Marvell nabs Innovium for $1.1B as it delves deeper into cloud ethernet switches

Marvell announced this morning it intends to acquire Innovium for $1.1 billion in an all-stock deal. The startup, which raised over $400 million according to Crunchbase data, makes networking ethernet switches optimized for the cloud.

Marvell president and CEO Matt Murphy sees Innovium as a complementary piece to the $10 billion Inphi acquisition last year, giving the company, which makes copper-based chips, more ways to work across modern cloud data centers.

“Innovium has established itself as a strong cloud data center merchant switch silicon provider with a proven platform, and we look forward to working with their talented team who have a strong track record in the industry for delivering multiple generations of highly successful products,” Marvell CEO Matt Murphy said in a statement.

Innovium founder and CEO Rajiv Khemani, who will remain on as an advisor post-close, told a familiar tale from a startup CEO being acquired, seeing the sale as a way to accelerate more quickly as part of a larger organization than it could on its own. “As we engaged with Marvell, it became clear that our data center optimized portfolio combined with Marvell’s scale, leading technology platform and complementary portfolio, can accelerate our growth and vision of delivering breakthrough switch silicon for the cloud and edge,” he wrote in a company blog post announcing the deal.

The company, which was founded in 2014, raised over $143 million last year on a post money valuation of $1.3 billion, according to Pitchbook data. The question is was this a reasonable deal for the company given that valuation?

No company wants to sell for less than it was last valued by its investors. In some cases, such deals can still be accretive for early backers of the selling concern, but not always. In this case TechCrunch is not privy to all the details of the Innovium cap table and what its later investors may have built into their deals with the company in the form of downside protection; such measures can tilt the value of the sale of company more towards its later and final investors. This is usually managed at the expense of its earlier backers and employees.

Still, the Innovium deal should not be seen as a failure. Building a company that sells for north of $1 billion in equity value is impressive. The deal appears to be slightly smaller in enterprise value terms. In the business world, enterprise value is a useful method of valuing the true cost of an acquisition. In the case of Innovium, a large cash position, what was described as “Innovium cash and exercise proceeds expected at closing of approximately $145 million,” lowered the cost of the transaction to a more modest $955 million in net outlays.

Our general perspective is that the sale is probably not the outcome that Innovium’s backers had hoped for, but that it may still prove lucrative to early workers and early investors, and still works at that lower figure. It’s also notable how in today’s market of mega-rounds and surfeit unicorns, an exit north of the $1 billion mark in equity terms can be viewed as a disappointment in any terms. Innovium is selling for around the price that Facebook paid for Instagram in 2012, a deal that at the time was so large that it dominated technology headlines around the world.

But with so much capital available today, private valuations are soaring and mega deals abound. And recent rounds north of $100 million, much like Innovium’s 2020-era, $143 million round, can set companies up with rich valuations and a narrow path in front of them to beat those heightened expectations.

What likely happened? Perhaps Innovium found itself with more cash than opportunities to spend it; perhaps it simply needed a large partner to help it better sell into its market. With expected revenues of $150 million in Marvell’s fiscal 2023, its next fiscal period, Innovium did not fail to reach scale. It may have simply grown well as a private, independent company, and stalled out after its last round.

Regardless, a billion dollar exit is a billion dollar exit. The deal is expected to close by the end of this year. While both company boards have approved the deal, it still must clear regular closing hurdles including approval by Innovium’s private stock holders.


By Ron Miller

Salesforce steps into RPA buying Servicetrace and teaming it with Mulesoft

Over the last couple of years, Robotic Process Automation or RPA has been red hot with tons of investor activity and M&A from companies like SAP, IBM and ServiceNow. UIPath had a major IPO in April and has a market cap over $30 billion. I wondered when Salesforce would get involved and today the company dipped its toe into the RPA pool, announcing its intent to buy German RPA company Servicetrace.

Salesforce intends to make Servicetrace part of Mulesoft, the company it bought in 2018 for $6.5 billion. The companies aren’t divulging the purchase price, suggesting it’s a much smaller deal. When Servicetrace is in the fold, it should fit in well with Mulesoft’s API integration, helping to add an automation layer to Mulesoft’s tool kit.

“With the addition of Servicetrace, MuleSoft will be able to deliver a leading unified integration, API management, and RPA platform, which will further enrich the Salesforce Customer 360 — empowering organizations to deliver connected experiences from anywhere. The new RPA capabilities will enhance Salesforce’s Einstein Automate solution, enabling end-to-end workflow automation across any system for Service, Sales, Industries, and more,” Mulesoft CEO Brent Hayward wrote in a blog post announcing the deal.

While Einstein, Salesforce’s artificial intelligence layer, gives companies with more modern tooling the ability to automate certain tasks, RPA is suited to more legacy operations, and this acquisition could be another step in helping Salesforce bridge the gap between older on-prem tools and more modern cloud software.

Brent Leary, founder and principal analyst at CRM Essentials says that it brings another dimension to Salesforce’s digital transformation tools. “It didn’t take Salesforce long to move to the next acquisition after closing their biggest purchase with Slack. But automation of processes and workflows fueled by realtime data coming from a growing variety sources is becoming a key to finding success with digital transformation. And this adds a critical piece to that puzzle for Salesforce/MulseSoft,” he said.

While it feels like Salesforce is joining the market late, in an investor survey we published in May Laela Sturdy, general partner at CapitalG told us that we are just skimming the surface so far when it comes to RPA’s potential.

“We’re a long way from needing to think about the space maturing. In fact, RPA adoption is still in its early infancy when you consider its immense potential. Most companies are only now just beginning to explore the numerous use cases that exist across industries. The more enterprises dip their toes into RPA, the more use cases they envision,” Sturdy responded in the survey.

Servicetrace was founded in 2004, long before the notion of RPA even existed. Neither Crunchbase nor Pitchbook shows any money raised, but the website suggests a mature company with a rich product set. Customers include Fujitsu, Siemens, Merck and Deutsche Telekom.


By Ron Miller

Box unwraps its answer to the $3.8B e-signature market: Box Sign

Box released its new native e-signature product Box Sign on Monday, providing e-signature capability and unlimited signatures as part of Box’s business and enterprise plans at no additional cost.

