Hybrid Graphics develops and licenses software graphics technology for mobile phones and other consumer electronics devices.
The roots of the company are in the cooperative Hybrid Kulttuurituotanto Ok, in which the eight founders started working together in 1994 developing advanced 3D graphics engines for computer games.
Nexit as sole investor
In 1998, the company secured its first venture capital investment round from Investor Growth Capital of Sweden and PCA Infocom of Finland. Investors and management later bought the shares of PCA Infocom. Nexit Ventures led the second investment round and made its first investment in October 2002. Nexit made an add-on investment in February 2003 and later also purchased all of Investor’s shares, ending as sole investor with approximately 50% ownership.
Deal screening and investment
Originally, Hybrids Graphics specialized in developing 3D visibility optimization and 3D software rasterizing tools running in a PC environment. The software was marketed and sold through external distribution channels. Significant part of the company's revenue came from 3D graphics modeling and image manipulation. The customers for these services consisted of advertising companies and film agencies in Finland.
Nexit had monitored Hybrid actively since the spring of 2000, and Nexit General Partner Artturi Tarjanne met with the company's management regularly since then. Nexit was greatly impressed by Hybrid's world-class 3D graphics capability, primarily in the PC area. Nexit proposed an investment in Hybrid, as it was seen that the future breed of multimedia handsets with big color screens would provide excellent new growth opportunities for the company.
Company development
After the initial investment, Artturi Tarjanne was Nexit’s representative on Hybrid’s board. In the spring of 2003, Pekka Salonoja was brought onboard as apart-time management consultant tohelp Hybrid's management redefine their business for the mobile segment. The following year, he was nominated as Chairman of Hybrid.
According to the new strategy, Hybrid’s graphics technology licensing business was shifted from PC applications to embedded 3D graphics software for mobile phones. The services for ad agencies were spun off into a company called Fake Graphics Oy through a management buy-out arrangement. A new VP of Sales was hired and a new distribution network for the mobile segment was established.
Into exit mode
In the beginning of 2005, Hybrid was in a strong position. The mobile 3D graphics segment was growing rapidly and Hybrid was clearly the world market leader. In fact, Hybrid was the only vendor that could offer a complete graphics software framework containing all relevant graphics components.
In the spring of 2005, Nexit began a project together with Hybrid management with a target to sell the company within a year. A new share option program was launched and shareholder agreements were updated.
The first discussions with potential buyers from US, Asia and Europe began in the summer of 2005. After many phases, Nexit had four seriously interested buyers in January 2006. The first concrete offers were received, and negotiations continued with two parties at the 3GSM 2006 conference in Barcelona.
After several busy weeks, the deal was finalized with nVidia. No investment bank participated in the acquisition. Nexit managed the negotiations with the potential buyers and orchestrated the entire exit process.
