Azure Keeps Returns Coming With Vapps Sale

Azure Keeps Returns Coming With Vapps Sale

11/17/2008 - VentureWire



Venture Capital
Fort Lauderdale, Fla.

Azure Keeps Returns Coming With Vapps Sale

By Tomio Geron


At a time when most venture firms are struggling to generate returns, Azure Capital Partners has seen its third successful exit this year with the $26.6 million cash sale of Internet-based audio conferencing start-up Vapps Inc.

Citrix Systems Inc. bought Vapps in October, and will provide an additional $4.4 million in possible earn-outs if certain financial and operational milestones are reached.

Azure Capital Partners, which led a $2.5 million Series A financing in the company in April 2007, generated a 3.6-times return and 125% internal rate of return in less than 18 months, according to General Partner Paul Weinstein. Azure was the largest investor in Vapps.

Azure put in about $2.25 million in the Series A, according to a previous VentureWire story. Vapps previously raised an angel round and had received a total of less than $5 million in investment, Weinstein said.

Despite a decidedly negative exit environment, Vapps is the third exit for Azure this year and the first from its second fund. The firm has generated more than $200 million in liquidity this year, Weinstein said.

The two other Azure exits were much larger: World Wide Packets Inc. was acquired by Ciena Corp. in January for $280 million in cash and stock, plus $15 million in debt; and Bill Me Later Inc. last month agreed to be acquired by eBay Inc. for $945 million in cash and options.

Vapps provides audio conferencing services to businesses, connecting traditional telephones with newer Internet-enabled services such as Skype. It provides high-definition quality, with technology that enables it to scale to hundreds or thousands of participants at low costs, Weinstein said.

Azure introduced Vapps to Citrix, Weinstein said, because Citrix is in the collaboration space and wanted to be able to offer a bundled solution with audio conferencing.

Azure also helped Vapps change its business model as it moved from a product company that sold the boxes that enable the audio conferencing to one that charges customers based on minutes used on the boxes.

Despite the difficult market, large companies are still interested in acquisitions, even if they're cautious, Weinstein said.

"We are seeing a high level of activity in M&A, though not necessarily closure" of deals, Weinstein said. "Part of that is a lot of public companies in technology have a lot of cash and they need to acquire growth, particularly in the environment where we're financially challenged."

In addition, there are many strong, larger start-ups that haven't been able to access the public markets, which provides an attractive and potentially lower-priced pool for acquirers, Weinstein added.