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Before Ncompass was spun out of Excite, I worked for Gerri and with Ncompass co-founders for a year or so. None of us had ever been able to figure out exactly what the tools they were building were until lately.

It’s unlikely that the Ncompass folks are all going to be millionaires as a result of this. While $36M is a fair valuation (actually, more than fair at 8x revenues) this smells like a bailout to me. Microsoft likely didn’t want to see a potentially valuable hedge against UNIX web development tools circle the drain, so they did what they had to do.

In fact, a substantial majority of Ncompass revenues probably came from Microsoft, which has licensed some ActiveX technology (32K of code) since Ncompass’ inception. The bridge loan mentioned in the article was due and Ncompass probably couldn’t pay it, which spawned the acquisition.

I would estimate that Ncompass has raised and burned on the order of $15M-20M USD, which would mean that investor return was only 2x. Not bad, but certainly not the high-flying IPO that Gerri sold all of her worker bees on.

Welcome to the New New Economy..

-Ian. 🙂

—— The following article is from The Vancouver Sun newspaper in Vancouver BC, one of Canada’s most respected dailies. Its website is at http://www.vancouversun.com.

Microsoft buys Vancouver’s NCompass Labs for $55 million

Microsoft official couldn’t say if employees will be transferred

William Boei Vancouver Sun

Gerri Sinclair, hanging around in her Gastown neighbourhood, is the founder, president and CEO of NCompass Labs Inc. Sinclair says the $55-million sale to Microsoft is “the best decision we’ve ever made.”

Gastown software-maker NCompass Labs is being bought by Microsoft Corp. for about $55 million.

A Microsoft official could not say Monday whether privately owned NCompass, 130 of whose 160 employees work in Vancouver, will stay here or be moved to Redmond, Wash.

Before last spring’s collapse of equity markets for high-tech companies, NCompass founder, president and CEO Gerri Sinclair had talked about taking the Simon Fraser University spin-off company public soon.

On Monday, she said the sale to Microsoft was “the best decision that we’ve ever made.”

NCompass makes Web-content management software, and Microsoft lead product manager Barry Goff said his company’s customers had been demanding such a product.

“This is really a necessary solution for Microsoft to deliver in order for us to have a complete, comprehensive platform,” Goff said in an interview.

“So we went out and looked at all the Web-content management solutions in the marketplace, and NCompass seemed to be the best fit for Microsoft.” Microsoft and NCompass announced no details of the transaction, but Goff confirmed a report by the Canada Stockwatch investment-news service that the purchase price was $36 million US or $55 million Cdn.

Stockwatch, which published its report before the announcement was made, cited court documents showing NCompass received a $1.36 million US bridge loan from Microsoft in February, and that the loan was due Monday.

The report said Microsoft had been showing interest in NCompass since last September, discussed a strategic alliance with it and then got its takeover machinery in high gear in early April.

NCompass reported a loss of $7.5 million US on revenue of $4.9 million last year, Stockwatch said, and had accumulated a deficit of $16 million US. It said NCompass faced “a cash squeeze” by the end of April.

Goff said NCompass will be folded into Microsoft.

“It will be integrated in terms of the technology, as will the people,” he said. “We have a family of server products referred to as the .NET [dot-net] enterprise servers. … NCompass’ primary offering, which is called NCompass Resolution, will become another dot-net enterprise server.”

Asked whether the employees will stay in Vancouver or move south, Goff said: “It’s too early to go into detail regarding the specifics of the transaction. Eventually we’ll figure that out. It’s not clear at this time.” Sinclair said her co-founders, chief programmer Kristof Roomp and technology director Kerem Karatal, have accepted positions with Microsoft.

“In the short term, I’m going to be working to help the transition of NCompass over to Microsoft ownership,” she said.

Asked about the long term, Sinclair said: “Right now, I’m focused on completing the deal and on the transition. Beyond that there are many opportunities, and we’ll have to see where they lead.”

She said Microsoft’s ownership will give NCompass employees the opportunity “to see it join the Microsoft dot-net enterprise server family, and as a result be distributed into a worldwide market into a way that we couldn’t even have contemplated before.”

Sinclair said she was proud of NCompass’ six-year run as a high-profile member of Vancouver’s fast-growing high-tech sector.

“I think this acquisition really confirms that the Vancouver high-tech community can create great companies with products that are able to compete in the global market place,” she said. bboei [at] pacpress.southam [dot] ca

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