The launch comes five months after the Redwood City, California-based company agreed to acquire e-signature startup SignRequest for $55 million.

Box CEO Aaron Levie told TechCrunch the company is already securing content management for 100,000 businesses, and Box Sign represents “a breakthrough product for the company” — a new category in which Box can help customers with business processes.

“We are building out a content cloud that powers the lifecycle of content so customers can retain and manage it,” Levie said. “Everyday, there are more transactions around onboarding a customer, closing a deal or an audit, but these are still done manually. We are moving that to digital and enabling the request of signatures around the content.”

Here’s how it works: Users can send documents for e-signature directly from Box to anyone, even those without a Box account. Places for signature requests and approvals can be created anywhere on the document. All of this integrates across popular apps like Salesforce and includes email reminders and deadline notifications. As with Box’s offerings, the signatures are also secure and compliant.

The global e-signature software market was estimated to be around $1.8 billion in 2020, according to Prescient & Strategic Intelligence, while IDC expects it to grow to $3.8 billion by 2023.

Levie considers the market still early as less than one-third of organizations use e-signature due to legacy tool limitations and cost barriers, revealing massive future opportunities. However, that may be changing: Box worked with banks during the pandemic that were still relying on mailing, scanning and faxing documents to help them adapt to digital processes. It also surveyed its customers last year around product capabilities, and the No. 1 “ask” was e-signature, he said.

He mentioned major players DocuSign and Adobe Sign — two products it will continue to integrate with — among the array of technology within the space. He said that Box is not trying to compete with any player, but saw a need from customers and wanted to proceed with an option for them.

The e-signature offering also follows the hiring of Diego Dugatkin in June as Box’s new chief product officer. Prior to joining, Dugatkin was vice president of product management for Adobe Document Cloud and led strategy and execution for Adobe’s suite of products, including Adobe Sign.

“Our strategy has been for many years to expand our portfolio and power more advanced use cases, as well as a vision to have one platform to manage everything,” Levie said. “Diego has two decades of tremendous domain experience, and he will make a massive dent in powering this for us.”

In addition to the e-signature product, Box also introduced its Enterprise Plus plan that includes all of the company’s major add-ons, as well as advanced e-signature capabilities that will be available later this summer, the company said.

 


By Christine Hall

ServiceMax promises accelerating growth as key to $1.4B SPAC deal

ServiceMax, a company that builds software for the field-service industry, announced yesterday that it will go public via a special purpose acquisition company, or SPAC, in a deal valued at $1.4 billion. The transaction comes after ServiceMax was sold to GE for $915 million in 2016, before being spun out in late 2018. The company most recently raised $80 million from Salesforce Ventures, a key partner.

Broadly, ServiceMax’s business has a history of modest growth and cash consumption.

ServiceMax competes in the growing field-service industry primarily with ServiceNow, and interestingly enough given Salesforce Ventures’ recent investment, Salesforce Service Cloud. Other large enterprise vendors like Microsoft, SAP and Oracle also have similar products. The market looks at helping digitize traditional field service, but also touches on in-house service like IT and HR giving it a broader market in which to play.

GE originally bought the company as part of a growing industrial Internet of Things (IoT) strategy at the time, hoping to have a software service that could work hand in glove with the automated machine maintenance it was looking to implement. When that strategy failed to materialize, the company spun out ServiceMax and until now it remained part of Silver Lake Partners thanks to a deal that was finalized in 2019.

TechCrunch was curious why that was the case, so we dug into the company’s investor presentation for more hints about its financial performance. Broadly, ServiceMax’s business has a history of modest growth and cash consumption. It promises a big change to that storyline, though. Here’s how.

A look at the data

The company’s pitch to investors is that with new capital it can accelerate its growth rate and begin to generate free cash flow. To get there, the company will pursue organic (in-house) and inorganic (acquisition-based) growth. The company’s blank-check combination will provide what the company described as “$335 million of gross proceeds,” a hefty sum for the company compared to its most recent funding round.


By Ron Miller

“Developers, as you know, do not like to pay for things”

In the previous part of this EC-1, we looked at the technical details of CockroachDB and how it provides accurate data instantaneously anywhere on the planet. In this installment, we’re going to take a look at the product side of Cockroach, with a particular focus on developer relations.

As a business, Cockroach Labs has many things going for it. The company’s approach to distributed database technology is novel. And, as more companies operate on a global level, CockroachDB has the potential to gain some significant market share internationally. The company is seven years into a typical 10-year maturity model for databases, has raised $355 million, and holds a $2 billion market value. It’s considered a double unicorn. Few database companies can say this.

The company is now aggressively expanding into the database-as-a-service space, offering its own technology in a fully managed package, expanding the spectrum of clients who can take immediate advantage of its products.

But its growth depends upon securing the love of developers while also making its product easier to use for new customers. To that end, I’m going to analyze the company’s pivot to the cloud as well as its extensive outreach to developers as it works to set itself up for long-term, sustainable success.

Cockroach Labs looks to the cloud

These days, just about any company of consequence provides services via the internet, and a growing number of these services are powered by products and services from native cloud providers. Gartner forecasted in 2019 that cloud services are growing at an annual rate of 17.5%, and there’s no sign that the growth has abated at all.

Its founders’ history with Google back in the mid-2000s has meant that Cockroach Labs has always been aware of the impact of cloud services on the commercial web. Unsurprisingly, CockroachDB could run cloud native right from its first release, given that its architecture presupposes the cloud in its operation — as we saw in part 2 of this EC-1.


By Danny Crichton

Former Nutanix execs launch new startup with $50M seed round

Today a new software company from two former Nutanix executives called DevRev emerged from stealth with a $50 million seed round from Mayfield Fund, Khosla Ventures and several industry luminaries. The company, which aims to bring the coding and revenue processes closer together, already has 75 employees working on the new software platform, which they hope to have ready to launch later this year.

It’s not every day you see a $50 million seed round, but perhaps the fact that former Nutanix co-founder and CEO Dheeraj Pandey and his former SVP of engineering Manoj Agarwal are involved, could help explain the investor enthusiasm for the new project.

