Dulcedo Buys Node // Revenue and Valuation Estimate
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss Dulcedo’s acquisition of Node, including the deal value prop, and an estimate of Node’s revenue and implied valuation multiples.
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Dulcedo Group paid $13M for Node App, an influencer marketing tech platform.
This marks Dulcedo’s 5th acquisition since 2016.
I estimate revenue and valuation multiples, and discuss the key dynamics driving the deal outcome.
Let’s break it down…
🤝 SELLER: Node
- AI-powered influencer marketing platform
- Mission = bridge gap between small businesses and micro-influencers
- Founded 2019 by Armin Faraji, Mackenzie Dérival
- Initially focused on restaurants, expanded to ecom brands
- Users are creators, talent agents, brands, agencies
- Brands pay creators in products, gifts, or cash for UGC content
- Focuses on Instagram, TikTok campaigns
- 2021 raised $1M seed round from Techstars, Alchemist, strategic angels
- 2020 raised undisclosed pre-seed round
- Team is 2 cofounders plus 1 engineer, 1 CSR (per LinkedIn)
🔎TECH OVERVIEW: Node
- In 2022 selected for Google for Startups Accelerator program
- Enhanced AI capabilities through access to Google’s computing resources, mentorship
- Pioneered machine-learning technology to enhance agency workflows by improving influencer discovery and data reporting
- “Creators can participate in brand campaigns in 3 clicks via Node, as opposed to pitching/negotiating with brands”
- “Brands can create a campaign and begin interacting with influencers within 5-10 min of landing on Node’s website”
✨PERFORMANCE HIGHLIGHTS: Node
- Over 2,000 clients across North America
- Generated “tens of millions of social media impressions”
- Clients incl Kraft, Samsonite, Jarritos, St. Regis, Marriott
- Has activated 5,000+ content creators in campaigns
- Creators include A-list models, elite athletes, actors, social influencers
- During pandemic scaled from 30 to 800 brands five months
💸BUYER: Dulcedo Group
- Global talent mgmt and digital marketing agency
- 4 divisions – Models, Sports, Gaming, Influencer
- Offices in Montreal and Toronto
- Founded 2008 by CEO Karim Leduc
- 3 co-owners incl founder
- Reps 600+ talent
- 70+ team members
💡M&A HISTORY: Dulcedo Group
- 2016 acquired 4249, an influencer relations agency
- 2022 acquired C4G, a startup esports marketing agency
- 2023 acquired Influence+All Management (read RockWater deal analysis here)
- 2023 acquired Sundae Creative Agency
- 2024 acquired Node App
🤔DEAL DETAILS
- Announced 9.18.24
- $13M purchase price
- No other details were disclosed
- My guess is price includes upfront payment + earnout
🤝DEAL VALUE PROP
- Give Node added funding, resources for growth and operational efficiency
- Access to Dulcedo’s 300M+ network following
- Access to Dulcedo’s premium, diverse creator roster to support IM campaigns across various industries
- Accelerate development of AI-enabled tools like matching algorithms and data insights to optimize the IM campaign lifecycle
- Overall, make high-quality, scalable influencer marketing campaigns more accessible to brand marketers
💡POST DEAL OPS
- Dulcedo CEO Karim Leduc will serve as interim Node CEO
- Node co-founder Armin Faraji moves to COO
- Node co-founder Mackenzie Dérival remains as CPO
WHAT ELSE I FIND INTERESTING & DEAL INSIGHTS
Estimating deal valuation…
Below are the key deal dynamics around the sale, which help inform potential valuation range.
My related takeaways and insights are based on the above data from press releases, online research, recent conversations with founders of tech-enabled influencer marketplaces, and my 12+ years of IM-specific dealmaking and operating experience.
Buyer: Dulcedo
- Accelerating M&A activity; 5 deals since 2016, with 3 in past 12 months
- $13M purchase price, though unknown consideration mix and structure (e.g. cash, parent co equity, rollover equity, earnout?)
