Once a buzzword, digital transformation is reshaping markets

The notion of digital transformation evolved from a buzzword joke to a critical and accelerating fact during the COVID-19 pandemic. The changes wrought by a global shift to remote work and schooling are myriad, but in the business realm they have yielded a change in corporate behavior and consumer expectation — changes that showed up in a bushel of earnings reports this week.

TechCrunch may tend to have a private-company focus, but we do keep tabs on public companies in the tech world as they often provide hints, notes and other pointers on how startups may be faring. In this case, however, we’re working in reverse; startups have told us for several quarters now that their markets are picking up momentum as customers shake up their buying behavior with a distinct advantage for companies helping customers move into the digital realm. And public company results are now confirming the startups’ perspective.

The accelerating digital transformation is real, and we have the data to support the point.

What follows is a digest of notes concerning the recent earnings results from Box, Sprout Social, Yext, Snowflake and Salesforce. We’ll approach each in micro to save time, but as always there’s more digging to be done if you have time. Let’s go!

Enterprise earnings go up

Kicking off with Yext, the company beat expectations in its most recent quarter. Today its shares are up 18%. And a call with the company’s CEO Howard Lerman underscored our general thesis regarding the digital transformation’s acceleration.

In brief, Yext’s evolution from a company that plugged corporate information into external search engines to building and selling search tech itself has been resonating in the market. Why? Lerman explained that consumers more and more expect digital service in response to their questions — “who wants to call a 1-800 number,” he asked rhetorically — which is forcing companies to rethink the way they handle customer inquiries.

In turn, those companies are looking to companies like Yext that offer technology to better answer customer queries in a digital format. It’s customer-friendly, and could save companies money as call centers are expensive. A change in behavior accelerated by the pandemic is forcing companies to adapt, driving their purchase of more digital technologies like this.

It’s proof that a transformation doesn’t have to be dramatic to have pretty strong impacts on how corporations buy and sell online.


By Ron Miller

Box beats expectations, raises guidance as it looks for a comeback

Box executives have been dealing with activist investor Starboard Value over the last year, along with fighting through the pandemic like the rest of us. Today the company reported earnings for the first quarter of its fiscal 2022. Overall, it was a good quarter for the cloud content management company.

The firm reported revenue of $202.4 million up 10% compared to its year-ago result, numbers that beat Box projections of between $200 million to $201 million. Yahoo Finance reports the analyst consensus was $200.5 million, so the company also bested street expectations.

The company has faced strong headwinds the past year, in spite of a climate that has been generally favorable to cloud companies like Box. A report like this was badly needed by the company as it faces a board fight with Starboard over its direction and leadership.

Company co-founder and CEO Aaron Levie is hoping this report will mark the beginning of a positive trend. “I think you’ve got a better economic climate right now for IT investment. And then secondarily, I think the trends of hybrid work, and the sort of long term trends of digital transformation are very much supportive of our strategy,” he told TechCrunch in a post-earnings interview.

While Box acquired e-signature startup SignRequest in February, it won’t actually be incorporating that functionality into the platform until this summer. Levie said that what’s been driving the modest revenue growth is Box Shield, the company’s content security product and the platform tools, which enable customers to customize workflows and build applications on top of Box.

The company is also seeing success with large accounts. Levie says that he saw the number of customers spending more than $100,000 with it grow by nearly 50% compared to the year-ago quarter. One of Box’s growth strategies has been to expand the platform and then upsell additional platform services over time, and those numbers suggest that the effort is working.

While Levie was keeping his M&A cards close to the vest, he did say if the right opportunity came along to fuel additional growth through acquisition, he would definitely give strong consideration to further inorganic growth. “We’re going to continue to be very thoughtful on M&A. So we will only do M&A that we think is attractive in terms of price and the ability to accelerate our roadmap, or the ability to get into a part of a market that we’re not currently in,” Levie said.

A closer look at the financials

Box managed modest growth acceleration for the quarter, existing only if we consider the company’s results on a sequential basis. In simpler terms, Box’s newly reported 10% growth in the first quarter of its fiscal 2022 was better than the 8% growth it earned during the fourth quarter of its fiscal 2021, but worse than the 13% growth it managed in its year-ago Q1.

With Box, however, instead of judging it by normal rules, we’re hunting in its numbers each quarter for signs of promised acceleration. By that standard, Box met its own goals.

How did investors react? Shares of the company were mixed after-hours, including a sharp dip and recovery in the value of its equity. The street appears to be confused by the results, weighing the report and working out whether its moderately accelerating growth is sufficiently enticing to warrant holding onto its equity, or more perversely if its growth is not expansive enough to fend off external parties hunting for more dramatic changes at the firm.