Pandey says that he has seen a gap between developers and the revenue the applications they create are supposed to generate. The idea behind the new company is to break down the silos that exist between the front of the office and the back of the office and give developers a deeper understanding of the customers using their products, or at least that’s the theory.

“Dev and Rev are Yin and Yang to each other. In today’s world they are really far apart with tons of bureaucracy between these two parties. Our goal to bring dev and rev to get rid of the bureaucracy,” Pandey told me

The company intends to build an API to help developers pull this information from existing systems for companies already working with a CRM tool like Salesforce, while helping gather that customer information for younger companies who might lack a tool. Regardless, the idea is to bring that info where the developer can see it to help build better products.

The way it works in most companies is customer service or sales hears complaints or suggestions about the product, and tickets get generated, but putting these issues in front of the people building the software isn’t always easy or direct. DevRev hopes to change that.

Navin Chaddha, managing director at Mayfield, whose firm is investing in DevRev, sees a need to bring these different parts of the company together in a more direct way. “The code that developers work on today is used by support as well as marketing and sales. By bringing the world of issues and tickets closer to the world of revenue and growth, DevRev’s unified platform bridges the gap between developer and customer and elevates the developer to a business leader,” Chaddha said.

With 75 employees working on the problem, DevRev is already a substantial startup. As experienced founders Pandey and Agarwal certainly understand the importance of building a diverse and inclusive company. Pandey sees the top of the employment funnel really being focused on engineering, design and business schools and the company is working to bring in a diverse group of young employees.

“[We are looking at ways] to search for talent and to promote talent, to make them into leaders. I think we have an empty canvas by the way, and we have this idea of COVID, and being able to do remote work has really grown the top of the funnel, the mouth of the funnel now can be anything and everything. […] [Colleges and universities] are I would say the real source of all diversity at the end of the day. We have seen how engineering schools, design schools and business schools are actually getting so diverse,” he said.

The company is working to build the product now and reaching out to developer communities on Discord, GitHub and other places that developers gather online to get their input, while testing and improving the product in-house and with design partners.

Nutanix, the founders’ previous company, launched in 2009 and raised over a $1 billion before going public in 2016. Pandey and Agarwal left Nutanix at the end of last year to launch the new company.


By Ron Miller

Cloud security platform Netskope boosts valuation to $7.5B following $300M raise

Netskope, focused on Secure Access Service Edge architecture, announced Friday a $300 million investment round on a post-money valuation of $7.5 billion.

The oversubscribed insider investment was led by ICONIQ Growth, which was joined by other existing investors, including Lightspeed Venture Partners, Accel, Sequoia Capital Global Equities, Base Partners, Sapphire Ventures and Geodesic Capital.

Netskope co-founder and CEO Sanjay Beri told TechCrunch that since its founding in 2012, the company’s mission has been to guide companies through their digital transformation by finding what is most valuable to them — sensitive data — and protecting it.

“What we had before in the market didn’t work for that world,” he said. “The theory is that digital transformation is inevitable, so our vision is to transform that market so people could do that, and that is what we are building nearly a decade later.”

With this new round, Netskope continues to rack up large rounds: it raised $340 million last February, which gave it a valuation of nearly $3 billion. Prior to that, it was a $168.7 million round at the end of 2018.

Similar to other rounds, the company was not actively seeking new capital, but that it was “an inside round with people who know everything about us,” Beri said.

“The reality is we could have raised $1 billion, but we don’t need more capital,” he added. “However, having a continued strong balance sheet isn’t a bad thing. We are fortunate to be in that situation, and our destination is to be the most impactful cybersecurity company in the world.

Beri said the company just completed a “three-year journey building the largest cloud network that is 15 milliseconds from anyone in the world,” and intends to invest the new funds into continued R&D, expanding its platform and Netskope’s go-to-market strategy to meet demand for a market it estimated would be valued at $30 billion by 2024, he said.

Even pre-pandemic the company had strong hypergrowth over the past year, surpassing the market average annual growth of 50%, he added.

Today’s investment brings the total raised by Santa Clara-based Netskope to just over $1 billion, according to Crunchbase data.

With the company racking up that kind of capital, the next natural step would be to become a public company. Beri admits that Netskope could be public now, though it doesn’t have to do it for the traditional reasons of raising capital or marketing.

“Going public is one day on our path, but you probably won’t see us raise another private round,” Beri said.

 


By Christine Hall

Rootly nabs $3.2M seed to build SRE incident management solution inside Slack

As companies look for ways to respond to incidents in their complex micro services-driven software stacks, SREs or site reliability engineers are left to deal with the issues involved in making everything work and keeping the application up and running. Rootly, a new early stage startup wants to help by building an incident response solution inside of Slack.

Today the company emerged from stealth with a $3.2 million seed investment. XYZ Venture Capital led the round with participation from 8VC, Y Combinator and several individual tech executives.

Rootly co-founder and CEO Quentin Rousseau says that he cut his SRE teeth working at Instacart. When he joined in 2015, the company was processing hundreds of order a day, and when he left in 2018 it was processing thousands. It was his job to make sure the app was up and running for shoppers, consumers and stores even as it scaled.

He said that while he was at Instacart, he learned to see patterns in the way people responded to an issue and he had begun working on a side project after he left looking to bring the incident response process under control inside of Slack. He connected with co-founder JJ Tang, who had started at Instacart after Rousseau left in 2018, and the two of them decided to start Rootly to help solve these unique problems that SREs face around incident response.

“Basically we want people to manage and resolve incidents directly in Slack. We don’t want to add another layer of complexity on top of that. We feel like there are already so many tools out there and when things are chaotic and things are on fire, you really want to focus quickly on the resolution part of it. So we’re really trying to be focused on the Slack experience,” Rousseau explained.

The Rootly solution helps SREs connect quickly to their various tools inside Slack, whether that’s Jira or Zendesk or DataDog or PagerDuty, and it compiles an incident report in the background based on the conversation that’s happening inside of Slack around resolving the incident. That will help when the team meets for an incident post-mortem after the issue is resolved.

The company is small at the moment with fewer than 10 employees, but it plans to hire some engineers and sales people over the next year as they put this capital to work.

