The Big Exit Show: Emma Tracey about selling Honeypot to XING


The Big Exit Show: Emma Tracey about selling Honeypot to XING

We proudly announce the third episode of our own podcast series the Big Exit Show! In this series, journalist and podcast-host Remy Gieling and our co-founder and managing partner Johan van Mil, talk to successful European tech entrepreneurs about the exit of their company.

This episode we get insights from co-founder and former CMO and interim CEO Emma Tracey about the journey of building Honeypot and selling it to listed XING in 2019. We will dig deeper into the amount of time it actually takes to exit a company to a listed partner, why you need an NDA in the process and how Emma and co-founder Kaya Taner threw a party to celebrate the exit with their staff.

Founders of Honeypot: Emma Louise Tracey and Kaya Taner

You can find the episode at your favorite podcast platform, linked below. And, if you are really interested listening to the big exit of specific founders – reach out to us so we can invite them for a next episode!

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You can find the transcribed version of the episode below:

Remy: Hello and welcome to The Big Exit Show, the podcast by Peak where we talk to successful European tech founders about the exit of their companies and the path to how they got there. My name is Remy Gieling, and all the way in Berlin is my beloved co-host, Johan van Mil – founder and managing partner of Peak. Johan, what was the trip like for you?

Johan: It was great, great traveling again in post-COVID times.

Remy: In this episode, we talked to Emma Tracey. After a career in journalism and PR, she founded Honeypot in 2015, which quickly grew to become one of the leading developer-focused job platforms in Europe. Honeypot was sold in 2019 to the publicly listed social network XING. At the time of the exit, the company had over 50 employees and over 1200 clients like Catawiki, MediaMonks, WeTransfer throughout Europe.

We will learn from Emma about scaling the company, but also about making a dream exit at the right time. Emma, so good to have you with us here today.

Emma: Hi, guys. Thanks a million for having me.

Remy: So Emma, what’s the heroic story of Honeypot?

Emma: Well, the funny thing is I’m Irish. And you know that self-deprecation, I think, is kind of a national characteristic. So the heroic story is always like a bit of a difficult one for me to go into.

What is the heroic story? So I mean, everything about Honeypot was focused on developers from the start. And I think Kaya and myself were so, so interested in the perspective of developers and the whole job. I think in difference, maybe, to other competitors we had at the time, the focus for them was very much on the recruiter, and what the recruiter was thinking and the whole job.

So from the time we started, we really wanted to build something which was really, really strong candidate-driven, very strongly focused [00:02:00] on the developers themselves.

And so we began building in 2015. I think we launched in October 2015, got a lot of press actually at that time. It meant as well we didn’t have to start any paid marketing for the first nine to ten months, which was wonderful.

Johan: Yeah.

Emma: So that was 2015. Heroic story would be we worked extremely hard for four and a half years, and we sold in 2019 to XING.

Remy: And so that’s a heroic story indeed. What if I read about you in the press, and all the podcasts that you did, and articles which were written on you, you read it everywhere, what’s the real story of Honeypot?

Emma: Well, a lot of work, yeah, a lot of really, really hard work. I mean there were definitely times when it was extremely challenging. We had to lay people off, and we had to kind of keep going and pushed with the team through.

We made bad [00:03:00] business decisions along the way, and we had hypotheses which weren’t proven to be true. So just, I think, a lot of perseverance, grit, a lot of commitment from the team, I think that’s probably the real story.

Remy: Yeah, we always start with the origin story, the beginning. What was the problem that you were trying to solve with Honeypot?

Emma: Yeah, I think the problem which was really interesting to us was this problem from the developer’s perspective of the fact that as a developer, you have all of this choice, but somehow, it’s very intangible to you. So what I always say is it’s like winning the lottery but winning it in the wrong currency for the specific country in which you’re living.

So imagine having all of this potential choice but not being able to realize it. And this was the problem we were really interested in—how do we make the job hunt easier and more transparent, and more candidate-driven [00:04:00] for software developers.

