Meltwater, which gained notoriety for media monitoring before branching into corporate intelligence using artificial intelligence and big data analytics, has attracted a new backer. At a corporate value of €542 million ($592 million), Verdane, a Norwegian private equity firm that created a $1 billion+ fund earlier this year to invest in expanding digital firms, is acquiring an 11% share in Meltwater, valuing the position at around $65 million. However, there are other deals involved in this transaction as well.
The funding will come from Verdane’s acquisition of a sizeable share in Fountain Venture, the investment vehicle run by Jørn Lyseggen, Meltwater’s founder and current chairman.
Meltwater was a publicly listed company on the Norwegian Stock Exchange until earlier this year. In a transaction with two private equity companies, Altor and Marlin, Lyseggen handled the company’s re-entry into the private market. He kept his remaining portion via Fountain. (Meltwater now references the take-private agreement as the latest stated value.) Instead of investing directly in Meltwater, Verdane invested in Fountain Venture, intending to collaborate with Fountain to make future investments in AI-related firms jointly.
Although Meltwater is by far the more considerable asset, Joakim Kjemperud, a principal at Verdane, stated that the transaction also offers his company a share in an HR company, Jobylon.
He stated, “The deal is that this is very much a portfolio transaction.” “The largest asset in the portfolio is Meltwater, but we’re also acquiring an implied direct stake in Jobylon, a Nordic HR firm, and Jørn’s investment company.” He said that Jobylon now has an ARR of about €5 million, but Meltwater, which was created in Norway but currently has its headquarters in San Francisco, has an ARR of over €500 million.
The transaction highlights a few key topics in the European venture capital and IT industries.
The first is the ongoing, intense pressure on tech firms’ valuations. With a market capitalization of just under $600 million, Meltwater raised less than half of its valuation when it went public in December 2020 at a price of over $1 billion, and less than what it raised throughout the years as a privately owned business (about $700 million, according to PitchBook statistics).
The second is how deals are made and how investors try to reduce risk. The European market is incredibly competitive right now. According to VC firm Atomico’s yearly deep dive into the funding landscape in Europe, which it conducts in conjunction with several third-party research firms and participation from other ecosystem members, funding will drop to just $43 billion in 2023. To offset some of this decline, private equity firms are now participating in deals to a greater extent.
Notably, Verdane chose to invest directly in Fountain Venture instead of Meltwater. Verdane will receive a share in Jobylon, Meltwater, and whatever else Fountain and Lyseggen deem intriguing. This will, therefore, lessen the impact of concentrating on a single industry. While attempting to be more ambitious, Verdane itself has recently begun to expand its wings and invest in companies throughout Europe and beyond. Partnering with someone to assist and guide this venture is a low-risk strategy.
These days, businesses like Meltwater are faced with a technological crossroads. The company’s origins would have been at establishments where employees would have physically combed through stacks of newspapers daily to extract mentions of a company’s name, compile those mentions, and forward them to those clients so they could better monitor their media coverage.
The demise of print media mechanized that endeavor, and as social media grew, it expanded to include sentiment analysis and words that were more often unstructured than organized. A media difficulty became technological with the arrival of an entirely new set of tools to extract meaning from that data. Meltwater developed artificial intelligence internally and has consolidated analytics by acquiring several companies. (DataSift, the ground-breaking company that was an early ally of Twitter in monetizing its firehose before that relationship soured, is undoubtedly the most well-known of these purchases.)
However, it now faces far greater danger from competitors: startups like OpenAI and advancements in generative AI will fundamentally alter consumer and enterprise search and the process of doing any business intelligence job.
Lyseggen thinks there are additional opportunities for his firm, even if Meltwater’s emphasis feels a little like a throwback to an issue that has now effectively been addressed and may be made more efficient by potential competitors.
He referred to OpenAI’s ChatGPT as the “Netscape moment” that marked the beginning of this new age. It’s noteworthy that, despite being far removed from modern use, Netscape altered how people search for information worldwide. AI alters the game so players can take on the established order. In my opinion, Meltwater already has the most cutting-edge and AI-focused tech stock in its class. We are thrilled to announce that we will invest in AI. We are exerting tremendous pressure. Meltwater evaluates almost a billion daily documents for customers in the PR, marketing, and communications industries.