Sticking to a high-level view of Box’s results, apart from its growth numbers Box has done a good job shaking fluff out of its operations. The company’s operating margins (GAAP and not) both improved, and cash generation also picked up.

Perhap most importantly, Box raised its guidance from “the range of $840 million to $848 million” to “$845 to $853 million.” Is that a lot? No. It’s +$5 million to both the lower and upper-bounds of its targets. But if you squint, the company’s Q4 to Q1 revenue acceleration, and upgraded guidance could be an early indicator of a return to form.

Levie admitted that 2020 was a tough year for Box. “Obviously, last year was a complicated year in terms of the macro environment, the pandemic, just lots of different variables to deal with…” he said. But the CEO continues to think that his organization is set up for future growth.

Will Box manage to perform well enough to keep activist shareholders content? Levie thinks if he can string together more quarters like this one, he can keep Starboard at bay. “I think when you look at the next three quarters, the ability to guide up on revenue, the ability to guide up on profitability. We think it’s a very very strong earnings report and we think it shows a lot of the momentum in the business that we have right now.”


By Ron Miller

Activist investor Starboard Value makes official bid for Box board seats in letter

Last week activist investor Starboard delivered a public letter rebuking the company for what it perceives as under performance. Today the firm, which owns 8% of Box stock, making it the company’s largest stock holder, took it a step further with an official slate of four candidates it will be putting up at the next stockholder’s meeting.

While the company rehashed many of the same complaints as in last week’s letter, this week’s explicitly stated its intent to run its own slate of candidates for the Box board. “Therefore, in accordance with the Company’s governance deadlines and in order to preserve our rights as stockholders, we have delivered a formal notice to Box nominating four highly qualified director candidates (the “Nominees”) for election to the Board at the Annual Meeting,” Starboard wrote in a public letter to Box.

Box responded in a press release that the Board as currently constituted categorically rejects this attempt by Starboard to take over additional seats.

“The Box Board of Directors does not believe the changes to the Board proposed by Starboard are warranted or in the best interests of all stockholders. The Box Board has been consistently responsive to feedback from all of its stockholders, including suggestions from Starboard, and open-minded toward all value enhancing opportunities. Furthermore, Starboard’s statements do not accurately depict the progress Box has made,” the Board wrote in a statement this morning.

Box further points out that the company overhauled the Board last year with three new board members specifically receiving Starboard approval.

What is driving Starboard to take this action? Like any good activist investor it wants a higher stock price and is seeking for more growth from Box. Activist investors often come in and try to extract value by brute force when they perceive the company is under performing. The end game were they successful could involve removing Levie as CEO or more likely selling the company and grabbing its profit on the way out.

Box asserted that “Starboard’s statements do not accurately depict the progress Box has made,” highlighting some of its recent financial performance including “a $127 million increase in free cash flow in fiscal 2021.” The former private-market darling also argued that its fiscal 2021 “revenue growth rate plus free cash flow margin [came to more than] 26%,” which beat its own target of 25% and was “nearly double” what it managed in its fiscal 2020.

This is a good time for a ‘yes, but‘: Yes, but Box’s ability to improve its profitability does not change the fact that its growth rate has been in steady decline for years. And while a company’s growth rate can cover nearly any sin, slowing growth that has already slipped into the single digits doesn’t cut Box much slack. (For reference, in its most recent quarter, the fourth of its fiscal 2021, Box grew just 8% on a year-over-year basis.)

It’s worth noting that the company did promise “accelerated growth and higher operating margins in the years ahead” in its most recent earnings call, but the company’s recent $500 million investment from KKR particularly irked Starboard, which asserts that it was akin to ‘buying the vote.’

“[Box] made several poor capital allocation decisions, including its recent entry into a financing transaction that we believe serves no business purpose and was done in the face of a potential election contest with Starboard at the 2021 Annual Meeting of Stockholders.”

Now it’s becoming a battle over more board seats. Box is putting up Levie, Verisign CFO Dana Evan and Peter Leav, Chief Executive Officer of McAfee and former Chief Executive Officer of BMC.

Starboard nominees include Deborah S. Conrad, former executive at Intel; Peter A. Feld, Starboard’s head of research; John R. McCormack, former CEO of WebSense and Xavier D. Williams, a director of American Virtual Cloud Technologies.

The vote will take place at the Box stockholder’s meeting, which has traditionally been held in late June or early July. To this point, the company has not put out the exact date publicly.


By Ron Miller

Starboard Value puts Box on notice that it’s looking to take over board

Activist investor Starboard Value is clearly. fed up with Box and it let the cloud content management know it in no uncertain terms in a letter published yesterday. The firm, which bought a 7.7% stake in Box two years ago claims the company is underperforming, executing poorly and making bad business decisions — and it wants to inject the board of directors with new blood.

