Cyanogen, which makes software based on Google's (NASDAQ: GOOG) Android operating system, is pursuing a Series C round of financing with late-stage investors and major tech firms after reportedly rejecting an overture from Google to acquire the startup.
The Information reported that revenue-challenged Cyanogen, which is not yet two years old, is seeking a valuation close to $1 billion. The article also cited "several potential investors" as saying Cyanogen's CEO, Kirt McMaster, disclosed that Google's Android leader, Sundar Pichai, had discussed Google's interest in acquiring the startup, a move supposedly aimed at helping Google retain control of the Android ecosystem. Cyanogen, however, is said to have rejected the advance.
Cyanogen and Google started off with a testy relationship. In September 2009, Google ordered Cyanogen to cease and desist distribution of its CyanogenMod custom Android ROM because the software contained proprietary applications, including YouTube and Google Maps. The situation was subsequently resolved, and Cyanogen founder Steve Kondik wrote last year in a blog post that "today we view Google as an important partner."
Some believe the CyanogenMod software will be poised to compete directly with Google Android by adding layers of code atop the Android source code and creating its own ecosystem of hardware vendors and application partners. The company already works with countless developers who contribute code to aid its quest to customize the look and feel of Android while retaining the OS' basic functionality. Its own staff of developers is based in both Seattle and Palo Alto, Calif.
Cyanogen reportedly has already agreed to an arrangement under which India-based manufacturer Micromax would make phones with CyanogenMod software. The phones could be released later this year. According to Droid Life, Micromax holds almost as large a share of India's smartphone market as Samsung.
McMaster confirmed to The Information that Cyanogen is "talking to many potential partners including software makers and hardware manufacturers."
Yet Cyanogen must be careful to not run afoul of Google's increasingly complex compatibility requirements. Failure to meet them could put Cyanogen in a position in which devices using its software are not licensed to run Google's services, such as Google Play and other Google applications. The startup could work around that issue by working with developers to create competing apps, but that might become a long, drawn-out process.
In early 2013, in its Series A round Cyanogen raised $7 million from Benchmark Capital and Redpoint Ventures. Other investors in the company include Andreessen Horowitz and China's Tencent.
Google slaps Android developer with cease-and-desist letter