Vungle Sells to Blackstone, Ending Unsettling Silicon Valley Saga

(Bloomberg) -- Mobile ad startup Vungle Inc. is being acquired by private equity funds of Blackstone Group Inc. in a transaction that will handsomely reward the startup’s backers and bring to a close a bizarre episode of Silicon Valley scandal.

The transaction is worth about $750 million including cash, according to a person familiar with the situation who asked not to be identified because the details are private. It represents a rich outcome for a startup founded in 2011 that raised less than $30 million in venture backing, including from Alphabet Inc.’s GV, Thomvest Ventures and Crosslink Capital. 

Vungle’s business, delivering ads to mobile phone users of games and other entertainment, has become highly competitive in recent years. In a press release, Blackstone said Vungle excelled at retaining users across different devices, and worked with customers including Angry Birds maker Rovio Entertainment Oyj, Zynga Inc., Pandora and Microsoft Corp.

Vungle’s founding CEO, Zain Jaffer, was fired from the company two years ago after police were called to his house in the middle of the night. Jaffer had hit both his father and his infant child, and was naked while performing a martial arts maneuver on his young son that involved gripping the child between Jaffer’s legs. A prosecutor charged Jaffer with performing a lewd act, child abuse and battery, but later dropped the charges after Jaffer argued the police had misinterpreted the martial arts move as sexual, and that at the time of the incident, he was suffering from a psychotic episode triggered by a cocktail of legally prescribed drugs. 

Earlier this year, Jaffer sued Vungle, asking for his old job back or for compensation to cover his losses. As part of the sale of the company, that case has now been settled, according to a statement from Blackstone.

“We look forward to contributing Blackstone’s resources to accelerate Vungle’s growth trajectory in the years ahead,” said Martin Brand, senior managing director at Blackstone, in the statement announcing the deal. Vungle chief executive officer Rick Tallman said the company would “aggressively expand” through organic growth and acquisitions. 

Jaffer said he now planned to spend some time with his family, and eventually start another company. “I’ve been itching to do that,” he said, adding that he was “thrilled” with the settlement and sale.

Early employees at Vungle will also benefit significantly from the sale, thanks to an agreement that valued employees’ shares equally to those of large shareholders—unusual in a startup acquisition. In a 2017 vote after Jaffer’s arrest, big shareholders voted to convert their holdings to common shares. At the time, it had the effect of preventing Jaffer, then the majority shareholder, from reinstating himself as CEO. Now, it has the effect of putting all shares on equal footing in the sale. 

To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net, Mark Milian

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