While they couched the letter in mostly polite language, it’s quite clear Starboard is exasperated with Box. “While we appreciate the dialogue we have had with Box’s management team and Board of Directors (the “Board”) over the past two years, we have grown increasingly frustrated with continued poor results, questionable capital allocation decisions, and subpar shareholder returns,” Starboard wrote in its letter.

Box as you can imagine did not take kindly to the shot across its bow and responded in a press release that it has bent over backwards to accommodate Starboard including refreshing the board last year when they added several numbers, whom they point out were approved by Starboard.

“Box has a diverse and independent Board with directors who bring extensive technology experience across enterprise and consumer markets, enterprise IT, and global go-to-market strategy, as well as deep financial acumen and proven track records of helping public companies drive disciplined growth, profitability, and stockholder value. Furthermore, seven of the ten directors on the Box Board will have joined the Board within the last three years,” the company wrote in a statement. In other words, Box is saying it already has injected the new blood that Starboard claims it wants.

Box recently got a $500 million cash injection from KKR widely believed to be an attempt to bulk up cash reserves with the goal generating growth via acquisition. Starboard was particularly taken aback by this move, however. “The only viable explanation for this financing is a shameless and utterly transparent attempt to “buy the vote” and shows complete disregard for proper corporate governance and fiscal discipline,” Starboard wrote.

Alan Pelz-Sharpe, founder and principal analyst at Deep Analysis, a firm that closely tracks the content management market, says the two sides clearly aren’t aligned and that’s not likely to change. “Starboard targeted and gained a seat on the board at Box at a difficult time for the firm, thats the modus operandi for activist investors. Since that time there has clearly been a lot of improvements in terms of Box’s financial goals. However, there is and will remain a misalignment between Starboard’s goals, and Box led by Levie as a whole. Though both would like to see the share price rise, Starboard’s end goal is most likely to see Box acquired, sooner rather than later, and that is not Box’s goal,” he said.

Starboard believes the only way to resolve this situation is to inject the board with still more new blood, taking a swipe at the Box leadership team while it was at it. “There is no good reason that Box should be unable to deliver improved growth and profitability, at least in-line with better performing software companies, which, in turn, would create significant shareholder value,” Starboard wrote.

As such the firm indicated it would be putting up its own slate of board candidates at the company’s next board meeting. In the tit for tat that has been this exchange, Box indicated it would be doing the same.

Meanwhile Box vigorously defended its results. “In the past year, under the oversight of the Operating Committee, the company has made substantial progress across all facets of the business — strategic, operational and financial — as demonstrated by the strong results reported for the full year of fiscal 2021,” the company wrote, pointing to its revenue growth last fiscal year as proof of the progress with revenue of $771 million up 11% year over year.

It’s unclear how this standoff will play out, but clearly Starboard wants to take over the Board and have its way with Box, believing that it can perform better if it were in charge. That could result ultimately, as Pelz-Sharpe suggested, in Box being acquired.

We would appear to heading for a showdown, and when it’s over, Box could be a very different company, or the current leadership could assert control once and for all and we could proceed with Box’s current growth strategy still in place. Time will tell which is the case.


By Ron Miller

Daily Crunch: KKR invests $500M into Box

Box gets some financial ammunition against an activist investor, Samsung launches the Galaxy SmartTag+ and we look at the history of CryptoPunks. This is your Daily Crunch for April 8, 2021.

The big story: KKR invests $500M into Box

Private equity firm KKR is making an investment into Box that should help the cloud content management company buy back shares from activist investor Starboard Value, which might otherwise have claimed a majority of board seats and forced a sale.

After the investment, Aaron Levie will remain with Box as its CEO, but independent board member Bethany Mayer will become the chair, while KKR’s John Park is joining the board as well.

“The KKR move is probably the most important strategic move Box has made since it IPO’d,” said Alan Pelz-Sharpe of Deep Analysis. “KKR doesn’t just bring a lot of money to the deal, it gives Box the ability to shake off some naysayers and invest in further acquisitions.”

The tech giants

Samsung’s AirTags rival, the Galaxy SmartTag+, arrives to help you find lost items via AR — This is a version of Samsung’s lost-item finder that supports Bluetooth Low Energy and ultra-wideband technology.

Spotify stays quiet about launch of its voice command ‘Hey Spotify’ on mobile — Access to the “Hey Spotify” voice feature is rolling out more broadly, but Spotify isn’t saying anything officially.

