Measuring Mettl’s mettle: The anatomy of a startup exit

$40 million.

There was a time not that long ago when $40 million (roughly Rs 300 crore) would have been considered a big amount in the Indian startup ecosystem. There was a time when there were entire VC funds that were smaller than this figure and 99% of Indian startups would have seen it as a magically large number for any aspect of their business.

Visualizing the results

But that time has passed.

Today, a $40 million figure means almost nothing. There are companies that have raised hundreds of millions, even billions of dollars.

$40 million is how much Flipkart burns in a single month.

$40 million is how much Zomato and Swiggy are jointly spending each month.

$40m is how much Mettl was acquired for earlier this month.

Wait, Mettl who? What acquisition?

If you asked yourself these two questions, don’t berate yourself for any perceived ignorance. There was hardly any media coverage of Mettl’s exit in mainstream print media (presumably at least partially because they didn’t have column space to spare after running all the Flipkart/Zomato/Swiggy advertisements).

Of course, this isn’t surprising in the least—in our current echo-chamber, “X”illion is newsworthy only if it starts with a B and not an M.

But the fact of the matter is that this $40 million figure is far more important and significant than it appears on the surface.

Why so?

Let’s start with the numbers.

Numbers that tell the tale

As a precursor, it might be pertinent to point out that Mettl is a SaaS startup operating in the HR technology space with a specific focus on online talent assessment. Basically, the company offers a solution that lets enterprises evaluate and assess potential hires. Headquartered in Gurugram, Mettl was founded by Ketan Kapoor and Tonmoy Shingal in 2009 and has since grown to a team of 380 members.

Mettl has been profitable since 2013 and is currently said to have annual revenue of $10 million or thereabouts. Earlier this month, the company was acquired for a reported sum of $40 million by Mercer, a wholly-owned subsidiary of NYSE-listed professional services firm Marsh and McLennan.

Mercer focuses on human resources consulting and has a large global footprint of 23,000 employees operating in 130 countries.

Now, why is this $40 million figure significant?

For starters, it represents an exit rather than an investment—there are many Indian startups that have raised more than this figure in funding but very few that have exited for anywhere close to this figure. The importance of this is further embellished by three factors.

First, it was an all-cash acquisition. It is one thing for one Indian startup to acquire another using over-valued stock as currency but it is entirely another for an international conglomerate to purchase an Indian startup by paying cash. This leaves no doubt about the perceived quality and value of the purchase.

Second, Mettl is a tech/SaaS startup. Prior to Mettl, there has been only a handful of Indian venture-funded SaaS startups that have been acquired at this scale, and hardly any that have not been acqui-hires. So in a sense, this is completely unchartered territory as far as startup exits go in India.

Amplification of the revenue

Finally, and most importantly, the $40 million figure is important because Mettl only raised a grand total of Rs 23 crore in funding through its life-cycle. Parlaying a Rs 23 crore investment into a Rs 300 crore exit means that everyone has made money on the deal—a rare win-win scenario.

Here is a summary of Mettl’s funding journey.

Blume invested a total of Rs 2.92 crore into Mettl (this includes a secondary transaction where Blume purchased the shares of angel investor Sasha Mirchandani). Assuming the Rs 300 crore exit value comes with no caveats (such as contingent earn-outs), Blume made a total return of Rs 22.74 crore—a great 7.8X return and healthy IRR of 40%. This exit also marks Blume’s highest cash exit. Considering the fact that this investment came from a Rs 100-crore fund, the Mettl exit represents a return of 22% of the total corpus, making it a clear winner.