Citrix is acquiring Wrike from Vista for $2.25B

Citrix announced today that it plans to acquire Wrike, a SaaS project management platform, from Vista Equity Partners for $2.25 billion. Vista bought the company just two years ago.

Citrix, which is best known for its digital workspaces, sees this as a good match, especially at a time where employees have been forced to work from home because of the pandemic. By combining the two companies, it produces a powerful combination, one that didn’t escape Citrix CEO and president David Henshall

“Together, Citrix and Wrike will deliver the solutions needed to power a cloud-delivered digital workspace experience that enables teams to securely access the resources and tools they need to collaborate and get work done in the most efficient and effective way possible across any channel, device or location,” Henshall said in a statement.

Andrew Filev, founder and CEO at Wrike, who has managed the company through these multiple changes and remains at the helm, believes his company has landed in a good spot with the Citrix purchase.

“First, as part of the Citrix family we will be able to scale our product and accelerate our roadmap to deliver capabilities that will help our customers get more from their Wrike investment. We have always listened to our customers and have built our product based on their feedback — now we will be able to do more of that, faster.,” Filev wrote in a company blog post announcing the deal, stating a typical argument from CEOs of acquired companies.

The startup reports $140 million ARR, growing at 30% annually, so that comes out to approximately 16x its present-day revenue, which is the price companies are generally paying for acquisitions these days. However, as Wrike expects to reach $180 million to $190 million in ARR this year, the company’s sale price could look like a bargain in a few years’ time if the projections come to pass.

The price was not revealed in the 2018 sale, but it surely feels like a big win for Vista. Consider that Wrike has previously raised just $26 million.


By Ron Miller

Extra Crunch roundup: antitrust jitters, SPAC odyssey, white-hot IPOs, more

Some time ago, I gave up on the idea of finding a thread that connects each story in the weekly Extra Crunch roundup; there are no unified theories of technology news.

The stories that left the deepest impression were related to two news pegs that dominated the week — Visa and Plaid calling off their $5.3 billion acquisition agreement, and sizzling-hot IPOs for Affirm and Poshmark.

Watching Plaid and Visa sing “Let’s Call The Whole Thing Off” in harmony after the U.S. Department of Justice filed a lawsuit to block their deal wasn’t shocking. But I was surprised to find myself editing an interview Alex Wilhelm conducted with with Plaid CEO Zach Perret the next day in which the executive said growing the company on its own is “once again” the correct strategy.


Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription


In an analysis for Extra Crunch, Managing Editor Danny Crichton suggested that federal regulators’ new interest in antitrust enforcement will affect valuations going forward. For example, Procter & Gamble and women’s beauty D2C brand Billie also called off their planned merger last week after the Federal Trade Commission raised objections in December.

Given the FTC’s moves last year to prevent Billie and Harry’s from being acquired, “it seems clear that U.S. antitrust authorities want broad competition for consumers in household goods,” Danny concluded, and I suspect that applies to Plaid as well.

In December, C3.ai, Doordash and Airbnb burst into the public markets to much acclaim. This week, used clothing marketplace Poshmark saw a 140% pop in its first day of trading and consumer-financing company Affirm “priced its IPO above its raised range at $49 per share,” reported Alex.

In a post titled A theory about the current IPO market, he identified eight key ingredients for brewing a debut with a big first-day pop, which includes “exist in a climate of near-zero interest rates” and “keep companies private longer.” Truly, words to live by!

Come back next week for more coverage of the public markets in The Exchange, an interview with Bustle CEO Bryan Goldberg where he shares his plans for taking the company public, a comprehensive post that will unpack the regulatory hurdles facing D2C consumer brands, and much more.

If you live in the U.S., enjoy your MLK Day holiday weekend, and wherever you are: thanks very much for reading Extra Crunch.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

 

Rapid growth in 2020 reveals OKR software market’s untapped potential

After spending much of the week covering 2021’s frothy IPO market, Alex Wilhelm devoted this morning’s column to studying the OKR-focused software sector.

Measuring objectives and key results are core to every enterprise, perhaps more so these days since knowledge workers began working remotely in greater numbers last year.

A sign of the times: this week, enterprise orchestration SaaS platform Gtmhub announced that it raised a $30 million Series B.