Verizon and Honda want to use 5G and edge computing to make driving safer — The two companies are piloting different safety scenarios at the University of Michigan’s Mcity, a test bed for connected and autonomous vehicles.

Startups, funding and venture capital

Norway’s Kolonial rebrands as Oda, bags $265M on a $900M valuation to grow its online grocery delivery business in Europe — Oda’s aim is to provide “a weekly shop” for prices that compete against those of traditional supermarkets.

Tines raises $26M Series B for its no-code security automation platform — Tines co-founders Eoin Hinchy and Thomas Kinsella were both in senior security roles at DocuSign before they left to start their own company in 2018.

Yext co-founder unveils Dynascore, which dynamically synchronizes music and video — This is the first product from Howard Lerman’s new startup Wonder Inventions.

Advice and analysis from Extra Crunch

Four strategies for getting attention from investors — MaC Venture Capital founder Marlon Nichols joined us at TechCrunch Early Stage to discuss his strategies for early-stage investing, and how those lessons can translate into a successful launch for budding entrepreneurs.

How to get into a startup accelerator —  Neal Sáles-Griffin, managing director of Techstars Chicago, explains when and how to apply to a startup accelerator.

Understanding how fundraising terms can affect early-stage startups — Fenwick & West partner Dawn Belt breaks down some of the terms that trip up first-time entrepreneurs.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

The Cult of CryptoPunks — Ethereum’s “oldest NFT project” may not actually be the first, but it’s the wildest.

Biden proposes gun control reforms to go after ‘ghost guns’ and close loopholes — President Joe Biden has announced a new set of initiatives by which he hopes to curb the gun violence he described as “an epidemic” and “an international embarrassment.”

Apply to Startup Battlefield at TechCrunch Disrupt 2021 — All you need is a killer pitch, an MVP, nerves of steel and the drive and determination to take on all comers to claim the coveted Disrupt Cup.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.


By Anthony Ha

Industry experts bullish on $500M KKR investment in Box, but stock market remains skeptical

When Box announced it was getting a $500 million investment from private equity firm KKR this morning, it was hard not to see it as a positive move for the company. It has been operating under the shadow of Starboard Value, and this influx of cash could give it a way forward independent of the activist investors.

Industry experts we spoke to were all optimistic about the deal, seeing it as a way for the company to regain control, while giving it a bushel of cash to make some moves. However, early returns from the stock market were not as upbeat as the stock price was plunging this morning.

Alan Pelz-Sharpe, principal analyst at Deep Analysis, a firm that follows the content management market closely, says that it’s a significant move for Box and opens up a path to expanding through acquisition.

“The KKR move is probably the most important strategic move Box has made since it IPO’d. KKR doesn’t just bring a lot of money to the deal, it gives Box the ability to shake off some naysayers and invest in further acquisitions,” Pelz-Sharpe told me, adding “Box is no longer a startup its a rapidly maturing company and organic growth will only take you so far. Inorganic growth is what will take Box to the next level.”

Dion Hinchcliffe, an analyst at Constellation Research, who covers the work from home trend and the digital workplace, sees it similarly, saying the investment allows the company to focus longer term again.

“Box very much needs to expand in new markets beyond its increasingly commoditized core business. The KKR investment will give them the opportunity to realize loftier ambitions long term so they can turn their established market presence into a growth story,” he said.

Pelz-Sharpe says that it also changes the power dynamic after a couple of years of having Starboard pushing the direction of the company.

“In short, as a public company there are investors who want a quick flip and others that want to grow this company substantially before an exit. This move with KKR potentially changes the dynamic at Box and may well put Aaron Levie back in the driver’s seat.”

Josh Stein, a partner at DFJ and early investor in Box, who was a long time board member, says that it shows that Box is moving in the right direction.

“I think it makes a ton of sense. Management has done a great job growing the business and taking it to profitability. With KKR’s new investment, you have two of the top technology investors in the world putting significant capital into going long on Box,” Stein said.

Perhaps Stein’s optimism is warranted. In its most recent earnings report from last month, the company announced revenue of $198.9 million, up 8% year-over-year with FY2021 revenue closing at $771 million up 11%. What’s more, the company is cash-flow positive, and has predicted an optimistic future outlook.

“As previously announced, Box is committed to achieving a revenue growth rate between 12-16%, with operating margins of between 23-27%, by fiscal 2024,” the company reiterated in a statement this morning.

Investors remains skeptical, however, with the company stock price getting hammered this morning. As of publication the share price was down over 9%. At this point, market investors may be waiting for the next earnings report to see if the company is headed in the right direction. For now, the $500 million certainly gives the company options, regardless of what Wall Street thinks in the short term.


