Tuesday, October 31, 2006

eDreams - first up, last out

One of the very first European online players has finally found a buyer - sort of. eDreams management backed by US PE firm TA Associates has put together €153 million to buy out the other shareholders (ie 100% of the capital) – Doll Capital Management, Apax Partners, Atlas Venture and 3i Group, among others. e-Tid and eyefortravel have also picked up the story.

eDreams has been around since 1999 and was ahead of its time. When I first met them in 2000 they had decided to avoid a head to head battle with lastminute, expedia, ebookers and travelocity etc by focusing on advice, user generated content and uber advisors - cant remember exactly what they were called but something like "DreamGuides" - who would provide advice and commentary on destinations. They would also target the markets that the bigger guys were avoiding - Italy, France, Spain. All very Web 2.0 and all dependent on online advertising - of which there was very little. Even then they were looking for a buy from one of the big guys and by 2003 every single one of the big players had 'kicked the tires" at eDreams - at least twice.

At the time I was a big nay-sayer about eDreams. Online travel at that time was all about scale, technology and big marketing budgets. There was no room for content heavy advisory sites, especially in Europe. The battle was being won by whoever could sell the most air with a cross-sold/packaged hotel. eDreams was not an effective part of that battle but has managed to survive through it with reports of 300 million euros in turnover and earnings of 9 million euros.

The interesting part of the transaction is that the VC shareholders are getting out but the founders are staying. Can't remember exactly how much eDreams raised but it was at least 40mm euros so a LBO at this price is not a huge return for the original VCs. That all said - congrats to eDreams of surviving one and half booms where hundreds have failed.

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