Israeli start-up Outbrain to seek billion-dollar IPO

Following two huge sabra buyouts in 2013, a local company decides to take an alternative – but potentially just as lucrative – exit route

After the massive buyouts of two Israeli tech companies for nearly $1 billion apiece, a third Israeli start-up is set to implement an alternative high-value exit strategy. A report Monday said that Israeli start-up Outbrain plans to go public with a valuation of a billion dollars, or a sum very close to it.

According to the report in the business daily Calcalist, Outbrain, which provides a platform for content management and promotion, will seek to raise $250 million, probably on the NASDAQ.

If the company succeeds, it would be the third-largest IPO for an Israeli company: Cellphone service provider Partner in 1999 raised $600 million on a NASDAQ IPO valued at $2.3 billion, and in 2007, Cellcom, also a cellphone service provider, debuted on the New York Stock Exchange with a valuation of $1.95 billion and was able to raise $400 million.

In June, Google paid close to a billion dollars for traffic and mapping app Waze. In August, IBM paid a similar amount in its buyout of security firm Trusteer.

No date was set for Outbrain’s IPO, the report said, but it would most likely be in the first half of 2014. The company is shopping around for banks or investment houses to handle the IPO, the report added. Outbrain has 200 employees in 15 offices worldwide, 70 of them in its Israeli R&D and data management facility. Employees outside Israel work in sales for the company.

Outbrain is a fixture on many content websites, providing links to a site’s older content and to content from other sites. The purpose is twofold — to engage users in previously posted content that may have gotten “buried” on the site, and to provide a richer user experience for web surfers Outbrain uses cookies to determine what a user is interested in and provides the appropriate links. When a user clicks on a promoted link from another site, the site that hosted the link gets paid for the referral — and Outbrain takes a cut. According to the company, some 100,000 content sites, including CNN, The New York Times, and The Wall Street Journal, use the company’s platform.

Outbrain, established in 2007, has so far raised $64 million in four rounds, the latest of which was in December 2011 when the company took in $35 million in investments. Sources said the company was already then valuated at about $500 million. Chief investors in Outbrain are Carmel Ventures; Sigma Investments, which is run by Dan Galai, father of Outbrain CEO Yaron Galai; investment houses Glenrock, Gemini, and Lightspeed Venture Partners; and serial angel investor Zohar Gilon.

Outbrain recently made news in mid-August when it was apparently hacked by Syrian hackers, enabling them to redirect traffic from sites like the Washington Post. According to the company, the “weak link” was generated from within the company when an employee clicked on a malicious link, enabling hackers to install a virus in the Outbrain system. The company pulled down its entire network as it searched for the compromising software.

According to the younger Galai, Outbrain-supplied content has click-through rates which are “orders of magnitude higher than most traditional forms of digital advertising. Audiences who discover content through Outbrain are also more engaged — they consume 44% more page views per session than those coming from search and 46% more than social media.”

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