By Ron Miller

KKR hands Box a $500M lifeline

Box announced this morning that private equity firm KKR is investing $500 million in the company, a move that could help the struggling cloud content management vendor get out from under pressure from activist investor Starboard Value.

The company plans to use the proceeds in what’s called a “dutch auction” style sale to buy back shares from certain investors for the price determined by the auction, an activity that should take place after the company announces its next earnings report in May. This would presumably involve buying out Starboard, which took a 7.5% stake in the company in 2019.

Last month Reuters reported that Starboard could be looking to take over a majority of the board seats when the company board meets in June. That could have set them up to take some action, most likely forcing a sale.

While it’s not clear what will happen now, it seems likely that with this cash, they will be able to stave off action from Starboard, and with KKR in the picture be able to take a longer term view. Box CEO Aaron Levie sees the move as a vote of confidence from KKR in Box’s approach.

“KKR is one of the world’s leading technology investors with a deep understanding of our market and a proven track record of partnering successfully with companies to create value and drive growth. With their support, we will be even better positioned to build on Box’s leadership in cloud content management as we continue to deliver value for our customers around the world,” Levie said in a statement.

Under the terms of the deal, John Park, Head of Americas Technology Private Equity at KKR, will be joining the Box board of directors. The company also announced that independent board member Bethany Mayer will be appointed chairman of the board, effective on May 1st.

Earlier this year, the company bought e-signature startup SignRequest, which could help open up a new set of workflows for the company as it tries to expand its market. With KKR’s backing, it’s not unreasonable to expect that Box, which is cash flow positive, could be taking additional steps to expand the platform in the future.

Box stock was down over 8% premarket, a signal that perhaps Wall Street isn’t thrilled with the announcement, but the cash influx should give Box some breathing room to reset and push forward.


By Ron Miller

Box shares rise on report company is exploring sale

Shares of Box, a well-known content-and-collaboration company that went public in 2015, rose today after Reuters reported that the company is exploring a sale. TechCrunch previously discussed rising investor pressure for Box to ignite its share-price after years in the public-market wilderness.

At the close today Box’s equity was worth $23.65 per share, up around 5% from its opening value, but lower than its intraday peak of $26.47, reached after the news broke. The company went public a little over five years ago at $14 per share, only to see its share price rise to around the same level it returned today during its first day’s trading.

Box, famous during its startup phase thanks in part to its ubiquitous CEO and co-founder Aaron Levie, has continued to grow while public, albeit at a declining pace. Dropbox, a long-term rival, has also seen its growth rate decline since going public. Both have stressed rising profitability over revenue expansion in recent quarters.

But the problem that Box has encountered while public, namely hyper-scale platform companies with competing offerings, could also prove a lifeline; Google and Microsoft could be a future home for Levie’s company, after years of the duo challenging Box for deals.

As recently as last week, Box announced a deal for tighter integration with Microsoft Office 365. Given the timing of the release, it was easy to speculate the news could be landing ahead of a potential deal. The Reuters article adds fuel to the possibility.

While we can’t know for sure if the Reuters article is accurate, the possible sale of Box makes sense.

The article indicated that one of the possible acquisition options for Box could be taking it private again via private equity. Perhaps a firm like Vista or Thoma Bravo, two firms that tend to like mature SaaS companies with decent revenue and some issues, could swoop in to buy the struggling SaaS company. By taking companies off the market, reducing investor pressure and giving them room to maneuver, software companies can at times find new vigor.

Consider the case of Marketo, a company that Vista purchased in 2016 for $1.6 billion before turning it around and selling to Adobe in 2018 for $4.75 billion. The end result generated a strong profit for Vista, and a final landing for Marketo as part of a company with a broader platform of marketing tools.

If there are expenses at Box that could be trimmed, or a sales process that could be improved is not clear. But Box’s market value of $3.78 billion could put it within grasp of larger private-equity funds. Or well within the reaches of a host of larger enterprise software companies that might covet its list of business customers, technology, or both.

If the rumors are true, it could be a startling fall from grace for the company, moving from Silicon Valley startup-darling to IPO to sold entity in just six years. While it’s important to note these are just rumors, the writing could be on the wall for the company and it could just be a matter of when and not if.


By Ron Miller

As activist investors loom, what’s next for Box?

Box could be facing troubled times if a Reuters story from last week is accurate. Activist investor Starboard Value took a 7.9% stake in the storage company in September 2019, and a year ago took three board seats as its involvement in the cloud company deepened. It seemed only a matter of time before another shoe dropped.

Activist investor Starboard Value is reportedly after three additional board seats.