Remy: So you turned the market around, right? Make it not demand-driven, but supply-driven, right? Focus toward developers. A lot of companies tried it in those days in different areas. What’s the reason why you succeeded and a lot of competitors didn’t?

Emma: Yeah. I think it really is for that genuine approach towards the candidate because if you looked at our competitors at that time, I think their focus actually really was on trying to solve this problem from the perspective of the recruiter, from the perspective of the company. Whereas, everything we did was very much focused on the candidate, which is why if you look at Honeypot now, we have so many things. We have open-source documentaries. We have events. We have everything possible for developers. And I think that kind of authenticity meant that we, from day one, had no issues when it came to supply of developers on the platform. When you have supply, I think demand naturally follows.

Remy: Now, you have a rich history [00:05:00] career-wise. You went into journalism, went into PR, even worked in a launderette your teenage years. How did you find out about this problem that was all around in this wonderful world but in the world of developers?

Emma: Yeah. It was super interesting, actually, because as you kind of said, I come from background of journalism and PR, and my whole career up until that point was in emerging economies, so Colombia, South Africa, West Africa. And I came back to Europe, to Berlin after five years of living outside. My mom was very, very happy.

But I came knowing that I came from a very different background, from a typical tech founder. And I knew that I wanted to start something digital but I also knew that I needed experience first.

And so I actually joined Honeypot as one of the first employees, so as the first marketing employee [00:06:00] knowing that Kaya, my co-founder was a really successful entrepreneur himself and that it would be a great time for me to spend a year with him before going on to my own thing.

And so the company at that time didn’t have a name or a brand, hadn’t launched, didn’t have a product, or anything like that. But Kaya, from his previous experiences, knew this challenge of finding developers from the recruiter’s perspective. So as we started to kind of dig into the problem, we realized, actually, it was so much more pertinent or so much more emotive, almost, on the developers’ side than it was on the recruiters’ side. And this is when we realized, actually, this is the perspective we need to be taking. This is where our brand needs to go. And so that’s when we really realized and decided to focus our attention on the developers instead of the recruiters.

Remy: You’ve been in Berlin for quite some years. What makes Berlin such an attractive city for you, but also for entrepreneurs you reckon?

Emma: Yeah. Well, in a personal sense, I think it’s [00:07:00] the perfect combination of a city, which is full of culture, full of history. If you like techno music, it’s probably the only place you need to be. And then professionally, I think it’s just full of creative people, full of opportunities. It’s still cheap, comparatively, to start a business here. And people just want to be here because of the great city that it is. So I think it’s still really an exciting place to be.

Remy: So what will be your next stop then after this great travel around the world and being in Berlin?

Emma: My next stop?

Johan: Yeah.

Emma: Oh, good question.

Remy: Amsterdam, say Amsterdam.

Emma: Oh, I love Amsterdam. That was the first city we set up outside of Germany, so we’re definitely massive fans of Amsterdam. We’d love to live there. I mean, I would love to live in Mexico City. I think it’s really exciting. It’s a really exciting place to be. And I think the whole startup ecosystem in Latin America, in general, is developing in a great [00:08:00] direction. So that would be something I would consider. I would also consider moving back to Colombia at some stage.

Johan: Great.

Emma: But like I said at the start, my poor mum, she probably does want me back in Dublin at some stage.

Johan: Yeah.

Remy: Now, back to the first years of honeypot, how did you find your first client?

Emma: The first clients came definitely through Kaya’s network. So my co-founder who had previously been involved with HitFox and had previously founded a company called Applift here. So a lot of that came through network actually at the start. And then I think from there, we began to partner with larger tech companies by hosting events. So we partnered with companies like Zalando, for example. And we hosted events, which were very much focused on how to run HR for tech companies, and they proved to be really popular. I think we also had not just an interesting event but a kind of fun post-drinks element. Maybe that’s [00:09:00] the Irish inspiration there. [laughter] So we started to kind of build-up traction, I think, a lot through those events as well.