To get a sense of how large the TAM is for OKR, Alex reached out to several companies and asked them to share new and historical growth metrics:

  • Gthmhub
  • Perdoo
  • WorkBoard
  • Ally.io
  • Koan
  • WeekDone

“Some OKR-focused startups didn’t get back to us, and some leaders wanted to share the best stuff off the record, which we grant at times for candor amongst startup executives,” he wrote.

5 consumer hardware VCs share their 2021 investment strategies

For our latest investor survey, Matt Burns interviewed five VCs who actively fund consumer electronics startups:

  • Hans Tung, managing partner, GGV Capital
  • Dayna Grayson, co-founder and general partner, Construct Capital
  • Cyril Ebersweiler, general partner, SOSV
  • Bilal Zuberi, partner, Lux Capital
  • Rob Coneybeer, managing director, Shasta Ventures

“Consumer hardware has always been a tough market to crack, but the COVID-19 crisis made it even harder,” says Matt, noting that the pandemic fueled wide interest in fitness startups like Mirror, Peloton and Tonal.

Bonus: many VCs listed the founders, investors and companies that are taking the lead in consumer hardware innovation.

A theory about the current IPO market

Digital generated image of abstract multi colored curve chart on white background.

Digital generated image of abstract multi colored curve chart on white background.

If you’re looking for insight into “why everything feels so damn silly this year” in the public markets, a post Alex wrote Thursday afternoon might offer some perspective.

As someone who pays close attention to late-stage venture markets, he’s identified eight factors that are pushing debuts for unicorns like Affirm and Poshmark into the stratosphere.

TL;DR? “Lots of demand, little supply, boom goes the price.”

Poshmark prices IPO above range as public markets continue to YOLO startups

Clothing resale marketplace Poshmark closed up more than 140% on its first trading day yesterday.

In Thursday’s edition of The Exchange, Alex noted that Poshmark boosted its valuation by selling 6.6 million shares at its IPO price, scooping up $277.2 million in the process.

Poshmark’s surge in trading is good news for its employees and stockholders, but it reflects poorly on “the venture-focused money people who we suppose know what they are talking about when it comes to equity in private companies,” he says.

Will startup valuations change given rising antitrust concerns?

GettyImages 926051128

financial stock market graph on technology abstract background represent risk of investment

This week, Visa announced it would drop its planned acquisition of Plaid after the U.S. Department of Justice filed suit to block it last fall.

Last week, Procter & Gamble called off its purchase of Billie, a women’s beauty products startup — in December, the U.S. Federal Trade Commission sued to block that deal, too.

Once upon a time, the U.S. government took an arm’s-length approach to enforcing antitrust laws, but the tide has turned, says Managing Editor Danny Crichton.

Going forward, “antitrust won’t kill acquisitions in general, but it could prevent the buyers with the highest reserve prices from entering the fray.”

Dear Sophie: What’s the new minimum salary required for H-1B visa applicants?

Image Credits: Sophie Alcorn

Dear Sophie:

I’m a grad student currently working on F-1 STEM OPT. The company I work for has indicated it will sponsor me for an H-1B visa this year.

I hear the random H-1B lottery will be replaced with a new system that selects H-1B candidates based on their salaries.

How will this new process work?

— Positive in Palo Alto

Venture capitalists react to Visa-Plaid deal meltdown

A homemade chocolate cookie with a bite and crumbs on a white background

OLYMPUS DIGITAL CAMERA

After news broke that Visa’s $5.3 billion purchase of API startup Plaid fell apart, Alex Wilhelm and Ron Miller interviewed several investors to get their reactions:

  • Anshu Sharma, co-founder and CEO, SkyflowAPI
  • Amy Cheetham, principal, Costanoa Ventures
  • Sheel Mohnot, co-founder, Better Tomorrow Ventures
  • Lucas Timberlake, partner, Fintech Ventures
  • Nico Berardi, founder and general partner, ANIMO Ventures
  • Allen Miller, VC, Oak HC/FT
  • Sri Muppidi, VC, Sierra Ventures
  • Christian Lassonde, VC, Impression Ventures

Plaid CEO touts new ‘clarity’ after failed Visa acquisition

Zach Perret, chief executive officer and co-founder of Plaid Technologies Inc., speaks during the Silicon Slopes Tech Summit in Salt Lake City, Utah, U.S., on Friday, Jan. 31, 2020. The summit brings together the leading minds in the tech industry for two-days of keynote speakers, breakout sessions, and networking opportunities. Photographer: George Frey/Bloomberg via Getty Images

