Shutterfly Acquires Nexo Systems; Let the M&A Wave Begin

We first met Nexo Systems more than a year ago, and were so impressed by its Web creation and collaborative environment that we invited the company to make its debut at DEMO 07.  In a marketplace filling with competitors, Nexo Systems stood apart from the crowd, largely due to its intuitive interface and ease of use. In the DEMO program, we wrote:

Nexo Systems takes group collaboration one step closer to consumer-friendliness with an extremely intuitive, couldn’t-be-simpler, module-based site builder.  Nexo’s founders recognized the positive sin the current group leader, Yahoo!Groups, and worked to integrate similar technology into their product. But they removed any limitations, added all manner of fun widgets to drag and drop,. and most interestingly, game the pages an open architecture for those users with a bit of savvy.

Clearly, the company  not only stood apart, but it stood out and captured the eye of Shutterfly.  Earlier this month, the  online photo site acquired Nexo Sytems, in a cash and stock deal totaling less than $15 million.  Nexo Systems was privately funded by angel investors.

Nexo Systems’ founders Craig Jorach and Tom McGannon will join Shutterfly’s technology team, giving Shutterfly a talent-boost, as well as a “next-generation sharing platform,” according to a statement by Shutterfly CEO Jeffrey Housenbold.

By most measures, a $15 million acquisition is a modest outcome for a Silicon Valley startup, and certainly not the payday an institutional investor would want.   Still, it’s not a bad pay day for a small team.  Assuming typical seed investment and cap tables, the deal provides the capital and experience that will fuel future ambitions.

It’s also most certainly the prototype deal for the army of capital efficient Web 2.0 companies who have developed some decent technology framework, attracted a respectable user base, and who will likely run out of steam before they run into additional venture capital.   We’ll see more of these M&A deals through the remainder of the year as established companies jump start their next-generation offerings, capture Web 2.0-savvy engineering talent, and take some noise out of the market.  

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