Johan: And with the marketplace is always the-chicken-and-the-egg problem, right? And I think in this case, you have a very clear target audience. From the moment you went live, and you had the idea about creating the Honeypot, more or less, what was your first event, which really brought traction to your platform in terms of supply or demand?

Emma: So physical event, definitely, that event with Zalando, which I think had over 150, or something like that, tech recruiters, which were all primarily, our audience. I think in terms of a marketing moment, which was really huge for us, it was definitely the launch PR, and when we got into TechCrunch, and VentureBeat, and Grandisonian [0:09:46], all of the kind of big tech press. That was an insane moment because we were suddenly getting hundreds of signups. You know, when I–

Remy: Yeah, 800 in a week, I recall.

Emma: Yeah.

Remy: Right? Yeah.


Emma: Our team kind of– me and Kaya were actually in Poland at the time, kind of launching the company at a tech event. And the team back in Berlin we’re really scrambling to try to figure out, “How do we actually process this many developers? How do we all get them through the funnel?” But it was a great time. It’s a great problem to have like an oversupply. [laughs] So that was good.


Remy: Now, let’s move on to the growth phase. When was the first time you really felt that you were gaining traction, that you had a product market fit, as we call it?

Emma: The first initial thought that, “Okay, this is something that actually is going to mean something,” was really when we got that first influx of developers, because every developer who was coming onto Honeypot at that time had to do a personal interview [00:11:00] with one of our team, and just feeling this kind of like sense of this is actually needed. The developer is telling us, “Okay. Finally, someone’s listening to us what we want. LinkedIn doesn’t work for us. Nothing that’s available really works for us at the moment.” So that was kind of the first feeling of, “Okay, this could definitely be something.” And then we did actually start making our first money quite quickly.

Remy: You’re profitable from year one and a half, right? I read, yeah.

Emma: But then there were bumps along the way. So there was one stage where we had to let go– I think it was three people. And this was only when we were a 20-person team because we were living month-to-month from our revenues, because we had only taken like small family and friends around. And we kind of said to each other, “Okay, six months. We need to really prove this in six months. And if we don’t, we really need to question if this is the right thing.” And so those six months, [00:12:00] the team and us we, just worked really [expletive] hard. And I’m so grateful to those early employees. We just worked so hard and we reached profitability.

A few months after that then, I was at this event run by the family here in Berlin. It was from Delivery Hero, and it was about how to kind of streamline your operations, how to scale a business. And the guy who was talking said, “At some stage, you need to look at your recruitment process and think about optimizing at different stages and for different types of talents you want to attract.” And he said, “You should really look at tools like Honeypot.

Johan: Wow!

Emma: And I was like, “Oh, wow!” For the first time, I was kind of less insular, and suddenly, there was someone who I respected on stage, and things like that.

Johan: And you were in the audience?

Emma: And I was in the audience, yeah.

Johan: Right, okay.

Emma: And so the next day, I wrote him and said, “Hey, would you to chat? I’m curious about your experience.” And that was Felix Plog, and he ended up becoming [00:13:00] an angel investor for us.

Johan: Your first angel [unintelligible 00:13:02]?

Emma: On our first angel, yeah. And that was then suddenly like this great feeling because he had already, obviously, seen quite a lot of different startups, and he had massive belief in us, and things like that. And I think those kind of moments where the real milestone moments where I felt like, “Okay, we’re actually doing something here.”

Remy: I read about your– you mentioned a really funny word, the fetishization of venture capital, right? You were not really positive about taking on venture capital, right? Also, given the experience with the shoe salesman, more or less. What was the reason for you for that to be less positive on that? What was your experience also and your thinking behind it?

Emma: I was also very new to the whole startup world, to how digital businesses are built and grown. It was my first experience in tech at all. And then I was a founder of this tech company. So I was very much learning as I was going. Of course, Kaya had much more [00:14:00] experience. I think that generally, we did, at one stage, go out into the market to look for VC and didn’t get that much traction around it.