Zach Perret, chief executive officer and co-founder of Plaid Technologies Inc., speaks during the Silicon Slopes Tech Summit in Salt Lake City, Utah, U.S., on Friday, Jan. 31, 2020. The summit brings together the leading minds in the tech industry for two-days of keynote speakers, breakout sessions, and networking opportunities. Photographer: George Frey/Bloomberg via Getty Images

Alex Wilhelm interviewed Plaid CEO Zach Perret after the Visa acquisition was called off to learn more about his mindset and the company’s short-term plans.

Perret, who noted that the last few years have been a “roller coaster,” said the Visa deal was the right decision at the time, but going it alone is “once again” Plaid’s best way forward.

2021: A SPAC odyssey

In Tuesday’s edition of The Exchange, Alex Wilhelm took a closer look at blank-check offerings for digital asset marketplace Bakkt and personal finance platform SoFi.

To create a detailed analysis of the investor presentations for both offerings, he tried to answer two questions:

  1. Are special purpose acquisition companies a path to public markets for “potentially-promising companies that lacked obvious, near-term growth stories?”
  2. Given the number of unicorns and the limited number of companies that can IPO at any given time, “maybe SPACS would help close the liquidity gap?”

Flexible VC: A new model for startups targeting profitability

12 ‘flexible VCs’ who operate where equity meets revenue share

Spotlit Multi Colored Coil Toy in the Dark.

Spotlit Multi Colored Coil Toy in the Dark.

Growth-stage startups in search of funding have a new option: “flexible VC” investors.

An amalgam of revenue-based investment and traditional VC, investors who fall into this category let entrepreneurs “access immediate risk capital while preserving exit, growth trajectory and ownership optionality.”

In a comprehensive explainer, fund managers David Teten and Jamie Finney present different investment structures so founders can get a clear sense of how flexible VC compares to other venture capital models. In a follow-up post, they share a list of a dozen active investors who offer funding via these non-traditional routes.

These 5 VCs have high hopes for cannabis in 2021

Marijuana leaf on a yellow background.

Image Credits: Anton Petrus (opens in a new window) / Getty Images

For some consumers, “cannabis has always been essential,” writes Matt Burns, but once local governments allowed dispensaries to remain open during the pandemic, it signaled a shift in the regulatory environment, and investors took notice.

Matt asked five VCs about where they think the industry is heading in 2021 and what advice they’re offering their portfolio companies:


By Walter Thompson

GitLab raises $195M in secondary funding on $6B valuation

GitLab has confirmed with TechCrunch that it raised a $195 million secondary round on a $6 billion valuation. CNBC broke the story earlier today.

The company’s impressive valuation comes after its most recent 2019 Series E in which it raised $268 million on a 2.75 billion valuation, an increase of $3.25 billion in under 18 months. Company co-founder and CEO Sid Sijbrandij believes the increase is due to his company’s progress adding functionality to the platform.

“We believe the increase in valuation over the past year reflects the progress of our complete DevOps platform towards realizing a greater share of the growing, multi-billion dollar software development market,” he told TechCrunch.

While the startup has raised over $434 million, this round involved buying employee stock options, a move that allows the company’s workers to cash in some of their equity prior to going public. CNBC reported that the firms buying the stock included Alta Park, HMI Capital, OMERS Growth Equity, TCV and Verition.

The next logical step would be appear to be IPO, something the company has never shied away from. In fact, it actually at one point included the proposed date of November 18, 2020 as a target IPO date on the company wiki. While they didn’t quite make that goal, Sijbrandij still sees the company going public at some point. He’s just not being so specific as in the past, suggesting that the company has plenty of runway left from the last funding round and can go public when the timing is right.

“We continue to believe that being a public company is an integral part of realizing our mission. As a public company, GitLab would benefit from enhanced brand awareness, access to capital, shareholder liquidity, autonomy and transparency,” he said.

He added, “That said, we want to maximize the outcome by selecting an opportune time. Our most recent capital raise was in 2019 and contributed to an already healthy balance sheet. A strong balance sheet and business model, enables us to select a period that works best for realizing our long term goals.”

