Tl;dr: Canaan invested $12 in ON24 at the series-A in 1999. They shared their investment memorandum which is apparently unredacted. Read to understand how a venture capital investor thinks about investing in a company and how they communicate it to their partners and potentially their limited partners.
About the VC investment memo
Last week Crunchbase news wrote about ON24’s IPO as “one of the oldest VC-backed IPOs of the year.” I prefer to think of it more as a “highly experienced” IPO.
In 1999, I led the company’s first institutional round. Before the investment, we valued the company at $12M. As a public company, it is now valued at about $3B (depending on the day).
For fun, we pulled out the original investment memo on the deal — the unredacted version is included below.
A few things stand out:
- A lot can change. I listed Broadcast.com as a major competitor at the time of our original investment but they went on to be acquired by Yahoo and struggled. ON24 actually ended up buying some of the original Broadcast.com assets from Yahoo many years later.
- Pivots rarely work but ON24 pulled it off. I wrote in 1999 “ON24 operates an Internet broadcast network for online investors.” Today they are an enterprise marketing platform for webinars, virtual tradeshows and conferences. This is a testament to the grit and insight of the team.
- A good idea still needs resources and commitment to be realized. When the executive team decided to pursue their new strategy, we were in the middle of the dotcom bust. Canaan and other inside investors supported the company financially and on the board for over 15 years until we found a new investor in 2016. We’re in the business of betting on vision — and pursuing a vision takes time.
- Companies need to keep incorporating new technology or face irrelevance. This “old” company bet early on the cloud and remote-first enterprise technologies and will continue to be a major player post-pandemic.
I hope it’s an interesting read. We were passing the memo around internally and thought it would be fun to post more widely.
About ON24
ON24 is the global leader in webinar-based marketing solutions that drive demand generation and customer engagement. Its patented cloud-based platform features an interactive and immersive user interface and industry-leading webinar analytics for events, campaigns and benchmarking. Providing one-click access from any computer or mobile device,ON24’s award-winning solutions are integrated with leading CRM and marketing automation platforms, enabling marketers to optimize demand generation, enhance lead qualification and accelerate opportunities in their sales pipelines.
| Announced Date | Transaction Name | Number of Investors | Money Raised | Lead Investors |
| May 4, 2016 | Venture Round – ON24 | 1 | $25M | GS Growth |
| Aug 27, 2008 | Series C – ON24 | 1 | $5M | U.S. Venture Partners |
| May 7, 2008 | Venture Round – ON24 | 3 | $8M | — |
| May 13, 2004 | Venture Round – ON24 | 3 | $3.3M | Canaan Partners, Rho Ventures, U.S. Venture Partners |
| Apr 11, 2000 | Series B – ON24 | 9 | $25M | U.S. Venture Partners |
| Aug 30, 1999 | Series A – ON24 | 1 | $6.1M | Canaan Partners |
About VC
Canaan is an early stage venture capital firm that invests in entrepreneurs with visionary ideas. With $5B under management, a diversified fund and over 190 exits to date, Canaan has invested in some of the world’s leading technology and healthcare companies over the past 30 years. Canaan’s focus areas include fintech, enterprise/cloud,marketplaces, frontier tech, biopharma, digital health, and medtech.
Usual caveats
No investment memo made voluntarily public will ever be 100% as it was. The pressure is just too high for VCs to look smarter, and not make founders uncomfortable, etc. I highly praise the VCs that share their thought leadership so we can all learn.
If you’re learning to make a VC investment memo, don’t assume the memos are what you exactly need to do. Information will be redacted. Assume anything “delicate” or sensitive is not in the memos.
The only memo that is 1 to 1 is the Youtube memo because it was in a lawsuit. Canaan say this is an unredacted memo which if true makes it rather unique.
Venture Capital Investment Memo
Canaan Partners Investment Opportunity Overview
Company: On24, Inc. Date: 4/30/99
Partner: DK Source: Sharat Sharan, CEO Location: San Francisco, CA
Service: On24 operates an Internet broadcast network for online investors. The Company’s strategy is to aggregate streaming content for the top 250 companies of high interest to online investors. This content would include audio and video clips provided by the companies and by third parties, as well as interviews with analysts, coverage of conferences and tradeshows. This content is then distributed through a syndication network of large web sites targeted at the online investor. The Company’s technology allows “template-driven” packaging for streaming content, a searchable database access and hosting.
Market: The individual online investor market grew 100% in 1997 to over 7.3M Internet accounts. 27% of all individual trades were conducted online in 1998. The streaming media market is growing twice as fast as the Internet. There have been over 50 million downloads of the Real Player to date.
The Company’s revenue model anticipates fees from companies who want to get distribution and hosting for such content, and advertising splits from the web sites that receive this content. Paying companies today include Synopsys, Etrade and Inprise.
Competition: A number of companies like Broadcast.com provide “webcasting”, i.e, posting of audio and video clips on their website. Unlike On24, these are generally broad, horizontal content sites, with no syndication or distribution to other web sites.
A number of financial sites such as Vcall, The Street.com, Marketwatch, etc. provide financial content, but not targeted at the top 250 companies of interest to online investors, and not in a targeted comprehensive manner. Many of these companies could expand their activities to include streaming media to a syndicated network, but are also potential partners for On24.
Distribution: The Company’s syndication partners include ZDNet, Earthweb, Meckler Media, BusinessWire, StockMaster, CNET/SNAP, and Quote.com. In process are GO2Net, Silicon Investor, Netscape and Nasdaq. Potential future partners include Etrade, Schwab and Marketwatch.
Management: Sharat Sharan, CEO, was a VP and GM at Hearst New Media for 4 years, with responsibility for sites such as Home Arts and Houston Chronicle Interactive. Previously he was a Director of Business Development at Lucent’s wireless group. He has an MBA from University of Chicago. Rajiv Puranik, VP Engineering, was Director of Engineering at OneTouch, Sun and AMD. Bill Boles, VP Sales and Founder was VP of Sales and Marketing at Quote.com. Mitch Ratcliffe, VP Programming was formerly with SoftBank and various magazines.
Stage: The Company has been funded by individual investors to date with $750K invested. Investors include Jim Barksdale (Netscape), Skip Glass (Kiva), Ed Johnson (Times Mirror) and Jim Bidzos (RSA Data).
Financials
| 98(A) | 99(P) | 00(P) | 01(P) | |
| Revenue | $100K | $2.5M | $8.5M | $25.2M |
| Profit | ($550K) | ($3.0) | ($750K) | $3.1M |
Deal Anticipated: Canaan would lead a $6M round with a $3M investment. The balance would come from the founders of Earthweb ($1M) and another venture investor (to be determined – SoftBank and Flatiron have showed interest). The valuation is $12M pre-money. Canaan would receive a Board seat.
Why of Interest
- Intersection of two fast growing markets – online investing and streaming media
- Growth in syndication network enhances value of Company and increases barriers to entry
- Early players in the market (Broadcast.com, Marketwatch, Multex and Infospace) all have large
- Strong acquisition interest likely from financial, Internet and media
Issues
- A content company
- Growth of online investment market could be adversely affected by a market downturn
- Losses anticipated to grow over a 24 month
- Advertising revenue model is relatively untested
- Strong potential competitors
Timing
- Due diligence is nearly complete
- Management has met JVB, EAY & DK
- Term sheet negotiation underway