How Elite Daily's 20-something founders sold their startup to Daily Mail for ~ $50 Million

Daily Mail just acquired media startup Elite Daily for $40-50 million, according to multiple sources familiar with the deal.

But when Daily Mail's US CEO Jon Steinberg was first told to meet with Elite Daily in June, he blew it off.

Steinberg had been approached by prominent venture capitalist, Alan Patricof, at an event. Patricof asked Steinberg to consider advising Elite Daily, a media startup he had invested in. Elite Daily was run by three 20-somethings who had raised a modest amount, about $2.1 million, and had benefitted from Facebook's firehose of traffic. In less than three years, the company had grown to 40 million monthly unique readers.

Steinberg agreed to look at the company, but neglected to follow up. One week later, Patricof pinged him again.

"He says, 'I've heard you haven't met with them,'" Steinberg recalls. "'I'd like you to do it by the end of the week.' When Alan tells you to do something you do it."

Steinberg followed orders and scheduled a sit down with the founders. He says he immediately fell in love with them and agreed to advise them.

Elite Daily is a media startup that's only a few years old. It was founded in February 2012 and was initially bootstrapped by David Arabov, 24, Jonathan Francis, 29 and a friend, Gerard Adams. Arabov and Francis were undergraduates at Pace University at the time, and they pooled together $60,000 to create The Huffington Post for millennials - despite the fact that they had no experience running a media company.

With some trial and error, the site began to take off. By the end of 2013, the company generated a $400,000 profit and soared to 41 million monthly readers. As of June, Elite Daily was seeing a healthy mix of direct traffic (18-20%), SEO (11%) and social (70%) of which 50-55% came from Facebook.

In September, Elite Daily decided to raise a large round of financing to compete with other well-funded digital media startups, like Mic, Vox and Business Insider. The company had operated on a lean budget but even with only one ad sales person, it was profitable.

The founders flew to the west coast to round up some cash. But when Steinberg caught wind of the fundraise, he picked up the phone and called Daily Mail's publisher, Martin Clark and chairman Lord Rothermere. He suggested Daily Mail buy Elite Daily. Out of the startup's 74 million monthly readers, there was only a 10% overlap with Daily Mail's readership. Clark and Rothermere had been following Elite Daily's progress for the past year, and they immediately agreed with Steinberg.

Steinberg put together a letter of intent and spent the next few months negotiating a sale price. The deal was completed at 12:30 AM Friday morning: a $40-50 million acquisition, much of which is cash.

"Now we have 50% of all millennials in the U.S. coming to one of our sites," says Steinberg.

At 9 AM on Friday, Steinberg broke the news to his team. Arabov, Elite Daily's CEO, bought a nice breakfast for his team of 65 and bottles of champagne.

All of Elite Daily's team will stay on board, and the brand will remain in tact under Daily Mail.

Here's the Elite Daily team celebrating the news Friday morning.