Dear Startup Investor,
444 Castro Street, San Francisco. That’s where Adam and I met Geekatoo Founder Kevin Davis last summer.
Geekatoo used to call it home.
Not anymore.
The slightly larger HelloTech recently acquired Geekatoo.
HelloTech was Geekatoo’s competitor. It operated in the same market and chased the same customers, but had slightly different business models and growth strategies.
It’s a noncash deal. Geekatoo’s investors will be paid in HelloTech shares.
Our Startup Investor members invested in June 2014 under a convertible note arrangement – a loan, in other words.
That loan will now be converted into preferred shares from HelloTech.
What This Deal Means if You Invested
The price of the buyout remains confidential. What we can say is this: The acquisition will be handing you a paper profit of more than 100% on your investment in Geekatoo.
Okay, let’s tackle a couple of things you need to be clear on. First off, this is not a liquidity event. You cannot cash out your shares. They are private and illiquid. (As they would have been if they were converted into Geekatoo preferred shares at its next round of fundraising.)
Second, this is not a bad thing. Even if you could cash out, we’d be recommending that you hold on to these shares. And for several good reasons.
HelloTech is an up-and-coming company. Its growth is strong. Its leadership outstanding. And it has the backing of several top venture capital companies, including Upfront Ventures, Greycroft Partners and Accel Partners (HelloTech’s founder and CEO – Richard Wolpert – used to work for them).
Upside for Early Investors
Kevin told us in a recent phone call how excited he was to be joining HelloTech’s dynamic team in LA. “I’m all in, 100% committed to making HelloTech a success,” he said.
Geekatoo will give HelloTech a nice boost – accelerating their growth plans by about a year, according to Wolpert. It will also be handing them an overnight national presence (via Geekatoo’s 7,000 “geeks”).
An added bonus: HelloTech also gets the use of Geekatoo’s Philippine call center.
As for the early investors – including many of you – who backed Geekatoo? Kevin assured us that “They’re getting a good deal. A very fair conversion price on their HelloTech equity.”
Kevin believes that this deal puts Geekatoo investors in a position to reap potentially quicker returns on their money. And with a higher profit ceiling.
You can expect a call or email from the folks at HelloTech shortly. They’ll be providing additional details on the conversion of your Geekatoo loan into HelloTech shares.
Invest early and well,
Andy
Startup Investor Portfolio
Startup Investor Exits
