Hepmil founders chose Publicis acquisition over fresh funding round, citing M&A risks

[SINGAPORE] While planning for its next phase of growth in the region, local media startup Hepmil Media Group came up against a conundrum – go through another funding round, or sell and be taken over by an established player?

The company’s founders, Karl Mak and Adrian Ang, who started the business with local meme page SGAG, chose to sell.

Hepmil announced in October that it would be acquired by global advertising giant Publicis Groupe for an undisclosed fee, in one of the most high-profile Singapore startup exits in recent years.

SGAG, Hepmil’s platform, produces comedic digital content for Millennials and Gen Z; the startup has since also launched MGAG and PGAG.

Mak, who is also Hepmil’s chief executive officer, told The Business Times in an exclusive interview in November that going for a Series B funding round – the second stage of capital raising in which a startup with an established business model raises funds for expansion – would have forced the team to execute its own mergers and acquisition (M&A), and that it was something it felt ill-equipped to do.

In its angel funding in 2017, Hepmil raised US$968,000; the Series A funding in 2021 brought in another US$10 million, said research firm Tracxn.

Mak said that the initial purpose of the Series B funding was to raise capital to “deepen” Hepmil’s investment into its six existing markets, and one of the ways to do this would have been through M&As of smaller companies.

However, he added: “I do not have the experience of buying and integrating companies.”

He also acknowledged his lack of understanding of financial acquisition and corporate development.

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He added that, more importantly, undertaking M&As would distract Hepmil from its core operations, and that a “wrong” deal could send the company down the “wrong path”.

While the proposed fresh capital injection from another round of funding promised more revenue and growth for the company, it would also make the company too “priced” and “expensive” from a valuation perspective – rendering a future exit for Hepmil more challenging.

Describing the investment scene for startups in Singapore as “beat-up” and “down”, Mak said that he feared disappointing the investors that had backed Hepmil from the beginning. “Will I deliver success to my investors who backed me when I had nothing?” he asked.

While the sale to Publicis may not be the “biggest success” possible, in terms of financial value, it secured a definite win for investors, he noted.

Tech In Asia reported that angel investors would pocket upwards of 20 times their initial investment, although Mak declined to confirm the figure.

He said that the sale was not just a win for the co-founders and investors, it was also a boon for the 310 employees at Hepmil.

“Many of them, perhaps, would never have even dreamed of having the opportunity to work in the MNC,” he said, noting that the positive response at the town hall when they announced the sale was “overwhelming”.

Business as usual

Publicis is not just offering to acquire Hepmil. It is seeking to integrate its data capabilities with Hepmil’s creative flair.

Amrita Randhawa, chief executive officer of Singapore and South-east Asia in Publicis, said: “I think this practice of influencer marketing hasn’t been as data-powered as it could potentially be.”

She added that Publicis will offer Hepmil opportunities beyond influencer marketing, including media and user experience.

Describing the integration as smooth so far, Mak said that there has been “no abrupt change” or disruption at Hepmil, and that he expects the headcount of Hepmil to increase in a controlled manner. “The only way is up, and there’s so much to be done,” he added.