GitLab has not only published IPO goals on its Wiki, but it’s entire company philosophy, goals and OKRs for everyone to see. Sijbrandij told TechCrunch’s Alex Wilhelm at a TechCrunch Disrupt panel in September, he believes that transparency helps attract and keep employees. It doesn’t hurt that the company was and remains a fully remote organization, even pre-COVID.

“We started [this level of] transparency to connect with the wider community around GitLab, but it turned out to be super beneficial for attracting great talent as well,” Sijbrandij told Wilhelm in September.

The company, which launched in 2014, offers a DevOps platform to help move applications through the programming lifecycle.


By Ron Miller

Harness snags $85M Series C on $1.7B valuation as revenue grows 3x

Harness, the startup that wants to create a suite of engineering tools to give every company the kind of technological reach that the biggest companies have, announced an $85 million Series C today on a $1.7 billion valuation.

Today’s round comes after 2019’s $60 million Series B, which had a $500 million valuation, showing a company rapidly increasing in value. For a company that launched just three years ago, this is a fairly remarkable trajectory.

Alkeon Capital led the round with help from new investors Battery Ventures, Citi Ventures, Norwest Venture Partners, Sorenson Capital and Thomvest Ventures. The startup also revealed a previously unannounced $30 million B-1 round raised after the $60 million round, bringing the total raised to date to $195 million.

Company founder and CEO Jyoti Bansal previously founded AppDynamics, which he sold to Cisco in 2017 for $3.7 billion. With his track record, investors came looking for him this round. It didn’t hurt that revenue grew almost 3x last year.

“The business is doing very well, so the investor community has been proactively reaching out and trying to invest in us. We were not actually planning to raise a round until later this year. We had enough capital to get through that, but there were a lot of people wanting to invest,” Bansal told me.

In fact, he said there is so much investor interest that he could have raised twice as much, but didn’t feel a need to take on that much capital at this time. “Overall, the investor community sees the value in developer tools and the DevOps market. There are so many big public companies now in that space that have gone out in the last three to five years and that has definitely created even more validation of this space,” he said.

Bansal says that he started the company with the goal of making every company as good as Google or Facebook when it comes to engineering efficiency. Since most companies lack the engineering resources of these large companies, that’s a tall task, but one he thinks he can solve through software.

The company started by building a continuous delivery module. A cloud cost efficiency module followed. Last year the company bought open source continuous integration company Drone.io and they are working on building that into the platform now with it currently in beta. There are additional modules on the product roadmap coming this year, according to Bansal.

As the company continued to grow revenue and build out the platform in 2020, it also added a slew of new employees, growing from 200 to 300 during the pandemic. Bansal says that he has plans to add another 200 by the end of this year. Harness has a reputation of being a good place to work, recently landing on Glassdoor’s best companies list.

As an experienced entrepreneur, Bansal takes building a diverse company with a welcoming culture very seriously. “Yes, you have to provide equal opportunity and make sure that you are open to hiring people from diverse backgrounds, but you have to be more proactive about it in the sense that you have to make sure that your company environment and company culture feels very welcoming to everyone,” he said.

It’s been a difficult time building a company during the pandemic, adding so many new employees, and finding a way to make everyone feel welcome and included. Bansal says he has actually seen productivity increase during the pandemic, but now has to guard against employee burnout.

He says that people didn’t know how to draw boundaries when working at home. One thing he did was introduce a program to give everyone one Friday a month off to recharge. The company also recently announced it would be a ‘work from anywhere’ company post-COVID, but Bansal still plans on having regional offices where people can meet when needed.


By Ron Miller

Pat Gelsinger stepping down as VMware CEO to replace Bob Swan at Intel

In a move that could have wide ramifications across the tech landscape, Intel announced that VMware CEO Pat Gelsinger would be replacing interim CEO Bob Swann at Intel on February 15th. The question is why would he leave his job to run a struggling chip giant.

The bottom line is he has a long history with Intel, working with some of the biggest names in chip industry lore before he joined VMware in 2009. It has to be a thrill for him to go back to his roots and try to jump start the company.

“I was 18 years old when I joined Intel, fresh out of the Lincoln Technical Institute. Over the next 30 years of my tenure at Intel, I had the honor to be mentored at the feet of Grove, Noyce and Moore,” Gelsinger wrote in a blog post announcing his new position.