Remy: And it was before Delivery Hero invested, right? Okay, yeah.

Emma: For that, yeah. And it was such a draining experience, to be honest. Quite intimidating and a little bit draining as well. I think if you talk to most founders, and you know, yourself as a former founder, the whole fundraising time is hard, and it is challenging.

Johan: Sort of.

Emma: And it pulls you away from the business, and things that. And I think then, that was part of that momentum to say, “Let’s just focus on what we’re doing and let’s make this work. And let’s get it to a point where it’s kind of irresistible to VCs or to whatever comes.”

Remy: Create also your Honeypot in that respect, right?

Emma: Yeah, exactly.

Remy: Yeah. Yeah. What can you advise VCs like the capital but also other VCs to do better in that respect, also, to learn from you?


Emma: Oh, interesting question. One interesting thing, which perhaps you, guys, do already is to actually go to the founders instead of asking the founders to come to you to let them be kind of on their home ground, I think, maybe when having the discussions. But again, I don’t want to be overcritical of VCs. And I think it’s super important, of course. And I have changed my perspective quite a bit from those earlier experiences. But being a first-time founder–

Remy: Nah, I feel you.

Emma: –non-tech person, it was a slightly intimidating experience.


Remy: The Exit Phase

Remy: What was the first time you discussed with Kaya the potential exit of the company? So really the first time you thought, “Perhaps, we should sell it.”

Emma: I mean, this was such a surprise to us, I think. So as I was saying earlier, we [00:16:00] kind of decided we reached that point where we felt we were in a very good position to raise money, essentially. And so we were going out in the market. And coincidentally at that time, we got approached by the VP of corporate development from Xing, and he had said that they were really interested in kind of this tech market in general, and that they had actually asked their internal recruiters which product do you like using the most of the marketplaces, which were available at the time, and they had said Honeypot. So he decided to talk to us. At first, Kaya and I, when he approached– we were just thinking, “Okay, well, let’s talk to them. It’s interesting. Maybe we’ll learn something.”

Johan: Did he just send an email or called you?

Emma: I think email, yeah.

Johan: Yeah? Email?

Emma: And yeah, kind of thought like, “Okay, it probably won’t materialize into anything. but we will potentially learn something as well from them. [00:17:00] And then it kind of just started to snowball a bit.

Johan: It is also in your mind, right?

Emma: Yeah, also in our minds. And so I can’t honestly remember the exact point in time when this became real, but I do remember at our Christmas party in 2018, we had been kind of having very intense discussions with them up to that point, and things that. And I think Kaya or something was making a speech at the Christmas party. And I just had one of those moments where you’re at dinner and you kind of phase out for a second, and I was like, “Maybe next year is going to be very different.”

Johan: Yeah, yeah, yeah.


Emma: And maybe that was the first time in my mind that it was really like, “Okay, this is a reality now.”

Remy: And how was that first talk with, in this case, Xing, right? So they sent you an email and you replied, and you probably scheduled a meeting, right? Where did you meet and how did it go? Especially, that first moment, right? Because you were not in the face at that time of selling the company, [00:18:00] and these guys were interested in buying your company but you’re, at that time, not yet. How did that go, that talk?

Emma: So the first few talks were just quite informal, I think, mostly between Kaya and Dennis, our counterpart at Xing. And then the first kind of formal meeting, we got the train up to Hamburg, and then met also someone from their product team, someone from their finance team, Dennis, and maybe some from their sales team. And it was just great, actually. It just felt like it clicked from the start. And this is always something that I reflect on now. It’s like this idea of whoever your VC partner is or exit partner, there has to be that feeling of like a click. I’m sure it’s exact same from your perspective, because these are the people who are going to shape your company and your baby in the future.

Johan: Especially, if it goes up and it goes down, right?

Emma: Exactly.

