He was also executive vice president at Engage Technologies when it went public in 1999.

Since inception, DataXu has received USD 37m in capital from backers Atlas Venture, Flybridge Capital Partners, and Menlo Ventures. Revenues were at least USD 10m in 2010 and more than triple that in 2011, according to Baker. DataXu has 120 employees.

Large technology groups, such as Google, Microsoft, AOL, Apple, as well as IBM, SAP, and Oracle, are likely to look at digital media technology with increased interest, particularly as the market opportunity is so huge, according to Baker. He cites McKinsey figures estimating that only 20% of the USD 1,000bn global market for advertising and marketing is digital, while the rest is still analog.

While DataXu is keen to find business partners, conversations about selling the company would be highly premature. “All this stuff is just beginning.”

Terms of the Mexad acquisition were not disclosed. DataXu did not use an investment bank for that deal, preferring to use the services of Boston-based consultant David Shapiro, who is a 3i investment partner and former employee at GE Capital. Future deals would likely follow a similar pattern, Baker said. Indeed, DataXu backed off acquiring another company when it decided to run a full-blown auction process run by an investment bank.

“We prefer to do business on a personal basis,” he said.

Calls to the company’s investors were not returned.

By Mark Andress