Limelight Acquires Delve Networks For Enterprise Video Management: Value $10M

Images This morning, Limelight Networks announced they have acquired privately held Delve Networks, a SaaS based online video platform (OVP) provider, in a mostly cash and small equity transaction. Terms of the deal were not disclosed but I have learned that Limelight valued Delve at about $10M. While the acquisition won’t add much in the way of top-line revenue to Limelight, it does give the company a crucial piece of software to help enterprise customers manage their video assets and also gives Limelight a video analytics component.

Delve Networks was founded in 2006 and since that time, had raised just under $10M in venture capital. The Limelight deal includes an earn out component for Delve based on meeting certain revenue targets so there is a chance that Delve’s investors may break even on the deal. With so many online video platforms (OVPs) in the space and the market not being large enough to support them all, more deals like this are inevitable. While OVPs play a crucial role in the market, there simply isn’t enough business to support the dozens of vendors all trying to help companies solve the problem of video ingestion, transcoding, management, monetization and tracking.

Delve’s CEO & Co-founder Alex Castro will stay on with Limelight as VP and GM of video platform solutions and Delve’s 22 employees will stay in Seattle and now become Limelight’s official office in that region. In addition to the technology, Limelight also now controls some unique patents granted to Delve pertaining to video search and speech recognition and Limelight greatly expands their engineering team since most of Delve’s 22 employees were on the engineering side.

For Limelight, this is a smart deal and one that I expect we’ll see them do more of. They have made two acquisitions in the past eight months and I expect
we’ll see one or two more deals of this size, probably having to do with site acceleration and analytics, before the year is up. While Delve was not doing a lot of revenue, they did have 100 120 customers and once they get integrated into Limelight’s infrastructure, Delve’s largest CAPEX cost gets reduce and their margins soar. Similar to Limelight’s recent purchase of EyeWonder, Limelight should be able to see Delve’s offerings have margins of more than 70%.

This is a really crucial time in the market for Limelight Networks and I consider 2010 to be a make or break year for the company. If they can continue to sell more value add services with higher margins and penetrate the enterprise vertical with more wins, the company has a chance at being profitable by the end of the year, thanks in large part to EyeWonder’s high-margin revenue. The company has not been able to show a lot in the way of revenue growth over the past 5-6 quarters, so deals like this make be just what the company needs to get their business going again.

As a result of Limelight focusing on more non-CDN services, it’s also interesting to note that I am hearing about companies who would not have though about potentially acquiring Limelight a year ago now keeping a closer eye on the company. While it has always been speculated that Limelight would some day be acquired by a telco, if they continue to move to being more of a SaaS provider, it probably wouldn’t be a telco that ends up taking them out of the market. (I’ll give out more details on this shortly and name some of the companies I think may be a fit in a longer post I am working on about Limelight’s business.)

  • HmmConvenient

    This is a great move by Limelight. In a market where so many are horizontally integrating (Highwinds + Bandcon, Telcos buying CDN) vertical integration makes much more sense. Enterprises would rather negotiate one single all inclusive contract versus having to manage many small vendors. Now that Delve is owned by a public company they have a better chance of winning business as there isn’t the fear that “will this company be around in a year?”

  • Brian

    “I’ll give out more details on this shortly and name some of the companies I think may be a fit in a longer post I am working on about Limelight’s business.”
    Yea right, you never follow up when you make statements like this and I have been let down by you time and time again expecting a post that never materializes.

  • Streamingguy

    Hey Brian, if Dan’s opinion on this subject is so interesting to you why don’t you give him a call rather than wait for the post – he’s extremely accessible. Your post sounds a little immature and indicates that you are personally a little dependant on Dan’s posts.
    Congrats to LLNW and Delve. OVP’s are having a tough time going it alone. No doubt they offer a lot of value and are a critical part of the chain but competition has prevented any margin in the space.

  • A Person

    Lots of OVP’s are having a tough time because lots of them are really poorly managed, case in point Delve. Alex is a really smart person technically, not so great as a manager.
    Btw, for those of you who don’t know finance, $10M is a firesale and means that no one made any money on this, not even the VC’s.

  • Mike

    Not only was this a firesale, but the earliest supporters of this deal got exactly $0 back — a 100% write-down, while Alex took a nice cash payday at closing.

  • Fred

    Did this company have any revenue? Less than $2 million annualized sort of thing?

  • Interesting story. It’s a shame LLNW didn’t get the brains behind most of Delve’s inventions. She left almost a year ago.

  • Marco Dawson

    We use the product and we are quite happy with the offering. We just renewed our agreement for another year since they showed us all the enhancements we requested. They were about maybe $2Million in revenue is my guess. However most OVPs we looked at had less then $6 Million in revenue including Ooyala & Kaltura. We did test episodic but they could not provide us with any references that fit profile.

  • I looked at Delve as a member of the Keiretsu Forum late last year, and their opening position for valuation was $6M. They have been downhill since then, so i have a major problem believing this “spin” that someone paid $10M for them. If they did, they are suckers.
    Delve has a nice product and team, but it is a very crowded space, and they had (have) not trace of a marketing plan, marketing gene, etc.
    Don’t get me started… i will keep my mouth shut outside of those comments. I would say thought, that Delve was one of the rudest startups I’ve ever dealt with, in the course of over 20 years of conducting diligence for VC’s, as an Angel, etc.

  • I concur with Steve’s thoughts above. Good product and we have used it, but the sales, marketing and customer service were practically non existent.
    A clear example of the different mindset between engineers and sales / marketing people. You really need both to be successful in the start up sphere.

  • Kevin

    So Steve and Gieo. Do you think Limelight is a good fit to purchase this? Limelight probably has a better customer service, marketing, and sales aspects put in place already.

  • Sang-Do Lee

    I stumbled on this blog after the acquisition announcement. We looked at 4 OVps settled on Delve. Their product was good but did not meet our requirements 100% that being said we felt they were the most responsive and hungry to earn our business.
    The references they provided us were great..infact these were names that we recognized and a lot larger then us…. All 3 references loved the product and customer service. We are happy with them and the team deserves this no doubt.
    Feel free to email me. I am a happy client!

  • Joseph Lundorski

    This is typical of Limelight in Acquiring companies that have upside down valuation to funding. ..same as Kiptronic..eyewonder? If you have an average product and failing to grow please contact haha.vc@llnw.com. Brightcove next?

  • Quitefrankly

    Quite frankly, this market is over saturated with video sites. If you we’re to google or Bing “Video SAAS”, there are literally 60 that show up. That is a tremendous amount.
    That said, as someone who is an angel investor and runs my own hedge fund. I’m not here to go in to monetary figures, as that would not be right. But, as I look at start-ups I’m always looking for the yield.
    Video companies spend a tremendous amount of money on CDN and other upkeep. The above sale makes complete sense.
    Side note: SAAS companies need to have technology that blows others out of the water. If the backend lacks, why would someone run with it. Just a thought.

  • To Christopher Levy or anyone
    Who is that was the woman who was the brains behind Delve and who left a year ago?