M&A Alert—July 27, 2012
Netgear Acquires Avaak
Transaction Size: Undisclosed
Avaak develops and markets wireless products for the smart home market. Avaak’s flagship product line is the VueZone™ home video monitoring system, featuring the only completely wire-free IP cameras on the market. The VueZone system includes a gateway unit, small wire-free (no networking or power cables required) cameras and a mobile application for viewing video on smartphones or tablets. Users can view their cameras via the mobile app or a browser, receive motion detection alerts, record and share video with others. VueZone is sold through the company’s web site and Amazon, and customers must sign up for a subscription service to watch video on mobile devices. Competitors include Dropcam, iControl, Logitech’s WiLife, Xanboo (acquired by AT&T), Motorola’s 4Home and Comcast’s and Verizon’s newly-introduced home networking offerings.
Founded in 2003, Avaak is based in San Diego and has raised $19mm in venture financing from Trinity Ventures (Fred Wang), Interwest Partners (Thomas Rosch), Leapfrog Ventures (Peter Sinclair) and Qualcomm Ventures (Nagraj Kashayp and Patrick Eggen).
Netgear offers wired and wireless networking products that enable broadband access, commercial business networking, connectivity, network storage and security services. Netgear has a broad line of routers, switches, gateways, wireless access points, network adapters/storage and IP telephony products, and is constantly introducing new products. Netgear has wide retail distribution and also sells directly to enterprise customers and service providers.
Netgear did not disclose the transaction value, but did state that it had used $31mm in cash to acquire Avaak and select assets of a small Indian engineering operation. Avaak is a private company and does not disclose revenues.
Netgear’s main business is in wireless routers. This is a very competitive business, and Netgear is working to differentiate its offerings with leading edge WiFi routers, network attached storage products, video solutions and other innovations and to create new revenue streams by launching services.
Avaak helps Netgear in both dimensions – the VueZone system currently plugs into a wireless router to get Internet access but could eventually be integrated. And the VueZone subscription platform could potentially be used to offer, provision and bill related smart home services.
Architect Partners’ Observations
1) This transaction rides two major trends: growing interest in SaaS business models (even for network-connected hardware vendors), and increasing use of video for sharing, monitoring and collaboration.
2) This deal underscores how the fast-growing smart home sector is attracting quite a bit of interest from consumer electronics manufacturers, security vendors and communications service providers.
3) Expanding retail distribution can be quite costly, and startups like Avaak frequently turn to large partners/acquirers to reach mass markets.