That thunk you just heard could be said shoe as Starboard is reportedly after three additional board seats. Those include current CEO Aaron Levie’s and two independent board members, all of whom have their seats coming up for election in June. If the firm were to obtain three additional seats, it would control six of nine votes and could have its way with Box.

What could the future hold for the company given this development (assuming it’s true)? It seems changes are coming for Box.

Below, we’ll explore how Box got to this point. And if an acquisition is in Box’s future, just who might be in the market for a cloud-native content management company built to scale in the enterprise? There would very likely be multiple suitors.

Box’s fickle financial fate

Starboard may have reason to be frustrated by Box’s performance. The cloud company’s stock price and market cap remain stubbornly low. Its share price is mired around $18 a share, not much higher than the price it went public at in 2015 when it was valued at $14 per share. Its market cap today is $3 billion, which is lacking in comparison to fellow cloud stalwarts like Dropbox at $9 billion, Slack at $23 billion or Okta at $34 billion.

Remember back in March 2014 when Box announced it was going public? It then did something highly unusual, delaying the deed 10 months until January 2015. One thing or another kept the company from pulling the trigger and just doing it. Perhaps it was a sign.

Instead, Box raised $150 million more after its S-1 filing received a lackluster response from the market. Looking back, you could argue that the SaaS model was simply less well known in 2014 than it is today. Certainly public investors are more sympathetic to software companies that run deficits in the name of growth than they were back then.

But when Box did file again, finally pricing at $14 per share in 2015, it received a strong welcome. The company had priced above its $11 to $13 per-share IPO range as TechCrunch reported at the time and instantly shot higher. We wrote on its IPO day that the cloud company quickly “surged to over $20 a share and [was then] trading at $23.67.”

A year later, our continuing coverage had flipped with the share price stuck at $10 in January 2016.

When growth won’t come


By Ron Miller

Customer experience and digital transformation concepts are merging during the pandemic

Customer experience and digital transformation are two terms we’ve been hearing about for years, but have often remained nebulous in many organizations — something to aspire to perhaps, but not take completely seriously. Yet the pandemic has been a forcing event for both concepts, thrusting the ideas front and center.

Suddenly startups that help with either of these concepts are seeing rising demand, even in a year with an overall difficult economic climate. If you are fortunate enough to be helping companies digitize a process or improve how customers interact with companies, you may be seeing increased interest from customers and potential acquirers (and this was true even before this year). A case in point is Twilio acquiring Segment for $3.2 billion recently to help build data-fueled applications to interact with customers.

Even though building a positive customer experience has never been completely about digital, at a time where it’s difficult to interact with customers in person, the digital side of it has taken new urgency. As COVID-19 took hold this year, businesses, large and small, suddenly realized the only way to connect to their customers was digitally. At that point, digital transformation became customer experience’s buddy when other ways of contacting one another have been severely limited.

Pandemic brings changes

Just about every startup founder I talk to these days, along with bigger, more established companies, talk about how the pandemic has pushed companies to digitally transform much faster than they would have without COVID.

Brent Leary, founder at CRM Essentials, says that the pandemic has certainly expedited the need to bring these two big ideas together and created opportunities as that happens. “The coronavirus, as terrible as it has been in so many ways to so many people, has created opportunities for companies to build direct-to-consumer (D2C) digital pipelines that can make them stronger companies despite the current hardships,” Leary told TechCrunch.

The cloud plays a big role in the digital transformation process, and for the last decade, we have seen companies make a slow but steady shift to the cloud. When you have a situation like we’ve had with the coronavirus, it speeds everything up. As it turns out, being in the cloud helps you move faster because you don’t have to worry about all of the overhead of running a business critical application as the SaaS vendors take care of all that for you.


By Ron Miller

Box benefits from digital transformation as it raises its growth forecast

Box has always been a bit of an enigma for Wall Street and perhaps for enterprise software in general. Unlike vendors who shifted tools like HR, CRM or ERP to the cloud, Box has been building a way to manage content in the cloud. It’s been a little harder to understand than these other enterprise software stalwarts, but slowly but surely Box has shifted into a more efficient, and dare we say, profitable public company.

Yesterday the company filed its Q2021 earnings reports and it was solid. In fact, the company reported revenue of $192.3 million. That’s an increase of 11% year over year and it beat analyst’s expectations of $189.6 million, according to the company. Meanwhile the guidance looked good too moving from a range of $760 to $768 million for the year to a range of $767 to $770 million.

All of this points to a company that is finding its footing. Let’s not forget, Starboard Value bought a 7.5% stake in the company a year ago, yet the activist investor has mostly stayed quiet and Box seems to be rewarding its patience as the pandemic acts as a forcing function to move customers to the cloud faster– and that seems to be working in Box’s favor.

