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Google sends big bags of fresh cash to Waze’s early backers

So Google (s GOOG) has finally made it official — it is buying Waze for a shade over a billion dollars. Earlier reports said that the deal was worth $1.3 billion. My sources say that company’s decision to stay in Israel was the primary reason why the price went down by $300 million.

This is the second billion dollar exit where Facebook (s fb) lost out. In case of Tumblr, Facebook’s Mark Zuckerberg offered around $500 million to David Karp, but Marissa Mayer charmed Karp and, of course, more than doubled the money she was willing to pay for Tumblr. It was rumored that Facebook were in the running to buy Waze, but couldn’t pull the trigger.

Actually, selling to Google (or anyone else) was actually the only outcome for this company — even though it had tens of millions of people using the software in dozens of countries worldwide, it would have been pretty hard for them to turn social commuting into a real business. Google, on the other hand, can simply layer this on its maps and try and use the data to drive more real world transactions.

As I pointed out in a post about the new Google Maps, Google will ultimately create more natural advertising formats for maps-driven interfaces and Waze helps them towards that objective. That said, it is a great exhale for Waze’s investors, who were facing the prospect of building a real business — a much harder proposition than most in Silicon Valley understand or are willing to admit.

The big winners in this deal are investors that include Magma Ventures, Blue Run Ventures and Vertex Ventures, who were earliest backers of the company. Sources say they each made well north of $100 million from the deal. The surprise (and ironic) winner might be Microsoft, which is rumored to have invested in the company as a strategic investor.

The company had raised $12 million in its Series A funding in early 2008 and was valued at around $20 million at that time. It snagged another $25 million Series B funding in November 2010 and was valued at just under $100 million after that round of funding. The company received cash from Qualcomm Ventures and Microsoft in addition to other internal investors.

Horizon Ventures and Kleiner Perkins Caufield & Byers were the last money into the company, but they too have made a nice chunk of change on this deal. In October 2011, the company received another $30 million in funding from Horizon Ventures and Kleiner Perkins Caufield Byers at a pretty hefty valuation – around $250 million, according to sources.

8 Responses to “Google sends big bags of fresh cash to Waze’s early backers”

  1. Pete Tenereillo

    Hats off to Noam, he raised that crucial middle 25MM in very difficult times when I was unable to get even a few to allow us to keep going, despite a commanding lead. I remember seeing their first PA office empty and depressing after having to lay off staff. But he turned the corner. The importance of selling the vision so often goes unappreciated. Nice work Noam! Maybe now you’ll buy me that damn beer you promised! :-)

    • In case anybody’s wondering Pete was the founder of Trapster – I would have loved to see you guys take that money and build on the “traps” idea vs. selling out to Nokia early!

  2. Great news! I started using Waze on my Windows Mobile phone. I’m a Knight Wazer, rank 19,486- the crowdsourced reports are a big plus. Now, Waze is next to Google Maps on my VZW GNex’s homescreen. Looking forward to their merging.

  3. i can’t see the logic of the returns here. say the first three vcs put a third each into $12m raised at a $20m valuation, then they each owned 20% of the company at that point. assume they kept their percentage going forward then at a $1bn exit, they should have cashed in $200M which is a lot more than suggested. What am i missing?

  4. Any thoughts on how FB would’ve used Waze? Unclear to me…and an obvious outcome to get scooped by Goog / Apple in this case, since they’re both actively building stuff in the mapping / mapping-data space.

    I can see Waze using FB to up-the-ante on acquisition price, but the opposite pursuit seems curious to me.