- No outside capital per Crunchbase. Will likely fund acquisition from balance sheet
- Core biz model is talent representation, a managed services business
- Primary revenue is connecting talent with brand marketers
- No proprietary tech pre acquisition
Seller: Node App
- 2,000 brand marketer clients and 5,000 “activated” content creators. Unknown how many are recurring and active today. Compared to other IM marketplaces I’ve recently spoken to, this feels on small end
- Tens of millions of social media impressions – again, feels on lower end of overall IM marketplace scale
- Lean team of 2 FT cofounders and 2-3 other PT/FT help
- Raised $1M seed in 2022 and a small pre-seed round – based on my revenue math below and deal guidance in press release, likely company had limited cash runway left pre sale
Market: Influencer Marketing
- Talent rep and influencer marketing M&A is going through rapid consolidation – there’s a race to scale up for a winner-take-most market
- Increasing M&A focus on IM tech marketplaces, see recent Influential sale to Publicis, which follows WPP/Obviously, Acceleration Group of Companies/Pixly, and Sprout Social/Tagger. But be wary what is true tech VS a “tech sheen” on top of managed services
- Few influencer marketing companies of scale remain. There are many subscale talent rep and IM tech businesses with minimal traction. Those with scale get premium valuations, but space is highly commoditized at lower end
- Increasing realization that influencer marketing is a person-to-person business, and needs humans to scale alongside the tech
- …read our blog and recent breakdown on Long Haul sale to Wasserman for deeper dives into all these themes
Before diving into the implied valuation multiples, let’s estimate Node’s revenue…
What Else We Know
- Monthly SAAS rate card per website: $0 base tier, $114 mid tier, $324 high tier
- Max creator campaigns per month by tier, low to high, per website rate card: 3, 6, 18
Assumptions
- Of 2,000 lifetime brand clients, 300 are active recurring users today (15%)
- Of those; 60% low tier, 30% mid tier, 10% high tier
- Half of SAAS users get 15% discount for annual signup
- Avg campaign size is $250 – low end since SMB focus
- Node takes 25% total revenue share per campaign
- EBITDA is 10% of gross revenue
Output (see financials chart below for more detail)
- NOTE: Assumes monthly run-rate as of Sep 2024
- 1,320 campaigns per month / 15,840 per year
- $4.2M annual gross SAAS + campaign revenue
- $1.2M annual net SAAS + campaign revenue
- EBITDA is 10% of gross revenue, or $420k
Implied Valuation Multiples at $13M Enterprise Value
- 3.1x gross revenue
- 10.7x net revenue
- 31.1x EBITDA
Reminder that these are just estimates – I don’t know what the real numbers are. Further, each assumed variable has a big impact on revenue and EBITDA potential. Ramping up or down avg campaign size, tier penetrations, # of monthly campaigns, commision %, etc can swing revenue materially up or down.
This is simply my best math-based guess.
Overall, for the reported client and creator figures for this business, I do feel the scale of the biz is low relative to the reported $13M purchase price and thus implied valuation multiples. Reminder that I estimated the Publicis/Influential deal to be around 11x forward EBITDA including earnout.
At 31x EBITDA for Node, this feels quite high.
Which speaks to a quick note on deal structure…
Estimated Deal Structure
If my revenue and EBITDA estimates for Node are in the ballpark, my guess is that the deal structure has a smaller upfront portion (20-40%) which could be a mix of cash + parent co equity, and then a meaningful earnout. That means the upfront valuation multiple could be closer to the 10x EBITDA range.
What else?
- 2-3 year earnout period, likely 100% paid in cash
- TBD earnout thresholds, but would assume rapid revenue growth of at least 50 to 100+% YoY
- Team likely got market comp packages, perhaps in $150-250k OTE range
Alright, hopefully this deal breakdown was helpful to better understand these IM tech marketplaces. I definitely learned a lot thinking through the different variables and all the math. If you have any feedback or alternative POV, feel free to DM me.
Detailed Financial Charts
| Brand Clients | ||||||
| Lifetime | 2,000 | |||||
| Monthly recurring | 300 | 15% | ||||
| Tier | Brand Clients | Breakout % | Monthly SAAS Rate | Monthly SAAS Revenue | Annual SAAS Revenue | SAAS Revenue + Annual Discount |
| Low | 180 | 60% | $0 | $0 | $0 | $0 |
| Mid | 90 | 30% | $114 | $10,260 | $123,120 | $113,886 |
| High | 30 | 10% | $324 | $9,720 | $116,640 | $107,892 |
| 300 | $19,980 | $239,760 | $221,778 | |||
| Campaigns per month | Avg campaign size | Monthly Gross Revenue | Annual Gross Revenue | Node Commission % | Monthly Net Revenue | Annual Net Revenue |
| 3 | $250 | $135,000 | $1,620,000 | 25% | $33,750 | $405,000 |
| 6 | $250 | $135,000 | $1,620,000 | 25% | $33,750 | $405,000 |
| 8 | $250 | $60,000 | $720,000 | 25% | $15,000 | $180,000 |
| $330,000 | $3,960,000 | $82,500 | $990,000 |
| Sep 2024 Run-Rate Financials | |
| Total SAAS + Gross Campaign Revenue | $4,181,778 |
| Total SAAS + Net Campaign Revenue | $1,211,778 |
| EBITDA at 10% gross revenue | 418,178 |
| EBITDA % of net revenue | 35% |
| Purchase Price | $13,000,000 |
| Enterprise Value Multiples | |
| Gross Revenue | 3.1x |
| Net Revenue | 10.7x |
| EBITDA | 31.1x |
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I’m the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