Tang says that they have built diversity as a core component of the company culture, and it helps that they are working with investor Ross Fubini, managing partner at lead investor XYZ Venture Capital. “That’s also one of the reasons why we picked Ross as our lead investor. [His firm] has probably one of the deepest focuses around [diversity], not only as a fund, but also how they influence their portfolio companies,” he said.

Fubini says there are two main focuses in building diverse companies including building a system to look for diverse pools of talent, and then building an environment to help people from under-represented groups feel welcome once they are hired.
“One of our early conversations we had with Rootly was how do we both bring a diverse group in and benefit from a diverse set of people, and what’s going to both attract them, and when they come in make them feel like this is a place that they belong,” Fubini explained.

The company is fully remote right now with Rousseau in San Francisco and Tang in Toronto, and the plan is to remain remote whenever offices can fully reopen. It’s worth noting that Rousseau and Tang are members of the current Y Combinator batch.

 


By Ron Miller

The single vendor requirement ultimately doomed the DoD’s $10B JEDI cloud contract

When the Pentagon killed the JEDI cloud program yesterday, it was the end of a long and bitter road for a project that never seemed to have a chance. The question is why it didn’t work out in the end, and ultimately I think you can blame the DoD’s stubborn adherence to a single vendor requirement, a condition that never made sense to anyone, even the vendor that ostensibly won the deal.

In March 2018, the Pentagon announced a mega $10 billion, decade-long cloud contract to build the next generation of cloud infrastructure for the Department of Defense. It was dubbed JEDI, which aside from the Star Wars reference, was short for Joint Enterprise Defense Infrastructure.

The idea was a 10 year contract with a single vendor that started with an initial two year option. If all was going well, a five year option would kick in and finally a three year option would close things out with earnings of $1 billion a year.

While the total value of the contract had it been completed was quite large, a billion a year for companies the size of Amazon, Oracle or Microsoft is not a ton of money in the scheme of things. It was more about the prestige of winning such a high-profile contract and what it would mean for sales bragging rights. After all, if you passed muster with the DoD, you could probably handle just about anyone’s sensitive data, right?

Regardless, the idea of a single-vendor contract went against conventional wisdom that the cloud gives you the option of working with the best-in-class vendors. Microsoft, the eventual winner of the ill-fated deal acknowledged that the single vendor approach was flawed in an interview in April 2018:

Leigh Madden, who heads up Microsoft’s defense effort, says he believes Microsoft can win such a contract, but it isn’t necessarily the best approach for the DoD. “If the DoD goes with a single award path, we are in it to win, but having said that, it’s counter to what we are seeing across the globe where 80 percent of customers are adopting a multi-cloud solution,” Madden told TechCrunch.

Perhaps it was doomed from the start because of that. Yet even before the requirements were fully known there were complaints that it would favor Amazon, the market share leader in the cloud infrastructure market. Oracle was particularly vocal, taking its complaints directly to the former president before the RFP was even published. It would later file a complaint with the Government Accountability Office and file a couple of lawsuits alleging that the entire process was unfair and designed to favor Amazon. It lost every time — and of course, Amazon wasn’t ultimately the winner.

While there was a lot of drama along the way, in April 2019 the Pentagon named two finalists, and it was probably not too surprising that they were the two cloud infrastructure market leaders: Microsoft and Amazon. Game on.

The former president interjected himself directly in the process in August that year, when he ordered the Defense Secretary to review the matter over concerns that the process favored Amazon, a complaint which to that point had been refuted several times over by the DoD, the Government Accountability Office and the courts. To further complicate matters, a book by former defense secretary Jim Mattis claimed the president told him to “screw Amazon out of the $10 billion contract.” His goal appeared to be to get back at Bezos, who also owns the Washington Post newspaper.

In spite of all these claims that the process favored Amazon, when the winner was finally announced in October 2019, late on a Friday afternoon no less, the winner was not in fact Amazon. Instead, Microsoft won the deal, or at least it seemed that way. It wouldn’t be long before Amazon would dispute the decision in court.

By the time AWS re:Invent hit a couple of months after the announcement, former AWS CEO Andy Jassy was already pushing the idea that the president had unduly influenced the process.

“I think that we ended up with a situation where there was political interference. When you have a sitting president, who has shared openly his disdain for a company, and the leader of that company, it makes it really difficult for government agencies, including the DoD, to make objective decisions without fear of reprisal,” Jassy said at that time.

Then came the litigation. In November the company indicated it would be challenging the decision to choose Microsoft charging that it was was driven by politics and not technical merit. In January 2020, Amazon filed a request with the court that the project should stop until the legal challenges were settled. In February, a federal judge agreed with Amazon and stopped the project. It would never restart.

In April the DoD completed its own internal investigation of the contract procurement process and found no wrong-doing. As I wrote at the time:

While controversy has dogged the $10 billion, decade-long JEDI contract since its earliest days, a report by the DoD’s Inspector General’s Office concluded today that, while there were some funky bits and potential conflicts, overall the contract procurement process was fair and legal and the president did not unduly influence the process in spite of public comments.

Last September the DoD completed a review of the selection process and it once again concluded that Microsoft was the winner, but it didn’t really matter as the litigation was still in motion and the project remained stalled.

The legal wrangling continued into this year, and yesterday The Pentagon finally pulled the plug on the project once and for all, saying it was time to move on as times have changed since 2018 when it announced its vision for JEDI.

The DoD finally came to the conclusion that a single vendor approach wasn’t the best way to go, and not because it could never get the project off the ground, but because it makes more sense from a technology and business perspective to work with multiple vendors and not get locked into any particular one.

“JEDI was developed at a time when the Department’s needs were different and both the CSPs’ (cloud service providers) technology and our cloud conversancy was less mature. In light of new initiatives like JADC2 (the Pentagon’s initiative to build a network of connected sensors) and AI and Data Acceleration (ADA), the evolution of the cloud ecosystem within DoD, and changes in user requirements to leverage multiple cloud environments to execute mission, our landscape has advanced and a new way-ahead is warranted to achieve dominance in both traditional and non-traditional warfighting domains,” said John Sherman, acting DoD Chief Information Officer in a statement.