Johan: You have to really have this–

Emma: That trust–

Johan: Yeah.

Emma: –is so essential. And so that feeling of a clicking kind of just Elevated [00:19:00] Xing from this, “Oh, maybe this will happen,” to like suddenly in my mind, I really want this to happen, actually. I really want this deal to go through.

Remy: Hey, and how did it evolve especially in those early days, right? The first talks, just the informal talks where you weren’t there, and then it became a little bit formal? Did you work at that time with an NDA? Because there are also a little more competitor, right? Because they’re also doing, on the side, a recruiting activities? Not so good as you did, specifically for the developers, but how did you handle that kind of stuff?

[Indistinct talking]

Remy: Yeah, pretty early on, also, in the process. Yeah. Yeah. Yeah. And Xing is, of course, a listed company, right? Which is, of course, a different ball game to sell your company to, right? Because they have all compliance issues, et cetera, and you were, also as a founder– of course, your colleague was a little bit more experienced, but how did you experience that, especially, working with a big structured listed company, and then being the small–?

Emma: I mean, Xing does a great job actually of hiring. I think the people who work in the company are all extremely [00:20:00] personable. And I felt a connection to most of them from the very start. I think the due diligence process though was really, really intense. So–

Remy: It took four months, I read somewhere, right?

Emma: Four months, yeah, exactly. And so we went through everything in the company. And we had to– I think we probably had about three people full time on us. And then Kaya, probably 95% of his time; me, probably 70% of my time. So that was a really intense period.

Remy: You were 50 people, so 10% of the total company was working on that, right? And the two CEOs also, right? The two, yeah.

Emma: So if that had fallen apart, I think that would have been really detrimental for the company just because of the amount of resource that we actually invested into the due diligence process.

Remy: Especially those days of selling the company, right? At the same time, keeping the motivation of your staff, because you’re really good at it. It’s really important for you, and keeping the numbers up also, right? Because that’s also important during [00:21:00] that phase. How did you manage to do that?

Emma: Oh, it was really challenging as well because the NDA worked also that we couldn’t even mention that they were in the process with us, so we couldn’t mention it to most of our staff.

Remy: How did you involve your staff and key members about your decision?

Emma: Basically, the whole way through, we were saying, “We are in, clearly, a very advanced state in fundraising. And we cannot be transparent about this. And it’s not also fun for us to not be transparent but this is a time where you have to trust us, unfortunately, and we can’t reveal that much more.” And people respected that. And people really stepped up as well. It was crazy to see people really stepping up in the marketing side of things to take over a lot of responsibilities, which I would have normally managed, a huge amount of effort on the sales side of people just stepping up. And I think that’s the blood of startups, isn’t it?

Johan: Mm-hmm.

Emma: Like people stepping up, inexperienced people stepping up. And I think we saw so much of that during that time.

Remy: Yeah. So you framed it as fundraising? Were they [00:22:00] surprised to hear that it was a company to take over?

Emma: I’m not sure. I can’t fully remember the details of that time. I know that definitely at some point, prior to it actually being signed and everything, we did actually bring in kind of the broader management team. Actually, yeah, this one also was one of my best memories, I think. So on the day that we signed, I think that probably, it had leaked a little bit to some people. I’m not 100% sure. I think it was like don’t-ask-don’t tell kind of situation. [laughter]

We went to Hamburg to sign the contract and what was supposed to be a four-hour notary kind of signing turned into like an eight-hour one. And so we had said to the team, “Okay, wait for us in the office. We will be back around five and we’ll tell you what’s going on.” And we were back around [00:23:00] nine. Nine or ten, something like that. And we were racing in a taxi to get to the office. And as we were walking up the steps, we were on the top floor at that time, you could just hear the music like blaring, and you know–?

Johan: You have a big party going on.

