VCs score in
Rent.com sale
by David Shabelman in
San Francisco
Updated 07:13 PM EST, Dec-17-2004
Venture capitalists who invested in Rent.com Inc. will close 2004 on a high note after eBay Inc. bought the online apartment rental company for $415 million in cash and stock.
Terms of the deal, which was announced Friday, Dec. 17, call for privately held Rent.com to receive $385 million in eBay common stock and $30 million in cash. The purchase price amounts to a sizeable windfall for Rent.com's venture backers and other investors, which invested a total of $33 million in the company since 1999. Rent.com launched in 2001.
In 2000 Allegis Capital of Palo Alto, Calif., led a $12 million Series B round of investment in Rent.com, joined by San Francisco-based Rosewood Capital and Kline Hawkes & Co. of Los Angeles. Also that year the company landed $18 million in third-round funding from several national real estate investment trusts, the Series B investors and new investors Bank of America and Thomas Weisel Partners. Rent.com also had a $3 million Series A round in 1999.
"We were very pleased with the valuation and even more pleased with the partner," said Tim Burke, managing director with Rosewood. "It's a great deal for eBay, with their community and traffic and it will be a profitable business for them."
Rent.com was preparing to register to go public when it received an unsolicited buyout offer in the fall from an undisclosed suitor, said one investor. It then prepared a short list of potential acquirers that included eBay, as well as other Internet and real estate-related companies.
"We thought the value we were getting was pretty comparable to what we would get going public, so we thought it was better to take the cash and go with it," said Klaus Koch, partner with Kline Hawkes.
Scott Ingraham, CEO and co-founder of Rent.com, said he and business partner Allan Hunter had previously run a public company — Oasis Residential Inc., a REIT — and were prepared to proceed with an initial public offering for Rent.com.
"More than the average Internet entrepreneur we know the hard parts of taking a company public and running it, and we know it's gotten harder with the complexities of Sarbanes-Oxley," he said, alluding to a 2002 law aimed at halting corporate fraud. "That, in and of itself, was not going to dissuade us from doing it. What did dissuade us was the once in a lifetime opportunity to become a part of the eBay story."
Santa Monica, Calif.-based Rent.com, which provides online apartment and housing rental listings, has been profitable since 2002 and is on track to generate more than $40 million in revenues in 2004.
eBay officials did not return calls seeking comment.