The riddle of the BeReal deal (2024)

A social networking company acquisition? In 2024? Acquired by a gaming company? A half-billion dollar (or euro) price tag? Nothing about this seems normal.

So, let’s start with the price.

It may not exactly be the venture exit of, say, investor Andreessen Horowitz’s dreams. But keep in mind that BeReal’s peak valuation in 2022 was $600 million, which makes this…a pretty good outcome. Menlo Ventures partner Amy Wu is with me on this one.

“If you look at the history of social network outcomes, if they’re not large, by default you’re dead, right? Because they’re monetizing via advertising and unless you’re getting into the few-hundred-million range, advertisers just aren’t interested in that asset,” said Wu. “So, by default, most social networks are just dead and, therefore, to get a $500 million outcome, that’s pretty rare for a social network that doesn’t have that scale.”

And with users down the company’s 2022 peak (Voodoo says BeReal has 40 million active users, but that can mean a lot of things), BeReal only had so much time to make this exit happen. If users are leaving or stagnating, it’s ultimately a declining asset.

“BeReal is a classic example of a tech company that’s hit a growth plateau within its historical market/biz model and needs to pivot,” said Joe Endoso, CEO of investment platform Linqto, via email. “The problem is that it needs capital to do this and today’s VC funding environment for its vertical is still weak. So M&A is the only option. Otherwise they languish and die.”

So acquirer Voodoo is now on a clock to figure out what exactly to do from here, but, to be clear—Voodoo is in its own pivot from hypercasual gaming, so though its a surprising and possibly overpriced deal for them, BeReal could end up making sense in terms of luring stickier users.

But the deal is also a marker of a warming M&A exit market that could stand to get warmer still.

Rick Yang, NEA partner and head of technology, says the BeReal deal is indicative of a “sweet spot” for acquisitions at a time when regulatory scrutiny has made big-ticket tech deals hard to come by. “I’m surprised we haven’t seen more M&A in this range,” Yang says.

The next deal wave could be materializing as we speak, as all sorts of acquirers are out there right now looking at deals of this size, from Wiz to Databricks to Nvidia.

“We’ve certainly heard that corp dev teams are very actively looking at targets right now,” says Menlo Ventures’ Wu. “You have the 2021 wave of companies that have raised a lot of capital, and are now either needing to raise again or looking for homes. You have the first wave of AI companies to get funded that really can’t stay in the capital accumulation game, so they’re looking for homes. Then, companies are looking for talent, right? So, you have multiple M&A stories happening at once.”

If nothing else, perhaps BeReal brings this into sharp relief: that this is an industry about what’s hot and what’s not. This week, around the time BeReal’s buyout was announced, French AI juggernaut Mistral raised another €600 million at a valuation around €6 billion. It raises the question of whether BeReal’s outcome is evidence that outliers can come from any sector, or whether going against the grain is ultimately futile.

As hot as AI is right now, are we convinced that Mistral’s reasonable best-case scenario isn’t along the lines of a BeReal-sized exit? AI is moving so fast that products can become obsolete quickly, and AI business models are still a giant question mark. Naturally, Mistral’s investors think differently, but I’m personally less sure.

And, in the end, as exits go, BeReal is a reminder that M&A really isn’t that bad.

“It’s a good home for the company and, frankly, there’s a lot you can do with BeReal in the context of the broader ecosystem,” said Yang. “So, from an investor standpoint…it ended up not being what they had hoped for, but it’s not that bad. And the ultimate story for the company itself hasn’t been completely written yet.”

See you Monday,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- AccountsIQ, a Dublin, Ireland-based cloud accounting platform, raised €60 million ($64.4 million) in Series C funding from Axiom Equity.

- Learn to Win, a Menlo Park, Calif.-based SaaS training platform, raised $30 million in Series A funding. The Westly Group led the round and was joined by Norwest Venture Partners and Pear VC.

- Findigs, a New York City-based rental screening and decision platform, raised $27 million in Series B funding. Nyca Partners led the round and was joined by existing investors RPM Ventures, Streamlined Ventures, Expa Ventures, Activant Capital, Colle Capital, and Frontier Venture Capital.

- FUZE Technology, a Los Angeles, Calif.-based IoT company, raised $11.5 million in Series A funding. Beverly Pacific led the round and was joined by Palm Tree Crew, Bain Capital Ventures Scout Fund, Dream Ventures, and others.

- IgniteData, a Wilmington, Del. and Maidenhead, U.K.-based patient data platform for clinical trials, raised $8 million in seed funding. SpringTide led the round and was joined by Oncology Ventures and others.

- Sidekick, a London, U.K.-based wealth management platform designed for modern investors, raised £4.5 million ($5.7 million) in seed funding. Pact VC and TheVentureCity led the round and were joined by MS&AD, Blackwood, 1818, and existing investors.

- Tern AI, an Austin, Texas-based developer of an AI-powered alternative to the GPS, raised $4.4 million in seed funding from Scout Ventures, Shadow Capital, Bravo Victor VC, and Veteran Fund.

- Zeta Labs, a San Francisco-based developer of AI bots capable of performing complex and multi-step tasks, raised $2.9 million in pre-seed funding. Daniel Gross and Nat Friedman led the round and Earlybird VC and others.

PRIVATE EQUITY

- Clearhaven Partners acquired Zixi, a Waltham, Mass.-based provider of live video software. Financial terms were not disclosed.

- NetSPI, backed by KKR, acquired Hubble, a Reston, Va.-based cyber asset attack surface management company. Financial terms were not disclosed.

EXITS

- Sony Pictures Entertainment acquired Alamo Drafthouse, an Austin, Texas-based chain of dine-in movie theaters, from Altamont Capital. Financial terms were not disclosed.

OTHER

- Pluxee agreed to acquire Cobee, a Madrid, Spain-based employee benefits platform. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

- J.P. Morgan Private Capital, a team within J.P. Morgan Asset Management, raised $500 million for its first fund focused on life sciences companies.

PEOPLE

- FTV Capital, a San Francisco-based growth equity investment firm, hired Richard Earnshaw as partner. Formerly, he was with Hg.

- HGGC, a Palo Alto, Calif.-based private equity firm, hired Cecilia Kwan as chief financial officer. Formerly, she was with B Capital Partners.