In other words, the DoD would benefit more from adopting a multi-cloud, multi-vendor approach like pretty much the rest of the world. That said, the department also indicated it would limit the vendor selection to Microsoft and Amazon.

“The Department intends to seek proposals from a limited number of sources, namely the Microsoft Corporation (Microsoft) and Amazon Web Services (AWS), as available market research indicates that these two vendors are the only Cloud Service Providers (CSPs) capable of meeting the Department’s requirements,” the department said in a statement.

That’s not going to sit well with Google, Oracle or IBM, but the department further indicated it would continue to monitor the market to see if other CSPs had the chops to handle their requirements in the future.

In the end, the single vendor requirement contributed greatly to an overly competitive and politically charged atmosphere that resulted in the project never coming to fruition. Now the DoD has to play technology catch-up, having lost three years to the histrionics of the entire JEDI procurement process and that could be the most lamentable part of this long, sordid technology tale.


By Ron Miller

Opaque raises $9.5M seed to secure sensitive data in the cloud

Opaque, a new startup born out of Berkely’s RISELabs, announced a $9.5 million seed round today to build a solution to access and work with sensitive data in the cloud in a secure way, even with multiple organizations involved. Intel Capital led today’s investment with participation by Race Capital, The House Fund and FactoryHQ.

The company helps customers work with secure data in the cloud while making sure the data they are working on is not being exposed to cloud providers, other research participants or anyone else, says company president Raluca Ada Popa.

“What we do is we use this very exciting hardware mechanism called Enclave, which [operates] deep down in the processor — it’s a physical black box — and only gets decrypted there. […] So even if somebody has administrative privileges in the cloud, they can only see encrypted data,” she explained.

Company co-founder Ion Stoica, who was a co-founder at Databricks, says the startup’s solution helps resolve two conflicting trends. On one hand, businesses increasingly want to make use of data, but at the same time are seeing a growing trend toward privacy. Opaque is designed to resolve this by giving customers access to their data in a safe and fully encrypted way.

The company describes the solution as “a novel combination of two key technologies layered on top of state-of-the-art cloud security—secure hardware enclaves and cryptographic fortification.” This enables customers to work with data — for example to build machine learning models — without exposing the data to others, yet while generating meaningful results.

Popa says this could be helpful for hospitals working together on cancer research, who want to find better treatment options without exposing a given hospital’s patient data to other hospitals, or banks looking for money laundering without exposing customer data to other banks, as a couple of examples.

Investors were likely attracted to the pedigree of Popa, a computer security and applied crypto professor at UC Berkeley and Stoica, who is also a Berkeley professor and co-founded Databricks. Both helped found RISELabs at Berkeley where they developed the solution and spun it out as a company.

Mark Rostick, vice president and senior managing director at lead investor Intel Capital says his firm has been working with the founders since the startup’s earliest days, recognizing the potential of this solution to help companies find complex solutions even when there are multiple organizations involved sharing sensitive data.

“Enterprises struggle to find value in data across silos due to confidentiality and other concerns. Confidential computing unlocks the full potential of data by allowing organizations to extract insights from sensitive data while also seamlessly moving data to the cloud without compromising security or privacy,” Rostick said in a statement

He added, “Opaque bridges the gap between data security and cloud scale and economics, thus enabling inter-organizational and intra-organizational collaboration.”


By Ron Miller

Nobody wins as DoD finally pulls the plug on controversial $10B JEDI contract

After several years of fighting and jockeying for position by the biggest cloud infrastructure companies in the world, the Pentagon finally pulled the plug on the controversial winner-take-all $10 billion JEDI contract today. In the end, nobody won.

“With the shifting technology environment, it has become clear that the JEDI cloud contract, which has long been delayed, no longer meets the requirements to fill the DoD’s capability gaps,” a Pentagon spokesperson stated.

The contract procurement process began in 2018 with a call for RFPs for a $10 billion, decade long contract to handle the cloud infrastructure strategy for The Pentagon. Pentagon spokesperson Heather Babb told TechCrunch why they were going with the. single-winner approach: “Single award is advantageous because, among other things, it improves security, improves data accessibility and simplifies the Department’s ability to adopt and use cloud services,” she said at the time.

From the start though, companies objected to the single winner approach, believing that the Pentagon would be better served with a multi-vendor approach. Some companies, particularly Oracle believed the procurement process was designed to favor Amazon.

In the end it came down to a pair of finalists — Amazon and Microsoft — and in the end Microsoft won. But Amazon believed that it had superior technology and only lost the deal because of direct interference by the previous president, who had open disdain for then CEO Jeff Bezos (who is also the owner of the Washington Post newspaper).

Amazon decided to fight the decision in court, and after months of delay, the Pentagon made the decision that it was time to move on. In a blog post, Microsoft took a swipe at Amazon for precipitating the delay.

“The 20 months since DoD selected Microsoft as its JEDI partner highlights issues that warrant the attention of policymakers: when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform. Amazon filed its protest in November 2019 and its case was expected to take at least another year to litigate and yield a decision, with potential appeals afterward,” Microsoft wrote in its blog post about the end of the deal.

It seems like a fitting end to a project that felt like it was doomed from the beginning. From the moment the Pentagon announced this contract with the cutesy twist on Star Wars name, the procurement process has taken more twist and turns than a TV soap.

In the end, there was a lot of sound and fury and now a lot of nothing. We move onto whatever cloud procurement process happens next.

Note: We have a request into Amazon for a comment and will update the story when they respond.


By Ron Miller

Box takes fight with activist investor public in SEC filing

The war between Box’s current leadership and activist shareholder Starboard took a new turn today with a detailed timeline outlining the two groups’ relationship, thanks to an SEC filing and companion press release. Box is pushing back against a slate of board candidates put forth by Starboard, which wants to shake up the company’s leadership and sell it.

The SEC filing details a lengthy series of phone calls, meetings and other communications between the technology company and Starboard, which has held a stake in Box greater than 5% since September of 2019. Since then shares of Box have risen by around $10 per share.