Emma: Already a big party going on, and we walked in and everyone just suddenly was silent. Someone turned off the music. And so we just went up in front of the team and said, “Actually, guys, this was an exit.” And we just signed the papers to sell the company. And it was just like everyone just screaming and such applause, and one of the best parties, I think, we’ve ever had, and people randomly standing up on tables making speeches because we were only 45-50 people at that time, and everyone had put their heart into things. And that was a great day.

Remy: So some of them had stock options? What was it like?

Emma: Yeah. I mean, most of them did also have stock. So that was awesome that they got rewarded. Another favorite memory was [00:24:00] like calling one of our early developers. He was 19, I think, when he joined Honeypot. And he’d left maybe a year prior. And I called him and it was like, “We just exited, which means you’re going to be getting some money soon.” And he just was so emotional and started saying, “This is going to be such a huge help for me and my family.” And then I started crying.

Johan: Ah! Wow! Yeah.

Emma: So those moments are just incredible when exiting, you know?

Remy: And during that process, because you mentioned Europe fundraising, did you also, at that time, actually fundraise because Xing, at that time, approached you, you had a few informal talks but also formal, did you at the same time, talk indeed with VCs to have a double-sided approach also on that?

Emma: Yeah, we did, at the time that Xing asked us if we would go into due diligence. We also had one offer, actually, from a VC as well.

Remy: And how were the talks at that time with the VC? Because the first time you really had to– it was really draining as you mentioned, right? How was the second time [00:25:00] talking to the VC? Because then, you had a different situation as a company?

Emma: I feel like I personally was more experienced. As I said, Kaya, I think was already very experienced, but it was much more positive, yeah. I think a lot more confidence and stronger business metrics, and everything like that as well.

Remy: And that was on your side, but especially also on the way that VC handled you, et cetera?

Emma: That was really positive as well. Yeah, it was.

Remy: And then how did you do that? Did you reach out to a lot of VCs? Did you just contact the ones you knew? Can you tell something about how you handled it? Because I can imagine that at those early days with Xing, it wasn’t clear yet that that would result into a transaction, right?

Emma: So kaya let the whole fundraising process but I remember that most of the people we engaged with at that time, the VCs were VCs who had contacted us already throughout the last, maybe, two years. And so we’d kind of built up a relationship with most of them, and kind of had also done probably a bit [00:26:00] more research in terms of talking to other founders, and things like that, about them.

Remy: And it was only German VCs you talked to or was also from other countries, or US-based, or was it–?

Emma: I think German and Dutch, actually.

Johan: German and Dutch, okay. Given your location.

Emma: Yeah, because of our presence in Amsterdam, yeah.

Johan: Yeah, yeah. Okay.

Emma: Yeah.

Johan: Okay, cool.

Remy: Hey, and during that process, did you two handle that process for yourself or did you get some help of other people, advisors, et cetera, or–?

Emma: Yeah, we had an M&A advisor, Parkland Capital who are based out of Hamburg. They were so great. They really helped us structure a lot of what we needed to structure. So we didn’t actually engage them until we had the kind of term sheet with Xing. And then they kind of came in and began to help us.

Remy: To help with the DD mainly, right? Because normally the advice that we often give to founders, if you’re being approached by a potential buyer of the company, we have in Dutch, in Holland an expression for us here, “One buyer is no buyer.” Sure, the shame, you have it in English, but we always advise that you always should have multiple buyers on the table, right? So that’s why if a company approached you, you, at that time, hire an investment banker, or you approach yourself or your VC, but you at that time, I guess you didn’t do that, right? So you were–

Emma: We did actually have two other large HR tech strategics approach us at that time as well. But to be honest, I’m not sure how serious they were. They definitely weren’t as serious as Xing.

Johan: Yeah.

Emma: Yeah.

Johan: Okay, okay.

Emma: But that’s actually very good advice, I think.

Remy: What was the thing that surprised you most about the whole process? You mentioned that the due diligence part took a heck of a lot of time. Were you prepared for that?