Certainly Intel recognized that the history and that Gelsinger’s deep executive experience should help as the company attempts to compete in an increasingly aggressive chip industry landscape. “Pat is a proven technology leader with a distinguished track record of innovation, talent development, and a deep knowledge of Intel. He will continue a values-based cultural leadership approach with a hyper focus on operational execution,” Omar Ishrak, independent chairman of the Intel board said in a statement.

But Gelsinger is walking into a bit of a mess. As my colleague Danny Crichton wrote in his year-end review of the chip industry last month, Intel is far behind its competitors, and it’s going to be tough to play catch-up:

Intel has made numerous strategic blunders in the past two decades, most notably completely missing out on the smartphone revolution and also the custom silicon market that has come to prominence in recent years. It’s also just generally fallen behind in chip fabrication, an area it once dominated and is now behind Taiwan-based TSMC, Crichton wrote.

Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy agrees with this assertion, saying that Swan was dealt a bad hand, walking in to clean up a mess that has years long timelines. While Gelsinger faces similar issues, Moorhead thinks he can refocus the company. “I am not foreseeing any major strategic changes with Gelsinger, but I do expect him to focus on the company’s engineering culture and get it back to an execution culture” Moorhead told me.

The announcement comes against the backdrop of massive chip industry consolidation last year with over $100 billion changing hands in four deals with NVidia nabbing ARM for $40 billion, the $35 billion AMD-Xilink deal, Analog snagging Maxim for $21 billion and Marvell grabbing Inphi for a mere $10 billion, not to mention Intel dumping its memory unit to SK Hynix for $9 billion.

As for VMware, it has to find a new CEO now. As Moorhead says, the obvious choice will be current COO Sanjay Poonen. Holger Mueller, an analyst at Constellation Research says it will be up to Michael Dell who to hand the reins to, but he believes Gelsinger was stuck at Dell and would not get a broader role, so he left.

“VMware has a deep bench, but it will be up to Michael Dell to get a CEO who can innovate on the software side and keep the unique DNA of VMware inside the Dell portfolio going strong, Dell needs the deeper profits of this business for its turnaround,” he said.

The stock market seems to like the move for Intel with the company stock up 7.26%, but not so much for VMware, whose stock was down close to the same amount at 7.72% as went to publication.


By Ron Miller

Slim.ai announces $6.6M seed to build container DevOps platform

We are more than seven years into the notion of modern containerization, and it still requires a complex set of tools and a high level of knowledge on how containers work. The DockerSlim open source project developed several years ago from a desire to remove some of that complexity for developers.

Slim.ai, a new startup that wants to build a commercial product on top of the open source project, announced a $6.6 million seed round today from Boldstart Ventures, Decibel Partners, FXP Ventures and TechAviv Founder Partners.

Company co-founder and CEO John Amaral says he and fellow co-founder and CTO Kyle Quest have worked together for years, but it was Quest who started and nurtured DockerSlim. “We started coming together around a project that Kyle built called DockerSlim. He’s the primary author, inventor and up until we started doing this company, the sole proprietor of that of that community,” Amaral explained.

At the time Quest built DockerSlim in 2015, he was working with Docker containers and he wanted a way to automate some of the lower level tasks involved in dealing with them. “I wanted to solve my own pain points and problems that I had to deal with, and my team had to deal with dealing with containers. Containers were an exciting new technology, but there was a lot of domain knowledge you needed to build production-grade applications and not everybody had that kind of domain expertise on the team, which is pretty common in almost every team,” he said.

He originally built the tool to optimize container images, but he began looking at other aspects of the DevOps lifecycle including the author, build, deploy and run phases. He found as he looked at that, he saw the possibility of building a commercial company on top of the open source project.

Quinn says that while the open source project is a starting point, he and Amaral see a lot of areas to expand. “You need to integrate it into your developer workflow and then you have different systems you deal with, different container registries, different cloud environments and all of that. […] You need a solution that can address those needs and doing that through an open source tool is challenging, and that’s where there’s a lot of opportunity to provide premium value and have a commercial product offering,” Quinn explained.

Ed Sim, founder and general partner at Boldstart Ventures, one of the seed investors sees a company bringing innovation to an area of technology where it has been lacking, while putting some more control in the hands of developers. “Slim can shift that all left and give developers the power through the Slim tools to answer all those questions, and then, boom, they can develop containers, push them into production and then DevOps can do their thing,” he said.

