1Mby1M Virtual Accelerator Investor Forum: With Seong Kim, Corporate Strategy & Development at Chegg Inc. (Part 5)

Sramana Mitra: In smaller acquisitions, what role does valuation play?

Seong Kim: It really depends on why you’re acquiring the business and what you’re ascribing the value of the business to. The role of valuation is always prevalent and important. The needle gets moved by the conviction that an acquirer is able to build around what it’s acquiring and the future state of that team as well. When you’re talking about smaller check sizes, the acquirer tends to focus on the simplest forms of consideration. It can be just cash along with some equity incentive.

1Mby1M Virtual Accelerator Investor Forum: With Seong Kim, Corporate Strategy & Development at Chegg Inc. (Part 4)

Sramana Mitra: What have you disclosed on the valuation on this most recent acquisition? In general, how do you think about valuation? How does valuation play into your acquisition decision?

Seong Kim: The valuation of this deal was approximately $436 million. This is based in London and Madrid. It’s definitely a key factor that impacts whether or not a deal is done, but it shouldn’t be the most important. Valuation is a dependent variable that is influenced by a multitude of factors, some of which, founders can influence and others, they can’t.

1Mby1M Virtual Accelerator Investor Forum: With Seksom Suriyapa, Partner at Upfront Ventures (Part 4)

Sramana Mitra: I’m going to double-click down on your second category. You have product-market fit. The options are, do we sell the company now or do we go for another round of funding. If we choose to go for another round of funding, we will get funded because we have product-market fit. In that scenario, how does valuation compare in an exit versus a funding valuation?

Seksom Suriyapa: This is where things get tricky. Because of the way the venture market is today, which is frothier than where an acquirer is willing to pay, the sticker price on getting venture money will look very attractive from a valuation point of view. The tension is two-fold. One is when you raise money at a relatively high valuation because that’s where the venture is pricing you, you’re also building an execution that could potentially be heroic. You have to grow into these valuations through executions.

1Mby1M Virtual Accelerator Investor Forum: With Seong Kim, Corporate Strategy & Development at Chegg Inc. (Part 3)

Sramana Mitra: Is the driver in that acquisition strategy upselling from your current user base and giving them more products to get into?

Seong Kim: Yes, it serves the two purposes that I alluded to before. It expands the suite of products and services and support we can offer to our existing base. It also extends our addressable market and audience. You look at the other three-quarters or so of language learners out there in the world that engage with this platform or other platform, they are looking at learning for work.

1Mby1M Virtual Accelerator Investor Forum: With Seksom Suriyapa, Partner at Upfront Ventures (Part 3)

Sramana Mitra: What role does valuation play in whether an acquisition happens or not?

Seksom Suriyapa: This is a tough one. The reality is that it tends to be the issue of whether a deal happens or not. Very professional corporate development teams are highly disciplined around how they value deals. Similarly, in the case of venture-backed companies, they have investors that are looking to maximize investor returns.

That constant tension between the two causes these deals to be valuation-driven when, in fact, there are a lot of other factors beyond valuation that are important. If I turn to the seller side, it’s often very difficult for minimally-capitalized ones because there is often an asymmetric advantage that buyers have. Sellers are selling their first-ever business. Buyers are doing this all the time.

1Mby1M Virtual Accelerator Investor Forum: With Seong Kim, Corporate Strategy & Development at Chegg Inc. (Part 2)

Sramana Mitra: Let’s do some examples. What have you been up to in the last few years that illustrates some of this framework thinking?

Seong Kim: The most recent acquisition that we just announced was just over a week ago. It was the largest acquisition we’ve ever done in language learning. As a company that has its humble roots as a textbook business that had embarked on a massive transition to digital, all of that has been highlighted by the fact that we bet on the inevitable – the move towards digital learning and the need for democratized access to on-demand, affordable, self-guided contact as a companion to the learner.

1Mby1M Virtual Accelerator Investor Forum: With Seksom Suriyapa, Partner at Upfront Ventures (Part 2)

Sramana Mitra: Let’s take this example that you started with. Who drives acquisition? Is it product leaders or corp dev? How do you find about this company that you ended up considering an OEM deal with that led to an acquisition?

Seksom Suriyapa: In a very perfect world, I advise that product leaders should drive an acquisition. The world is never perfect. One of the challenges on the sell side is to understand who is driving the acquisition. It’s a moving target and you get passed around a lot. In the case of Twitter specifically, it’s always the product leader who is the decider. Corp dev is there as a collaborator and driver of the deal.

1Mby1M Virtual Accelerator Investor Forum: With Seong Kim, Corporate Strategy & Development at Chegg Inc. (Part 1)

Seong Kim, Corporate Strategy & Development for Chegg Inc. discusses exit strategy within EdTech.

Sramana Mitra: Let’s start with a little bit of introduction. What path have you pursued in the industry? Then we’ll get into some specific topics.

Seong Kim: I’ve been working in Corporate Strategy & Development for the past six and a half years. To me, it’s important to articulate my role in that way because the strategy part must lead the development part. The characteristic that most differentiates what I do now versus what I did prior is the strategy part.