IFund Companies Turning Down Buyout Offers as Mobile Heats Up

The iFund, founded by Kleiner Perkins two years ago for the purpose of investing in applications and services for Apple’s iPhone, has only seen one exit.

But not for lack of offers.

In an interview with iFund manager Matt Murphy, he said several of the fund’s 18 companies have received verbal offers during a recent six-week stretch.

And, even more impressive, all of the companies have turned them down.

“I feel like everyone is realizing how massive mobile is, and some Internet companies are thinking that they should snap these up while they can still be leaders,” Murphy said.

The interest in mobile companies is fairly predictable.

Big public companies, like Google, Microsoft and Amazon, have deep pockets capable of buying companies to fill out a particular niche. Likewise, private companies with public-like valuations, like Facebook, Zynga and Groupon, also have plenty of cash and incentive to grow.

But what’s more unusual is the preference by the entrepreneurs to go big and stay independent.

Indeed, the darker moments of the recession appear to be behind us.

IFund companies include Booyah, Pelago and Flipboard. Cooliris, which lets you view photo and video, announced it has raised $9.6 million in funding todayShazam is another iFund investment, and it could be headed for an IPO in the next year or so.

One of the more public deals was Kleiner Perkins-backed Path, which turned down a $100 million offer from Google and decided to raise nearly $10 million in venture capital to remain an independent mobile social network.

We also hear that Los Angeles-based GOGII, an iFund company, turned down an offer from Zynga, which is averaging about an acquisition every month. Instead, it plans to raise more money and evolve its group-texting platform.

GOGII’s Scott Lahman declined to discuss any negotiations, or whether the offer happened at all, but said he thinks people are waking up to the fact that everything is mobile, and “new platforms introduce new winners.”

The one iFund company that did sell was Ngmoco, which was bought late last year by DeNA for $400 million.

Heck, maybe even think that was a mistake now (although its CEO Neil Young would disagree).

Murphy said the offers the companies are receiving are not low, and are not just from companies seeking mobile talent–the valuations are too high for that, and the teams they are after are too big.

So why is everyone saying no?

“For entrepreneurs, the decision is, ‘what do I want to do for the next few years?’ For passionate entrepreneurs, it’s too early to give up on the dream. If it’s wildly successful, the achievement of going through it all is never replaceable.”

Murphy also says the business is encouraging right now because of the growth rates companies are seeing.

It took Ngmoco more than a year to hit its first $1 million month in revenues. But now Murphy can name multiple game companies that have hit $1 million a month in less than half that time. “If you are the founder, and you are growing revenues 100 to 150 percent year-over-year, why sell today?”

The growth is expedited by the fact that more people are buying smartphones, and the mechanisms are in place to make money.

Almost a year after the iFund was started, Apple enabled in-app commerce, allowing people to buy virtual goods and other items within a game or application. Once it did, it took only a couple of months for companies’ revenues to increase five-fold, he said.

Now the iPhone has come to Verizon Wireless, which expands the market, and Google is coming out with in-app purchasing for Android soon.

Does Murphy mind that these company’s aren’t selling?

No, he said. If they choose to sell, “we may be disappointed.” What gets him excited is when an entrepreneur says, “Hell no.”


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