Let’s get profitable

Box CEO Aaron Levie has not been shy about talking about how the pandemic has pushed companies to move to the cloud much more quickly than they probably would have. He said as a digital company, he was able to move his employees to work from home and remain efficient because of tools like Slack, Zoom, Okta, and yes, Box were in place to help them do that.

All of that helped keep the business going, and even thriving, through the extremely difficult times the pandemic has wrought. “We’re fortunate about how we’ve been able to execute in this environment. It helps that we’re 100% SaaS, and we’ve got a great digital engine to perform the business,” he said.

He added, “And at the same time, as we’ve talked about, we’ve been driving greater profitability. So the efficiency of the businesses has also improved dramatically, and the result was that overall we had a very strong quarter with better growth than expected and better profitability than expected. As a result, we were able to raise our targets on both revenue growth and profitability for the rest of the year,” Levie told TechCrunch.

Let’s get digital

Box is seeing existing customers and new customers alike moving more rapidly to the cloud, and that’s working in its favor. Levie believes that companies are in the process of reassessing their short and longer term digital strategy right now, and looking at what workloads they’ll be moving to the cloud, whether that’s cloud infrastructure, security in the cloud or content.

“Really customers are going to be trying to find a way to be able to shift their most important data and their most important content to the cloud, and that’s what we’re seeing play out within our customer base,” Levie said.

He added,”It’s not really a question anymore if you’re going to go to the cloud, it’s which cloud are you going to go to. And we’ve obviously been very focused on trying to build that leading platform for companies that want to be able to move their data to a cloud environment and be able to manage it securely, drive workflows on it, integrate it across our applications and that’s what we’re seeing,” he said.

That translated into a 60% increase quarter over quarter on the number of large deals over $100,000, and the company crossed 100,000 customers globally on the platform in the most recent quarter, so the approach seems to be working.

Let’s keep building

As with Salesforce a generation earlier, Box decided to build its product set on a platform of services. It enabled customers to tap into these base services like encryption, workflow and metadata and build their own customizations or even fully functional applications by taking advantage of the tools that Box has already built.

Much like Salesforce president and COO Bret Taylor told TechCrunch recently, that platform approach has been an integral part of its success, and Levie sees it similarly for Box. calling it fundamental to his company’s success, as well.

“We would not be here without that platform strategy,” he said. “Because we think about Box as a platform architecture, and we’ve built more and more capabilities into that platform, that’s what is giving us this strategic advantage right now,” he said.

And that hasn’t just worked to help customers using Box, it also helps Box itself to develop new capabilities more rapidly, something that has been absolutely essential during this pandemic when the company has had to react quickly to rapidly changing customer requirements.

Levie is 15 years into his tenure as CEO of Box, but he still sees a company and a market that is just getting started. “The opportunity is only bigger, and it’s more addressable by our product and platform today than it has been at any point in our history. So I think we’re still in the very early stages of digital transformation, and we’re in the earliest stages for how document and content management works in this modern era.”


By Ron Miller

Box CEO Aaron Levie says thrifty founders have more control

Once upon a time, Box’s Aaron Levie was just a guy with an idea for a company: 15 years ago as a USC student, he conceived of a way to simply store and share files online.

It may be hard to recall, but back then, the world was awash with thumb drives and moving files manually, but Levie saw an opportunity to change that.

Today, his company helps enterprise customers collaborate and manage content in the cloud, but when Levie appeared on an episode of Extra Crunch Live at the end of May, my colleague Jon Shieber and I asked him if he had any advice for startups. While he was careful to point out that there is no “one size fits all” advice, he did make one thing clear:

“I would highly recommend to any company of any size that you have as much control of your destiny as possible. So put yourself in a position where you spend as little amount of dollars as you can from a burn standpoint and get as close to revenue being equal to your expenses as you can possibly get to,” he advised.

Don’t let current conditions scare you

Levie also advised founders not to be frightened off by current conditions, whether that’s the pandemic or the recession. Instead, he said if you have an idea, seize the moment and build it, regardless of the economy or the state of the world. If, like Levie, you are in it for the long haul, this too will pass, and if your idea is good enough, it will survive and even thrive as you move through your startup growth cycle.


By Ron Miller

Emergence’s Jason Green still sees plenty of opportunities for enterprise SaaS startups

Jason Green, co-founder and partner at Emergence, has made some solid enterprise SaaS bets over the years, long before it was fashionable to do so. He invested early in companies like Box, ServiceMax, Yammer, SteelBrick and SuccessFactors.

Just those companies alone would be a pretty good track record, but his firm also invested in Salesforce, Zoom, Veeva and Bill.com. One consistent thread runs through Emergence’s portfolio: They focus on the cloud and enterprise, a thesis that has paid off big time. What’s more, every one of those previously mentioned companies had a great founding team and successful exit via either IPO or acquisition.