Emma: I don’t think, no. I don’t think, structurally, in the company, we were prepared for that. And that would actually be my biggest advice to founders, it’s like how is your time going to be compensated [00:28:00] in the sense of who’s taking over, what you normally do, how do you make sure decisions are unblocked, how does the company move forward. That kind of thing I think is super, super important to define because no matter what, even if you have it split, and like I said, Kaya was the one running fundraising, you’re always going to be pulled into the process as a founder, and you need to figure out how does the company keep going. And luckily, we had a team who really pulled together but I think we could have done much, much better. And I will do much better in the future.

Remy: Exiting a company is also a rational decision, but it’s also an emotional one. How did you deal with the emotions of selling your baby basically?

Emma: Yeah, that was a really emotional decision, especially on the community side because that was really my baby, and the marketing team and community team, I love working with them. [00:29:00] I think it’s so much down to your personal motivation. So I don’t think I was particularly motivated by the money, you know? But I am motivated by legacy. I am motivated by users having a good experience. I am motivated by building a good company for employees. And I need to know that those things will be true post the time of me leaving. And if I thought that they wouldn’t be true, then I wouldn’t have sold it. And that’s I think how I deal with the emotions.


Remy: Evaluation. And normally in this segment, we ask the analyst of Peak to do a rough estimate on what the sales price might be for a company. But since Xing is publicly listed, we already know what the deal terms were. So they analyzed the deal to see if it was a good one.

Colleague from Peak: So let’s dive deeper into the juicy part, [00:30:00] the exit valuation. This time, an easy job as the valuation of the exit has been publicly disclosed and consisted of two parts. One, a cash component of €2 million, and two, a quite large earn out option of €35 million based on revenue and EBITDA performance over the next three years, meaning that if the company would hit these targets, shareholders could earn €35 million more.

While the press release didn’t mention revenue, the annual report of Xing stated that Honeypot contributed €3.5 million in revenues over 2019. If we only consider the cash component, this would imply a six times sales multiple. So what do we think of this valuation? If you compare Honeypot sales multiple to their acquirer, Xing, we see a slight discount as Xing was trading and 7.8 sales multiple.

Fun fact, if you compare the federation of both Xing and Honeypot by dividing the valuation of the amount of members on their platforms, we see the following:

Xing having a market cap at a time of €1.7 billion and 16 [00:31:00] million members, and a valuation price per member of €110.

Honeypot with a valuation of €21 million and 100k members, and a price per member of 220, double the price per member compared to Xing.

So that’s pretty large premium to pay for the members on the Honeypot platform.

So what’s our take? What’s particularly interesting is the high earn-out component. Well, €21 million already seems like a decent price. The €35 million over the next three years is quite substantial. It’s probably imposed by Xing, due to the fact that unlike a SaaS business, we’ve locked in via software and contracts, it’s a bit more uncertain whether the customers of Honeypot would indeed continually return to the platform, especially after an exit.

Xing most likely wants to pay a good price but only if customers remain to be repeat buyers. The founders were probably willing to accept this because either one, they were confident about the business, which I hope was the case, or two, because they were already happy with the base anyway and weren’t even counting the upsides. [00:32:00]

However, earn-outs can be risky as, unfortunately, the Honeypot case has proven to be, because the next year, in 2020, COVID hit and caused a massive decline in their performance. But the annual report of Xing did not state the actual performance of Honeypot. The goodwill of Honeypot on the balance sheet went down from 24 million to 6.4 million. And the annual report also mentioned no earn-out viability has been recognized for the acquisition of Honeypot. Meaning, they don’t expect to pay anything for the earn-outs in the future.

Remy: All right, ladies and gentlemen. Thank you so much for listening to this episode of The Big Exit Show. We hope you enjoyed today’s program. And if you did, please subscribe to our show through Spotify or your favorite podcast platform. If you have any feedback, please send a message to [email protected]. My name is Remy Gieling.

Johan: And I’m Johan van Mil.

Remy: And thanks again for listening, and hope you join us at the next episode.