Google acquired their startup for $114mn. Then, the founders bought it back: The DailyDeal story

Fabian (links) und Ferry (rechts) HeilemannHow often do you hear of an over $100 million acquisition and months later, a buy back? Brothers Fabian and Ferry Heilemann surprised many when they bought back their daily deals company, DailyDeal, from Google 17 months after they sold it for $ 114 million to the giant.

At the time of the acquisition, it was reported that Fabian had remarked how lucky he was to sell the company right before the collapse of the coupon hype in the West. But when Google started laying off staff at DailyDeal and winding up company operations, the founders decided to act from their heart, and stepped in to buy back their company.

This gutsy move is highly unusual, almost incredible in the hard-nosed world of business. But Fabian and Ferry proved that being entrepreneurs is not just about making money but also listening to one’s heart.

The back story

Fabian and Ferry were born in West Germany. Both of them completed their A-levels at public schools. Ferry went on to study business economics at the WHU Otto Beisheim School of Management, Germany, and the Nottingham University Business School, UK. Fabian studied law at the Bucerius Law School in Hamburg and the Santa Clara University School of Law, USA. He did his PhD in Heidelberg, Germany.

During our studies and afterwards, we worked for several consulting firms like Simon + Kucher & Partners or Booz & Company. But it didn’t satisfy us to act just as consultants. We wanted to make decisions on our own and therefore we decided to become entrepreneurs,” Fabian tells YourStory.

According to him, there was just one big reason to become entrepreneurs: “It satisfies us to realize our own business ideas, build up a team and lead it to success. We acquire self-affirmation by running our own companies.”

The brothers already knew that they were a good team: “Back in 2001, we founded an event-gastronomy company and ran it for several years.”

Their decision to startup on the “Deal of the Day” business model, he says, was the result of a methodic evaluation process. “We analyzed about 60 business ideas and finally decided to realize the most marketable one.”

Fabian Heilemann, Sir Richard Branson and Ferry Heilemann

Fabian Heilemann, Sir Richard Branson and Ferry Heilemann

The first European ‘deal of the day’ portal

They launched DailyDeal.de in December 2009 in Berlin as the first European ‘deal of the day’ portal. Initially, they were just a 3-member team: Fabian, Ferry and a developer. The trio set up the beta version, but the market and their company grew very fast. In March 2010, just three months after the launch, they already had 100 employees. “Today, we lead a team of 125 employees who work for DailyDeal and our four other companies,” Fabian says.

DailyDeal was probably the first local commerce company in Germany. For the first time, restaurants, hotels, hairdressers, wellness salons and other local companies had an avenue to win new customers online by offering them discounts for specific products/services or for off peak periods. “From day one, we offered full service to our merchants. We helped them to calculate a profitable offer, create and promote their deal and handle the payment process. For our service, we only charge a performance based provision. We only charge a provision for each conveyed customer. That’s why so many merchants trust in DailyDeal,” he explains.

In the early stages, DailyDeal competed with Citydeal, which got acquired by Groupon in May 2010. Fabian says that the acquisition worked in their favour as many merchants “felt more comfortable to partner with a comparatively small company instead of a concern.” DailyDeal was able to be more dynamic and accommodating as the brothers were the only decision-makers, he feels.

The $114 million acquisition by Google

In the early days, DailyDeal faced strong competition and had to grow fast to survive. To finance the rapid growth, they had to close new financing rounds up to three times a year! “Some processes weren’t even established perfectly then. Google helped us to sort out these inefficient processes and restructure our team,” Fabian says.

Google acquired DailyDeal in September 2011. By then, “we were in business relationships with roundabout 12,000 merchants and reached out to a much higher number of users,” Fabian recalls.

“To this date, 250 people have worked for DailyDeal. We have been the strong number two in Germany, market leader in Austria and number three in Switzerland.”

The incredible buy back

Fabian says that the MBO ( a management practice which aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization.) gave them an opportunity to gain all the assets they assembled between 2009 and early 2013.

DailyDeal logoFor example, DailyDeal is in long-term business relationships with more than 15,000 small and medium-sized businesses. “We use this asset and the knowledge of our experienced team to build up a group of companies under the umbrella of our company-builder, Sky & Sand. Today, we own and run four companies. Besides DailyDeal, we manage E-Business Agency Heilemann & Co., LOCALIZE!, an authorized Google AdWords Premier SMB Partner, and pepperbill - one of the leading POS providers for the gastronomy industry. They are all separate enterprises but reach out to nearly the same target group.”

DailyDeal is currently in a consolidation phase. “We are making processes more efficient to reduce our burn-rate and break even. With success, DailyDeal will become profitable in 2014.”

The brothers’ vision is to make Sky & Sand one of the “leading company builders in Europe and become the go-to-guys for all (local) companies who want to use digital media for their further growth”.

They believe in the “1 % inspiration, 99 % transpiration” mantra. “Of course, you need a marketable business idea at the beginning, but you will have to pay much more time and effort on its execution. Founders need to work very hard and should do business only with trustworthy people to succeed,” Fabian says.

Fabian and Ferry are rare entrepreneurs, who do not see an acquisition as the end goal of starting up. Let’s hope, they will be able to revive DailyDeal and make a success of it yet again.

What do you think about these brave-heart entrepreneurs and their gutsy move? Share your comments with us.

Malavika Velayanikal

Malavika Velayanikal

Malavika Velayanikal is Executive Editor of YourStory.com and an innovation junkie . She is hooked to bold ideas. Got a NEWS TIP related to anything in the world of tech, startups and entrepreneurs? Email her at malavika@yourstory.com