Did the French government just sell Dailymotion back to itself?

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So Why Should You Care About NFC?

So let’s just get this straight. Dailymotion, a French-born competitor to YouTube, has been bought by Orange which will acquire about 49% of the company for €58.8 million or about 160 million dollars. Orange can gradually increase its stake to 100% by 2013, however, it appears the deal is not formally signed yet. Reportedly Orange has an has option to buy the rest later, just as soon as the last half of the company has collapsed in value because no-one else will be competing for other 51%.

We spoke to an investor inside who told us that Dailymotion has done well against the YoTube giant and it’s P&L had started to turn a corner towards “exciting growth.” This is “not a basket case business” he said and while it wasn’t setting the world alight it wasn’t a case of investors searching around for someone stupid enough to buy it.

However, it is the case that the French government screwed around with this deal.

Dailymotion raised money from the Fonds Stratégique d’Investissement (FSI), the French government’s sovereign wealth fund. The FSI is also a large shareholder of France Telecom, of which Orange is a subsidiary.

So essentially, the French government just sold Dailymotion to itself.

More pertinently are the implications for traditional “10x” VC in Europe. Only Balderton and Index seem to be doing $100m exits but there precious few other VCs doing that kind of deal in Europe right now.

Atlas Venture and Partech International invested $9.5m in 2006. Advent Venture Partners and IDInvest Partners invested in Dailymotion in 2007 the tune of $34m and is clearly not going to see anything like the “10x” exit normal venture capitalists require. Let’s not even mention the $25m added to the pot in 2009 from all existing backers. As an early investor only Atlas will have done ok. Dailymotion and YouTube both started in 2005 but the latter was sold to Google for $1.65 billion.

But let’s not be unkind. Dailymotion has been profitable since the end of last year, it’s traffic had improved greatly, helped partly by the emerging market of India and in Turkey, where YouTube is routinely banned thus making Dailymotion the default option.

So the story of Dailymotion is not over yet. But European VCs have a lot of thinking to do right now.

  • Filipe

    €58.8 million or about 160 million dollars jesus

  • Jim

    Hire a sub.

  • ferra

    Mike, you need to check your exchange rate, unless you are talking about some lesser known dollars, Hong Kong $?

    • http://twitter.com/horatiumocian Horatiu Mocian

      I think he refers to the value of the entire company (not just the 49% bought by Orange).

  • http://topsy.com/eu.techcrunch.com/2011/01/25/did-the-french-government-just-sell-dailymotion-back-to-itself/?utm_source=pingback&utm_campaign=L2 Tweets that mention Did the French government just sell Dailymotion back to itself? -- Topsy.com

    […] This post was mentioned on Twitter by Mike Butcher, TechCrunch Europe, TechCrunch Europe, Maxime VALETTE, Jean-Marie Le Ray and others. Jean-Marie Le Ray said: RT @maxime: RT @TCEurope: Did the French government just sell Dailymotion back to itself? http://bit.ly/gV9K0m by @mikebutcher […]

  • http://twitter.com/lifeisbetteron Life Is Better On

    Well that’s a bit more complicated Mike :-). The FSI is an entity owned by La Caisse des dépôts et consignations (http://en.wikipedia.org/wiki/Caisse_des_d%C3%A9p%C3%B4ts_et_consignations) which is totally independent in terms of investment decision.
    And the French government *only* owns 30% of France Telecom.

  • http://twitter.com/stanjourdan Stanislas Jourdan

    interesting input, Mike.

    But i think you over estimate the ownership of the « fond stratégique d’investissement » (FSI) in Orange. As far as i know, the FSI only owns around 13% of Orange. So not that much ;-)

  • Dave

    i remember reading about this investment made by Fred Destin. I poopooed it then and he poopoo’d me. While I hope (and am sure) Fred got out intact plus loose change, I hold to my comments. So, other than localisation (France) and being 2nd to Youtube, what is Dailymotions USP?

    • http://www.freddestin.com Fred Destin

      (A) Who are you ?
      (B) Run the math (it’s not that difficult)

  • Whatever

    it’s traffic had improved greatly

    Oh, do try harder, please.

  • http://twitter.com/epelboin Fabrice Epelboin

    Really nice having a foreign point of view. I was so focused on the impact this will have on net neutrality via connected tv that I totally miss this VC point of view.

    Mike, you should definitely write more about France! How about looking closer at the Orange/Deezer deal that occur a few month ago? ;-)

  • http://www.facebook.com/christophe.sauveur Christophe Sauveur

    Excuse me but, €58,8 million makes 80 million dollars, not 160 million.
    (Checked with the current exchange rate of €1 = $1,38915)

  • Anonymous

    Really great to have a foreign perspective. I was so focused on the impact this will have on the neutrality of the network through a television screen that I completely missed the point of view VC.

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  • http://eu.techcrunch.com/2011/02/23/dailymotion-shoots-for-video-powered-apps-slowly-opening-up-developer-api/ Dailymotion shoots for video-powered apps, slowly opening up developer API

    […] €59 million with an option to purchase the rest of Dailymotion at a later day. Although, as we pointed out at the time, the deal looked an awful lot like the French government selling a company to itself, with both […]

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