Today’s news is multi-faceted, but we’ve learned more concerning Starboard’s demands that Box sell itself; how strongly the investor wanted co-founder and CEO Aaron Levie to be fired; and that the company’s complaints about a KKR-led investment into Box that it used to repurchase its shares did not match its behavior, in that Starboard asked to participate in the transaction despite its public statements.

Activist investors, a bit like short-sellers, are either groups that you generally like or do not. In this case, however, we can learn quite a lot from the Box filing. Including the sheer amount of time and communication that it takes to manage such an investor from the perspective of one of its public-market investments.

What follows are key excerpts from Box’s SEC filing on the matter, starting with its early stake and early agreement with Starboard:

  • On September 3, 2019, representatives of Starboard contacted Mr. Levie to inform Mr. Levie that Starboard would be filing a
  • Schedule 13D with the SEC reporting a 7.5% ownership stake in the company.
  • On March 9, 2020, Mr. O’Driscoll and Ms. Barsamian had a call with representatives of Starboard to discuss entering into a settlement agreement with Starboard.
  • On March 22, 2020, the company and Starboard entered into an agreement[.]
    Also on March 23, 2020, Starboard reported beneficial ownership of 7.7% of the outstanding Class A common stock.

Then Box reported earnings, which Starboard appeared to praise:

  • On May 27, 2020, the company reported its fiscal first quarter results, noting a 13% increase in year-over-year revenue, a 900 basis point increase in year-over-year GAAP operating margin and a $36.4 million increase in year-over-year cash flow from operations. Peter Feld, a representative of Starboard, and Mr. Levie had an email conversation related to the company’s first quarter results in which Mr. Feld stated “you guys are on a good path…congrats to the team and keep it up.”
  • Also on May 29, 2020, Starboard reported that it had decreased its beneficial ownership to 6.0% of the outstanding Class A common stock.

The same pattern repeated during Box’s next earnings report:

  • On August 27, 2020, Mr. Levie, Mr. Smith and company IR discussed the company’s earnings release with Starboard. Starboard indicated it was pleased with the rate of margin expansion and where the company was heading. In an email exchange between Mr. Feld and Mr. Levie related to the company’s results, Mr. Feld stated that he was “thrilled to see the company breaking out and performing better both on the top and bottom line. Appreciate you guys working with us and accepting the counsel. Not everyone behaves that way and it is greatly appreciated. Shows your comfort as a leader and a willingness to adapt. Very impressive.”

Then Box reported its next quarter’s results, which was followed by a change in message from Starboard (emphasis TechCrunch):

  • On December 1, 2020, the company announced its fiscal third quarter results, noting an 11% increase in year-over-year revenue, an improvement of 2100 basis points in year-over-year GAAP operating margin and a $36 million increase in year-over-year cash flow from operations. The company also provided guidance regarding its fiscal fourth quarter results, noting that its revised revenue guidance was due to “lower professional services bookings than we noted previously, which creates a roughly $2 million headwind” and that the company was being “prudent in our growth expectations given the macroeconomic challenges that our customers are facing.” The revised guidance for revenue was 1.1% below analysts’ consensus estimates of $198.8 million.
  • On December 2, 2020, Box’s common stock declined approximately 9% from its prior close of $18.54 to $16.91. On December 2, 2020 and December 4, 2020, Mr. Levie, Mr. Smith and Box IR discussed the company’s earnings release with representatives of Starboard. Despite the prior support Mr. Feld communicated to the company, Starboard reversed course and demanded that the company explore a sale of the entire company or fire the company’s CEO, or otherwise face a proxy contest from Starboard. Mr. Feld further stated that the company should not turn down an offer from a third party to buy the entire company “in the low twenties” and that Starboard would be a seller at such a price.

Recall that Box shares are now in the mid-$26s. At the time, however, Box shares lost value (emphasis: TechCrunch)

  • On December 16, 2020, two weeks after earnings, the company’s stock price closed at $18.85, which was above where it was trading immediately prior to the announcement of the company’s fiscal third quarter results on December 1, 2020.
  • On January 11, 2021, Starboard disclosed that it had increased its beneficial ownership to 7.9% of the outstanding Class A common stock.
  • On January 15, 2021, Mr. Lazar and Ms. Barsamian had a call with representatives from Starboard. Mr. Feld expressed his view that, while the company’s Convertible Senior Notes were executed on favorable terms, he was not supportive of the transaction. He reiterated his demand that the company sell itself and indicated that if the company did not do so then it must replace its CEO or otherwise face a proxy contest from Starboard to replace the CEO.

Over the next few months, Box bought SignRequest, reported earnings, and engaged external parties to try to help it bolster shareholder value. Then the KKR deal came onto the table:

  • On March 31, 2021, the Strategy Committee met to discuss the status of the strategic review. At such time, the Strategy Committee was in receipt of a proposal from KKR pursuant to which KKR and certain partners would make an investment in the form of convertible preferred stock at an initial yield of 3%, which had been negotiated down from KKR’s proposal of 7% yield in its preliminary indication of interest in early March.

The deal was unanimously approved by Box’s board, and announced on April 8th, 2021. Starboard was not stoked about the transaction, however:

  • Later on April 8, 2021, Ms. Mayer and Mr. Lazar had a call with representatives of Starboard. Mr. Feld expressed Starboard’s strong displeasure with the results of the strategic review. During the conversation, Mr. Feld indicated that he would stop the fight immediately if Mr. Levie were replaced.
  • On April 14, 2021, Ms. Mayer, Mr. Lazar and Ms. Barsamian had a call with Mr. Feld. Despite his prior statements, Mr. Feld now indicated that Starboard was not willing to sell its shares of Class A common stock at $21 or $22 per share. Mr. Feld requested that the company release KKR from its obligation to vote in favor of the company as a gesture of good faith. Mr. Feld reiterated Starboard’s desire to replace Mr. Levie as CEO and indicated that he would like to join the Board of Directors if the company did so. Ms. Mayer offered Mr. Feld the opportunity to execute a non-disclosure agreement to receive more information about the strategic review process, which Mr. Feld immediately declined.

