Google’s Waze Deal Said to Give BlueRun 19-Fold Return

Google Inc.’s $1.1 billion acquisition of Waze Inc. produced a 19-fold return for BlueRun Ventures, the biggest investor in the mobile-mapping company, a person familiar with the matter said.

Led by John Malloy, BlueRun had a stake of 15 percent in Waze that was worth more than $165 million at the time of sale, said the person, who asked not to be identified because the information isn’t public. The firm invested a total of $8.7 million in Waze, starting in 2008, Malloy said.

Waze is the first investment for BlueRun that’s fetched more than $1 billion since PayPal Inc., another portfolio company, was acquired by EBay Inc. in 2002. BlueRun, which changed its name from Nokia Venture Partners in 2005, has raised $540 million for its last two funds, Malloy said. About 65 percent of the portfolio is in mobile startups like Waze, which was founded in Israel, he said.

“Mobile is really at the epicenter of everything,” Malloy said in a June 13 interview on “Bloomberg West.” It’s “the most global of all technology sectors. It’s also the most horizontal, so it’s impacting many many different vertical industries,” he said.

Out of China

Malloy said BlueRun’s next breakout companies will probably come out of China, where the firm has invested in startups including social-shopping site Meilishuo and mobile-classified service Ganji. He said he’ll be raising additional funds, including one centered around Asian opportunities.

Google’s purchase of Waze, announced on June 11, comes as the world’s largest search engine seeks to recover ground in mobile after its mapping tool was surpassed by Facebook Inc. as the most popular U.S. smartphone application. The social-networking service had previously been in talks to acquire Waze, according to people familiar with the matter, who asked not to be identified because the discussions were private.

Waze joins a crop of Web-based startups, including Yammer Inc. and Tumblr Inc., that have been acquired in the past year for more than $1 billion. Those deals are poised to help bolster the returns for early-stage funds that have struggled to make money since the dot-com bubble burst in the early 2000s.

As of the end of last year, venture firms had earned 6.9 percent on average annually during the past decade, trailing all of the major U.S. stock indexes, including the average 7.1 percent yearly gain for the Standard & Poor’s 500 Index, according to Cambridge Associates LLC. For early-stage funds, the annual gain was 5.8 percent.

The last time Malloy was part of a such a large transaction was when EBay bought web-payments company PayPal for about $1.2 billion. Malloy backed Confinity, the predecessor to PayPal, while running Nokia Oyj’s venture arm. The firm made about 22 times its money on PayPal, he said.

Mobile Startups

Max Levchin, a PayPal co-founder, raised money from Malloy again in 2005 for his social-media company Slide Inc. BlueRun more than doubled its money from Slide’s $200 million sale to Google in 2010. Levchin said Malloy was bullish on mobile before most Silicon Valley investors.

“He’s got 10 years of experience over anyone else,” said Levchin, who now runs mobile-payments startup Affirm Inc. and is chairman of consumer-review website Yelp Inc. “Through the expertise of being a longtime mobile guy, he’s seen everything through the prism of mobile.”

Malloy, whose firm is based in Menlo Park, California, said he first met Waze’s founders in early 2008 at the Mobile World Congress in Barcelona. Soon thereafter, he led the first investment, which included Israeli firms Magma Venture Partners and Vertex Venture Capital. In 2011, Kleiner Perkins Caufield & Byers, an early Google backer, and Li Ka-shing’s Horizon Ventures Hong Kong led a $30 million round.

Malloy has been a board member since his initial investment and said he’s an avid Waze user. Waze, which runs on Apple Inc.’s iOS and Google’s Android mobile operating system, alerts users to potential traffic slowdowns and suggests alternative ways to reach destinations. The app lets users share their location, so others can track their progress.

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