I spoke with Green in June about his investment performance with enterprise SaaS to get a sense of the secret of his long-term success. We also asked a few of those portfolio company CEOs about what it has been like to work with him over time.

All in on SaaS

Green and his co-founders saw something when it came to the emerging enterprise SaaS market in the early 2000s that a lot of firms missed. Salesforce co-founder and CEO Marc Benioff told a story in 2018 about his early attempts at getting funding for his company — and how every single Silicon Valley firm he talked to turned him down.

Green’s partner, Gordon Ritter, eventually invested in Salesforce as one of the company’s earliest investments because the partners saw something in the SaaS approach, even before the term entered the industry lexicon.


By Ron Miller

New Box tools should help ease creation of digitally driven workflows

As COVID-19 has forced companies to move employees from office to home, cloud services have seen a burst in business. Box has been speeding up its product roadmap to help companies who are in the midst of this transition. Today, the company announced the Box Relay template library, which includes a series of workflow templates to help customers build digital workflows faster.

Box CEO Aaron Levie says that the rapid shift to work from home has been a massive accelerant to digital transformation, in some cases driving years of digital transformation into a matter of weeks and months. He says that has made the need to digitize business processes more urgent than ever.

In fact, when he appeared on Extra Crunch Live last month, he indicated that businesses still have way too many manual processes:

We think we’re [in] an environment that anything that can be digitized probably will be. Certainly as this pandemic has reinforced, we have way too many manual processes in businesses. We have way too slow ways of working together and collaborating. And we know that we’re going to move more and more of that to digital platforms.

Box Relay is the company’s workflow tool, and while it has had the ability to create workflows, it required a certain level of knowledge and way of thinking to make that happen. Levie says that they wanted to make it as simple as possible for customers to build workflows to digitize manual processes.

“We are announcing an all new set of Box Relay templates, which are going straight to the heart of how do you automate and digitize business processes across the entire enterprise and make it really simple to do that,” he explained.

This could include things like a contract review, change order process or budget review to name a few examples. The template includes the pieces to get going, but the customer can customize the process to meet the needs of the individual organization’s requirements.

Image Credits: Box

While this is confined to Box-built templates for now, Levie says that down the road this could include the ability for customers to deploy templates of their own, or even for third parties like systems integrators to build industry or client-specific templates. But for today, it’s just about the ones you get out of the box from Box.

At the same time, the company is announcing the File Request feature, a name Levie admits doesn’t really do the feature justice. The idea is that in a workflow such as a paperless bank loan process, the individual has to submit multiple documents without having a Box account. After the company receives the documents, it can kick off a workflow automatically based on receiving the set of documents.

He says the combination of these two new capabilities will give customers the ability to digitize more and more of their processes and bring in a level of automation that wasn’t previously possible in Relay. “The combination of these two features is about driving automation across the entire enterprise and digitizing many more paper-based and manual processes in the enterprise,” Levie said.

Box will not be charging additional fees for these new features to customers using Box Relay. File Request should be available at the end of this month, while the template library should be available by the end of July, according to the company.


By Ron Miller

SaaS earnings rise as pandemic pushes companies more rapidly to the cloud

As the pandemic surged and companies moved from offices to working at home, they needed tools to ensure the continuity of their business operations. SaaS companies have always been focused on allowing work from anywhere there’s access to a computer and internet connection, and while the economy is reeling from COVID-19 fallout, modern software companies are thriving.

That’s because the pandemic has forced companies that might have been thinking about moving to the cloud to find tools what will get them there much faster. SaaS companies like Zoom, Box, Slack, Okta and Salesforce were there to help; cloud security companies like CrowdStrike also benefited.

While it’s too soon to say how the pandemic will affect work long term when it’s safe for all employees to return to the office, it seems that companies have learned that you can work from anywhere and still get work done, something that could change how we think about working in the future.

One thing is clear: SaaS companies that have reported recent earnings have done well, with Zoom being the most successful example. Revenue was up an eye-popping 169% year-over-year as the world shifted in a big way to online meetings, swelling its balance sheet.

There is a clear connection between the domestic economy’s rapid transition to the cloud and the earnings reports we are seeing — from infrastructure to software and services. The pandemic is forcing a big change to happen faster than we ever imagined.

Big numbers

Zoom and CrowdStrike are two companies expected to grow rapidly thanks to the recent acceleration of the digital transformation of work. Their earnings reports this week made those expectations concrete, with both firms beating expectations while posting impressive revenue growth and profitability results.


By Ron Miller