In February of 2019, Spotify announced they were acquiring Anchor.fm. We now know the total purchase price for the company was $151MM. The total purchase price consisted of $139MM in cash and $12MM related to the fair value of partially vested share-based payment awards replaced.
In connection with the acquisition of Anchor during the first quarter of 2019, the Company granted 162,320 equity instruments to certain employees of Anchor. The grant date fair value of each equity instrument was US$145.21. Total equity granted at time of grant date equated to $23.5MM. As of today, May 23rd 2019, these share are underwater with a per share price of $121.58. This is about $4MM lower than when originally granted.
Anchor.fm was founded in 2015 and raised $14.4MM. In Feb, 2016 they raised a $1.6MM Seed Round, in March of 2017 they raised an additional $2.8MM and in Sept of 2017 they raised their final $10MM. This is one heck of a return for the investors and team in such a short amount of time. Based on these numbers, we wanted to estimate what the total return would have been for each of these investors, the founders and the rest of the team.
We have made the following assumptions. 1) We made a best guess estimate on pre-money valuation for each round. 2) We assumed a 1x liquidation preference for preferred shareholders. 3) We assumed founders just held common stock with no liquidation rights. 4) We assumed employee option pool did not dilute and shares came from the founders. 5) We assumed all employee options within the pool were distributed to employees. Obviously all of the above could be negotiated differently but this should give us a good guide.
Estimated Anchor.fm Simplified Cap Table
Estimated Return on Investment
Once you factor in the 1x liquidation preference for the preferred shareholders, the total return is very impressive. The early investors in March 2017 turned $1.6MM into most likely around $16.5MM in less than 3 years. The founders of Anchor.fm and most likely many of the early employees are filthy rich. Even the Series A investors turned $10MM into $41M in less than 2 years. Well done team. Well done.