Last update - 00:00 29/01/2008
eBay subsidiary buys Israeli startup for 1200 percent return
By Guy Grimland, TheMarker
The parade of 2008 exits marches on, with the buyout of Israeli startup Fraud Sciences by U.S. on-line auctioning giant eBay. Privately owned Fraud Sciences, which has developed technology for securing commercial transactions and the prevention of credit-card fraud on the Internet, will be acquired by Ebay's subsidiary, PayPal for about $170 million.
Key personnel from Fraud Sciences, including Yossi Barak, Fraud Sciences' COO, and founders Shvat Shaked and Saar Wilf, will join the company's technology and fraud management teams.
Only $7 million have been invested in Fraud Science to date. Its main shareholders, BRM Capital and Eli Barkat, who acquired a 40% stake in the firm for $5 million, are set to make 12 times that amount ($70 million) from the exit. Founders Shvat Shaked and Saar Wilf will also be taking home $20 - $25 million each.
Fraud Sciences' exit is the latest in a series of successful sell-offs by the BRM fund. The venture capital fund has sold its holdings in three firms over the past two years, bringing in $150 million. As in this most recent case, the holdings were acquired by giants Intel, Microsoft and Primavera, which BRM says was an important element, alongside the price, in the transaction. BRM Capital's portfolio still has holdings worth an estimated $180 million in a number of startups.
Fraud Sciences had originally meant to raise $11 million in a two-staged financing round, but in the course of the due diligence process, which included review of its technology, the firm was offered a buyout, and negotiations moved onto a different track.
This will be eBay's second Israeli acquisition, after it bought out Shopping.com in 2005, whose system provides price comparison solutions, for $634 million.