Facebook’s Acquisition of Little Eye Shot in Arm for Indian Start-ups

Edited by Vani Rao

Takeover aimed at increasing user experience on Android devices

The acquisition of Bangalore-based Little Eye Labs by Facebook (NASDAQ: FB) might be a small step for the social media giant, but it would well infuse oxygen into India’s fledgling start-up ecosystem.

Facebook Little Eye Labs
Source Facebook.com

Ending months of speculations about an imminent acquisition, Kumar Rangarajan, Co-founder and Chief Ion, stated, “Today, we’re very excited to announce that Facebook is acquiring our company. With this acquisition, Little Eye Labs will join forces with Facebook to take its mobile development to the next level! This is Facebook’s first acquisition of an Indian company, and we are happy to become part of such an incredible team.”

Little Eye Labs was founded about a year ago by a bunch of program analysis geeks who wanted to build better tools for mobile developers and were later backed by GSF and VenturEast Tenet Fund. The company released its official version of Little Eye for Android in April 2013. Rangarajan stated, “Since then we have had many Android developers and testers using Little Eye Labs to measure, analyze, and optimize their app’s performance. We’re thankful for the opportunity we’ve had to make an impact in the development of some of the best apps out there.”

The entire Little Eye Labs team will move to Facebook’s headquarters in Menlo Park, California. From there, they will be able to leverage Facebook’s world-class infrastructure and help improve performance of their already awesome apps.

“For us, this is an opportunity to make an impact on the more than one billion people who use Facebook,” stated Little Eye Labs website, “This has been a fun and exciting journey. We’re eager to be working alongside the incredible team at Facebook, and together, we’ll continue on our mission of building awesome analysis tools to aide in the development of brilliant apps.”

Reacting to the acquisition, Mukund Mohan, CEO-in-residence of start-up advisory Microsoft Accelerator said that the US on an average does about 1,200-1,500 acquisitions, Israel takes over 115-200, and India has done 10-11, and most of them have been covert. Hence, there is a lot of scope (in this area).

“In the past eight years, the investment into start-ups in the technology space in India has increased by nearly seven fold — from around $300 million in 2006 to $2 billion at present. The number of start-ups has also increased dramatically from 300-400 in 2008 and now to nearly over a 1,000 entities every year. The number of firms that invest in these fledgling firms have increased from 23 in 2008 to around 70 at present, including Mumbai Angels, Angel Networks, and accelerators such us ours. The number of companies and investors has increased, but the number of exits (read acquisition) hasn’t increased dramatically. The fact that there is so much money under investment some people need to some exits. The only way that Indian investors in the technology space have gotten exits so far is by selling their companies’ share to a PE funds later on,” Mohan added.

So, is it the first acquisition by a US technology giant? Facebook, Twitter (NYSE:TWTR), and Google (NASDAQ:GOOG) haven’t done a single acquisition in India. Even Microsoft (NASDAQ:MSFT) hasn’t done a single acquisition in the country. This is the first take over by US technology firm of that size. Earlier, Buzzgame was acquired by US-based Meltwater. SlideShare was acquired by LinkedIn (NYSE:LNKD) in 2012. “This is not the first acquisition, it is the first acqui-hire,” Mohan asserted.

Facebook mobile & Web

So why do these sector giants acquire? There are primarily two reasons — access to market and access to technology or product. They want to acquire a company because that would give it access to a new market and a new set of customers. Or they will acquire a firm for its technology. “There is a recent phenomenon called acquisition-hire, which is acquisition for talent. It is extremely difficult to hire excellent talent in the world over, particularly in the US,” Mohan underlined.

The tech giants who go on a start-up shopping spree every now and then have shown little interest in Indian companies. What has it changed now?

Similar to the financial boom and bust cycles, there is also a trend in the productivity space where you would have innovation productivity vice versa. During innovation cycles, the absolute emphasize would be on getting out new product quick. However, during productivity cycle, the focus would be on saving and becoming more operationally efficient.

“We are finishing out of a productivity cycle in the US and entering the innovation cycle. So need to get kind of the kind of talent that innovate. Entrepreneurs innovate and take risks. Over the past few years, Facebook, Google, and Twitter have figured out the only good way to get talent is acquire talent. This is the reason for companies for acquire. In the 1990s, Cisco (NASDAQ: CSCO) would acquire 20-30 companies every year and put a prize on every engineer because it was so difficult to get good talent at that time. It is easier to hire a team for say $40 million and quickly get a product out worth $1 billion than sit and hire one by one for a year and build a team. Previously, people would hire individuals and now they want teams. Earlier, they used to hire good candidates now they want entrepreneurial candidates. That’s the dramatic shift that is happening. Little Eye’s acquisition is the first acqui-hire by a US company.”

Needless to say, this is a huge exit for the founders of Little Eye. The rumored price is something around $10-15 million. The previous valuation of the company was around $4 million. “I know the guys but I cannot divulge anything, right?” he said, underlining that Microsoft Accelerator did not play a role in mentoring or helping Little Eye but iSpirit and GSF and VentureEast played their part in grooming or supporting the start-up.

Little Eye Lab thanked all its customers for their support, investors — Sateesh Andra from VenturEast, Rajesh Sawhney and all the GSF super angels — for believing in them, their advisors — Jaideep Mirchandani, Brij Bhasin, and all the GSF mentors — for guiding them. “The next phase in our incredible journey begins now. Here we go…,” stated the site.

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