Box was like, all right, but Feld doesn’t get to be on the board:

  • On April 20, 2021, Ms. Mayer and Mr. Lazar had a call with representatives of Starboard. Mr. Feld stated that Starboard would not move forward with its planned director nominations if Starboard were offered the opportunity to participate in the KKR-Led Transaction and Mr. Feld were appointed to the Board of Directors. Mr. Feld reiterated that he was not willing to sign a non-disclosure agreement.
  • On April 27, 2021, Mr. Park had a discussion with Mr. Feld. During this conversation, Mr. Feld reiterated his desire for Starboard to participate as an investor in the KKR-Led Transaction.
  • On April 28, 2021, Ms. Mayer and Mr. Lazar informed Mr. Feld that the Board of Directors was amenable to allowing Starboard to participate in the KKR-Led Transaction but would not appoint Mr. Feld as a director. Mr. Feld indicated that there is no path to a settlement that doesn’t include appointing him to the Board of Directors.

And then Starboard initiated a proxy war.

What to make of all of this? That trying to shake up a company from the position of a minority stake is not impossible, with Starboard able to exercise influence on Box despite having a sub-10% ownership position. And that Box was not willing to put a person on the board that wanted to fire its CEO.

What’s slightly silly about all of this is that the fight is coming at a time when Box is doing better than it has in some time. Its profitability has improved greatly, and in its most recent quarter the company topped expectations and raised its forward financial guidance.

There were times in Box’s history when it may have deserved a whacking for poor performance, but now? It’s slightly weird. Also recall that Starboard has already made quite a lot of money on its Box stake, with the company’s value appreciating sharply since the investor bought in.

Most media coverage is surrounding the public criticism by Starboard of the KKR deal and its private demand to be let into the deal. That dynamic is easily explained: Starboard thought that the deal wouldn’t make it money, but later decided that it could. So it changed its tune; if you are expecting an investor to do anything but try to maximize returns, you are setting yourself up for disappointment.

A person close to the company told TechCrunch that the current situation should be a win-win for everyone involved, but Starboard is not seeing it that way. “If you’re a near term shareholder, [like Starboard] then the path Box has taken has already been better. And if you’re a long term shareholder, Box sees significantly more upside. […] So overwhelmingly, the company believes this is the best path for shareholders and it’s already been proven out to be that,” the person said.

Alan Pelz-Sharpe, founder and principal analyst at the Deep Analysis, who has been watching the content management space for many years, says the battle isn’t much of a surprise given that the two have been at odds pretty much from the start of the relationship.

“Like any activist investor Starboard is interested in a quick increase in shareholder values and a flip. Box is in it for the long run. Further, it seems that Starboard may have mistimed or miscalculated their moves, Box clearly was not as weak as they appeared to believe and Box has been doing well over the past year. Bringing in KKR was the start of a big fight back, and the proposed changes couldn’t make it any clearer that they are fed up with Starboard and ready to fight back hard,” Pelz-Sharpe said.

He added that publicly revealing details of the two companies’ interactions is a bit unusual, but he thinks it was appropriate here.

“Actually naming and shaming, detailing Starboard’s moves and seemingly contradictory statements, is unusual but it may be effective. Starboard won’t back down without a fight, but from an investor relations/PR perspective this looks bad for them and it may well be time to walk away. That being said, I wouldn’t bet on Starboard walking away, as Silicon Valley has a habit of moving forward when they should be walking back from increasingly damaging situations”

What comes next is a vote on Box’s board makeup, which should happen later this summer. Let’s see who wins.

It’s worth noting that we attempted to contact Starboard Value, but as of publication they had not gotten back to us. Box indicated that the press release and SEC filing speak for themselves.

 

 


By Ron Miller

Jim Whitehurst steps down as president at IBM just 14 months after taking role

In a surprise announcement today, IBM announced that Jim Whitehurst, who came over in the Red deal, would be stepping down as company president just 14 months after taking over in that role.

IBM didn’t give a lot of details as to why he was stepping away, but acknowledged his key role in helping bring the 2018 $34 billion Red Hat deal to fruition and helping bring the two companies together after the deal closed. “Jim has been instrumental in articulating IBM’s strategy, but also, in ensuring that IBM and Red Hat work well together and that our technology platforms and innovations provide more value to our clients,” the company stated.

He will stay on as a senior advisor to Krishna, but it begs the question why he is leaving after such a short time in the role, and what he plans to do next. Oftentimes after a deal of this magnitude closes, there is an agreement as to how long key executives will stay. It could be simply that the period has expired and Whitehurst wants to move on, but some saw him as the heir apparent to Krishna and the move comes as a surprise when looked at in that context.

“I am surprised because I always thought Jim would be next in line as IBM CEO. I also liked the pairing between a lifer IBMer and an outsider,” Patrick Moorhead, founder and principal analyst at Moor Insight & Strategies told TechCrunch.

Regardless, it leaves a big hole in Krishna’s leadership team as he works to transform the company into one that is primarily focused on hybrid cloud.  Whitehurst was undoubtedly in a position to help drive that change through his depth of industry knowledge and his credibility with the open source community from his time at Red Hat. He is not someone who would be easily replaced and the announcement didn’t mention anyone filling his role.

When IBM bought Red Hat in 2018 for $34 billion, it led to a cascading set of changes at both companies. First Ginni Rometty stepped down as CEO at IBM and Arvind Krishna took over. At the same time, Jim Whitehurst, who had been Red Hat CEO moved to IBM as president and long-time employee Paul Cormier moved into his role.

At the same time, the company also announced some other changes including that long-time IBM executive Bridget van Kralingen announced she too was stepping away, leaving her role as senior vice president of global markets. Rob Thomas, who had been senior vice president of IBM cloud and data platform, will step in to replace Van Kraligen.


By Ron Miller

After bootstrapping since 2002, Articulate raises $1.5B on $3.75B valuation

Most companies don’t announce their first venture investment after almost 20 years in the business, nor do they announce that round is the equivalent of a good startup’s entire private fundraising history. But Articulate, a SaaS training and development platform, is not your typical company and today it announced a whopping $1.5 billion investment on a $3.75 billion valuation.

