Facebook Pays 0.085 Instagrams for Parse to become largest Mobile-Backend-as-a-Service (MBaaS) Provider

The leading vendors in the MBaaS space ordered by viability/stability just got shuffled.

parsebook

My previous post detailed a whole slew of Mobile-Backend-as-a-Service (MBaaS) Vendors who had all raised less than 1M in venture capital and predicted that those small MBaaS vendors would be caught in the “Series A Crunch” This post has turned out to (so far) accurately predict that none of these vendors would be able to raise any more money.

The small ones on my list included: Cloudmine,FatFractalApplicasa (500k)CloudyreciKnodeScottyAppQuickBlox and others

The vendors called out in the “Safe Zone” were  Kii (profitable),  Stackmob (7.5M)Kinvey (7.02M) and Parse (7M). My direct source in Silicon Valley reports that Parse was raising a significant round of Venture Capital when it decided, instead, to take the acquisition offer from FaceBook.

Given the burn rate, organizational size and growth of this space (as well as the validation of the exit potential of this space), the other “Safe Zone” vendors should have no trouble raising additional capital and we should expect to see several announcements of this sort coming soon. We expect those who raised around 7M should have burnt through most of it by now. Linkedin shows a Kinvey of about 20 people, and a Stackmob of about 29 people.

So the list now puts Parse at the top of the vendor viability equation in MBaaS… However, with the Facebook acquisition comes a lot of questions.

Here are the the data points we have collected from reputable sources:

* The rumored amount of the transaction was 85M
* Facebook rep was quoted as saying the sum was “Not Material” (they wont file an 8K with the SEC)
* Total amount of VC raised by Parse was about 7M
* 85M exit is consistent with the kind of returns VC would expect
* I spoke to a VC who was planning to invest in their large B round
* Obviously they didnt raise a round but chose to go with FB
* There must have been other bidders, hence the VC Exit level pricing
* Illiya said that they liked FB the best for executing their plans
* 85M equals 0.085 Instagrams for Facebook
* This price puts them into mixed territory–it’s not exactly an
acqui-hire but also not an instagram either
* Both parties claim that the service will continue uninterrupted
* We’ll see about this
* This is a very different business model from what FB is used to
* Linkedin shows the company to be about 12 people, maybe more

So what does this mean?

1) Validation for the MBaaS space: this will grease the skids for
Stackmob and Kinvey to raise big rounds or to exit at a neighborhood
multiple, say about 40-60M each

2) Further investment for smaller players: I think not. I think the
smaller players will continue to scratch in the desert–however,
smaller players *WILL* experience acqui-hire by bigger players

3) Facebook is probably not sure what’s going to happen, but it seems
sure that MOBILE is a huge deal, DEVELOPERS are also a huge deal and
they are aggressively trying to flip the company in that direction.

4) If Facebook doesn’t squash these entrepreneurs (at 85M in probably
mostly stock, it’s not above company politics) then it puts them in
direct competition with Amazon, Heroku, Google and Apple. Add in
FaceBook Home and also Instagram and it does put them in Google and
Apple Land.

In terms of consolidation: I expect that this will drive some of the big players to make acquisitions, but this was an unusual deal. I would expect some of the smaller vendors to be acqui-hired over the next six months by the likes of Google, Apple, Amazon, Heroku and other big cloud providers. An orthogonal app/platform provider with momentum might also do an all stock acqui-hire like maybe a Yahoo, Box.com or an Evernote.

The big message is that the MBaaS space is validated big time and we’ll see a lot more excitement in the upcoming year in the form of financing, M&A and other big announcements.

Disclosure: Miko works for Kii Corporation, one of the vendors mentioned in this article.

Update: This just in… FeedHenry (an MBaaS vendor that did not make my “safe” list nor my “small” list just raised $9M in venture capital. Feedhenry is squarely in the Enterprise market and is focused on HTML5 JavaScript CSS write once run anywhere code not unlike Appcelerator or Sencha. So it appears that the market is starting to segment into consumer facing and enterprise facing MBaaS.

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