Dow Jones announced its acquisition of database assets from beleaguered U.K.-based Library House on Jan. 6, less than 2 weeks after closing the deal. Back on Dec. 4, paidContent:UK reported that Library House had gone into administration. According to BusinessWeekly.co.uk, "A number of parties had been in talks with administrators Leonard Curtis but Dow Jones was considered to offer the best fit." Both Dow Jones VentureSource (www.venturesource.com) and Library House (www.libraryhouse.net) focus on compiling and selling data on venture capital investments. Specifically, the database that Dow Jones VentureSource acquired focuses on companies that are backed by venture capital and private-equity investors. While some in the media have questioned the long-term viability of this type of market, others think this acquisition might just be the first of its kind. Either way, DowJones says this acquisition has positioned the company well for the future.
Adam Wade, marketing communications manager for Dow Jones Financial Information Services (www.fis.dowjones.com), says the Library House acquisition was "a spur of the moment opportunity for us." After Lehman Brothers collapsed, and the world economy went into a tailspin, a struggling Library House succumbed to financial distress, and VentureSource was able to quickly structure a transaction, getting a good deal—though Wade could not discuss specific numbers—on the company’s database assets after it went into administration. "We just saw the opportunity and took it."
Media reports say Library House, founded in 2002 by Doug Richard, had been laying off staff for much of the year and meeting with possible investors of its own, but it finally folded, according to BusinessWeekly.co.uk, "When a nervous bank called in the bulk of the company overdraft, [and] the directors were unable to meet the demand."
In other corners, media sources have wondered what future remains for companies like these. For instance, Mike Butcher from TechCrunch wrote: "First, it’s clear that with the downturn Library House’ main client base of Venture Capitalists could no longer afford Library House’s fees—thousands of pounds for just one subscriber account. … They are also increasingly less interested in early stage companies, the usual fodder for LH’s research." Those are not the only problems Butcher pondered though. He also pointed out that the availability of information on the web about companies—including About Us pages and crowd-sourced databases such as CrunchBase—can provide more than enough information for any venture capitalists looking for investment opportunities.
Not everyone sees it that way, however. "We’ve seen these boom and bust cycles for services supporting private equity investors before, but it’s a strong signal that Dow Jones is picking it up at this time. It’s an indication of the underlying truth—venture capital didn’t disappear, it’s just sitting on the sidelines for the next wave," says Shore Communications president John Blossom. "While some information about private deals can be found on the web, there’s always a premium to be paid for getting more of it, better organized than others have provided, in order to do more sophisticated analysis. Well-organized information about private transactions will always be a good premium service, even if, in this instance, it may have a strong cyclical component in its revenue stream," he adds.
Dow Jones—owned by Rupert Murdoch’s News Corp.—seems to lean more toward Shore’s side of things. Wade says Library House’s financial problems were caused more by its business model than by the quality of or demand for the data it sold. With backing from a global corporation, VentureSource has far deeper pockets than Library House—and probably most of its would-be competitors for the defunct company’s assets, enabling it to come up with the financing for the deal when other companies found the credit crisis to be a hurdle—but one might still wonder if it’s not a risky move to make a large purchase of any sort in this economic climate. Blossom, however, does not seem concerned. "It’s a good move by Dow Jones at a time when they could pick up this important cyclical data at the market bottom," he says.
According to Wade, VentureSource still has firm footing with its client base, though potential new clients have clearly become more cautious with how they spend their dollars and sometimes find it hard to make big expenditures on this sort of information. "I can’t say that we’ve seen problems, but we’ve seen our growth plateau as new customers pull back … but our existing customers are very happy," says Wade.
And what about everything that Library House brings to the table for Dow Jones? Wade says VentureSource moved into Europe about a decade ago; it has moved on to Israel, China, and India since then. Library House was based out of Cambridge, England, and "there was a very heated marketing battle between the two of us" for European customers. Because of its location in Cambridge, Wade says, Library House was privy to a lot of information about new startup companies and small venture capital deals—those often less than $1 million.
Therein lies the value for VentureSource, though Butcher called its value into question in the TechCrunch article. Wade says many of VentureSource’s competitors focus—almost exclusively—on big deals, of $5 million or more. By acquiring the database assets of Library House, a company that was "good at getting research on upstart companies in the early stages," according to Wade, VentureSource gets a jump on some of its biggest competitors.
If you take Blossom’s word for it, this acquisition just may be a trendsetter. He says, "As with the venture capital data market itself, weak plays that entered late and assumed that the bubble-level interest in leveraged finance would sustain their operations are likely to fail, unless they can find a patient and well-financed buyer like Dow Jones that has an opportunity to plan new revenue streams for the long run. I think that we can expect companies like Thomson Reuters [to make] similar ‘bottom trawling’ acquisitions for good cyclical database products as well."