You can call it Series A if you must label it, but whatever it is, it’s a hefty investment by any measure. General Atlantic led the round with participation from Blackstone Growth and Iconiq Growth. GA claims it’s one of the largest A rounds ever, and I’m willing to bet it’s right.

CEO Adam Schwartz founded the company with his life savings in 2002 and hasn’t taken a dime of outside investment since. “Our software enables organizations to develop, deliver, and analyze online training that is engaging and [interesting] for enterprises and SMBs,” Schwartz explained.

He says that the company started back in 2002 as a plug-in for PowerPoint. Today it is a software service with the goal of helping enable everyone to deliver training, even if they aren’t a training professional. Articulate actually has two main products, one is a set of tools for companies building training that connects to an enterprise learning management system or LMS. The other is aimed at SMBs or departments in an enterprise.

Its approach seems to be working with the company reporting it has 106,000 customers across 161 countries including every single one of the Fortune 100. Schwartz was loath to share any additional metrics, but did say they hope to use this money to grow 10x over the next several years.

Company president Lucy Suros, who has been with the organization for a decade, says even with this success, they see plenty of opportunity for growth and they felt taking this capital now would really enable them to accelerate.

“We are the most dominant player by far in course offering apps, but when you look at that whole ecosystem and you think about where companies are in transforming from instructor-led training to online training, they’re still really in the early innings so there’s a lot of opportunity,” she said.

Anton Levy, co-president and managing director at General Atlantic, who is leading the investment for the firm, says that this is a “big, bold, incredible business” and that’s why they’re making an investment of this size and scope. “The reason we’re stepping up in such a large way, and what’s such a large check for us, is because of the business they’ve built, the team they’ve built, and frankly the market opportunity that they’re playing in and their ambition,” he said.

Today the company has 300 employees and they have been working as a remote company long before COVID. With the new capital, that number could triple over the next several years. Suros says that when she started at the company, there were 50 employees, mostly male engineers and she went to work to make it a more diverse work environment.

“We’ve put emphasis and a lot of just structural things in place to ensure that we are bringing more [diverse] people to the table, and then supporting folks once they’re here,” she said. With the new capital, the company announced a lot of new benefits and she said those were developed with the idea of helping break down barriers for under-represented groups in their ranks including covering gender transition-related costs.

She says that one of the benefits of becoming more visible as a company is being able to talk about and their human-centered organization framework, the set of principles the company put in place to define its values. “[We think about] how that can impact the employees and drive human flourishing for its own sake, and that also happens to lead to better business outcomes. But we’re really also interested in it from [the standpoint that] we want to be good and do good in the world and promote human flourishing at work,” she said.

The company seems to have been doing just fine up until now, but with this kind of capital, it aims to take the business to another level, while trying to be good corporate citizens as they do that.


By Ron Miller

Slack’s new voice, video tools should fit nicely on Salesforce platform after deal closes

It’s easy to forget, but Salesforce bought Slack at the end of last year for almost $28 billion, a deal that has yet to close. We don’t know exactly when that will happen, but Slack continues to develop its product roadmap adding new functionality, even while waiting to become part of Salesforce eventually.

Just this morning, the company made official some new tools it had been talking about for some time including a new voice tool called Slack Huddles, which is available starting today, along with video messaging and a directory service called Slack Atlas.

These tools enhance the functionality of the platform in ways that should prove useful as it becomes part of Salesforce whenever that happens. It’s not hard to envision how integrating Huddles or the video tools (or even Slack Atlas for both internal and external company organizational views) could work when integrated into the Salesforce platform.

Slack CEO Stewart Butterfield says the companies aren’t working together yet because of regulatory limits on communications, but he could definitely see how these tools could work in tandem with Salesforce Service Cloud and Sales Cloud among others and how you can start to merge the data in Salesforce with Slack’s communications capabilities.

“[There’s] this excitement around workflows from the big system of record [in Salesforce] into the communication [in Slack] and having the data show up where the conversations are happening. And I think there’s a lot of potential here for leveraging these indirectly in customer interactions, whether that’s sales, marketing, support or whatever,” he said.

He said that he could also see Salesforce taking advantage of Slack Connect, a capability introduced last year that enables companies to communicate with people outside the company. “We have all this stuff working inside of Slack Connect, and you get all the same benefits that you would get using Huddles to properly start a conversation, solve some problem or use video as a better way of communicating with [customers],” he said.

These announcements seem to fall into two main categories: the future of work and in the context of the acquisition. Bret Taylor, Salesforce president and COO certainly seemed to recognize that when discussing the deal with TechCrunch when it was announced back in December. He sees the two companies directly addressing the changing face of work:

“When we say we really want Slack to be this next generation interface for Customer 360, what we mean is we’re pulling together all these systems. How do you rally your teams around these systems in this digital work-anywhere world that we’re in right now where these teams are distributed and collaboration is more important than ever,” Taylor said.

Brent Leary, founder and principal analyst at CRM Essentials says that there is clearly a future of work angle at play as the two companies come together. “I think moves like [today’s Slack announcements] are in response to where things are trending with respect to the future of work as we all find ourselves spending an increasing amount of time in front of webcams and microphones in our home offices meeting and collaborating with others,” he said.

Huddles is an example of how the company is trying to fix that screen fatigue from too many meetings or typing our thoughts. “This kind of “audio-first” capability takes the emphasis off trying to type what we mean in the way we think will get the point across to just being able to say it without the additional effort to make it look right,” he said.

Leary added, “And not only will it allow people to just speak, but also allows us to get a better understanding of the sentiment and emotion that also comes with speaking to people and not having to guess what the intent/emotion is behind the text in a chat.”

As Karissa Bell pointed out on Engadget, Huddles also works like Discord’s chat feature in a business context, which could have great utility for Salesforce tools when it’s integrated with the Salesforce platform

While the regulatory machinations grind on, Slack continues to develop its platform and products. It will of course continue to operate as a stand-alone company, even when the mega deal finally closes, but there will certainly be plenty of cross-platform integrations.

Even if executives can’t discuss what those integrations could look like openly, there has to be a lot of excitement at Salesforce and Slack about the possibilities that these new tools bring to the table — and to the future of work in general — whenever the deal crosses the finish line.


By Ron Miller