They are just 15 people right now including the founders, but Amaral says building a diverse and inclusive company is important to him, and that’s why one of his early hires was head of culture. “One of the first two or three people we brought into the company was our head of culture. We actually have that role in our company now, and she is a rock star and a highly competent and focused person on building a great culture. Culture and diversity to me are two sides of the same coin,” he said.

The company is still in the very early stages of developing that product. In the meantime, they continue to nurture the open source project and to build a community around that. They hope to use that as a springboard to build interest in the commercial product, which should be available some time later this year.


By Ron Miller

Extra Crunch roundup: 2 VC surveys, Tesla’s melt up, The Roblox Gambit, more

This has been quite a week.

Instead of walking backward through the last few days of chaos and uncertainty, here are three good things that happened:

  • Google employee Sara Robinson combined her interest in machine learning and baking to create AI-generated hybrid treats.
  • A breakthrough could make water desalination 30%-40% more effective.
  • Bianca Smith will become the first Black woman to coach a professional baseball team.

Despite many distractions in our first full week of the new year, we published a full slate of stories exploring different aspects of entrepreneurship, fundraising and investing.

We’ve already gotten feedback on this overview of subscription pricing models, and a look back at 2020 funding rounds and exits among Israel’s security startups was aimed at our new members who live and work there, along with international investors who are seeking new opportunities.

Plus, don’t miss our first investor surveys of 2021: one by Lucas Matney on social gaming, and another by Mike Butcher that gathered responses from Portugal-based investors on a wide variety of topics.

Thanks very much for reading Extra Crunch this week. I hope we can all look forward to a nice, boring weekend with no breaking news alerts.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist


Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription


The Roblox Gambit

In February 2020, gaming platform Roblox was valued at $4 billion, but after announcing a $520 million Series H this week, it’s now worth $29.5 billion.

“Sure, you could argue that Roblox enjoyed an epic 2020, thanks in part to COVID-19,” writes Alex Wilhelm this morning. “That helped its valuation. But there’s a lot of space between $4 billion and $29.5 billion.”

Alex suggests that Roblox’s decision to delay its IPO and raise an enormous Series H was a grandmaster move that could influence how other unicorns will take themselves to market. “A big thanks to the gaming company for running this experiment for us.”

I asked him what inspired the headline; like most good ideas, it came to him while he was trying to get to sleep.

“I think that I had “The Queen’s Gambit somewhere in my head, so that formed the root of a little joke with myself. Roblox is making a strategic wager on method of going public. So, ‘gambit’ seems to fit!”

8 investors discuss social gaming’s biggest opportunities

girl playing games on desktop computer

Image Credits: Erik Von Weber (opens in a new window) / Getty Images

For our first investor survey of the year, Lucas Matney interviewed eight VCs who invest in massively multiplayer online games to discuss 2021 trends and opportunities:

  • Hope Cochran, Madrona Venture Group
  • Daniel Li, Madrona Venture Group
  • Niko Bonatsos, General Catalyst
  • Ethan Kurzweil, Bessemer Venture Partners
  • Sakib Dadi, Bessemer Venture Partners
  • Jacob Mullins, Shasta Ventures
  • Alice Lloyd George, Rogue
  • Gigi Levy-Weiss, NFX

Having moved far beyond shooters and sims, platforms like Twitch, Discord and Fortnite are “where culture is created,” said Daniel Li of Madrona.

Rep. Alexandria Ocasio-Cortez uses Twitch to explain policy positions, major musicians regularly perform in-game concerts on Fortnite and in-game purchases generated tens of billions last year.

“Gaming is a unique combination of science and art, left and right brain,” said Gigi Levy-Weiss of NFX. “It’s never just science (i.e., software and data), which is why many investors find it hard.”

How to convert customers with subscription pricing

Giant hand and magnet picking up office and workers

Image Credits: C.J. Burton (opens in a new window) / Getty Images

Startups that lack insight into their sales funnel have high churn, low conversion rates and an inability to adapt or leverage changes in customer behavior.

If you’re hoping to convert and retain customers, “reinforcing your value proposition should play a big part in every level of your customer funnel,” says Joe Procopio, founder of Teaching Startup.

What is up with Tesla’s value?

Elon Musk, founder of SpaceX and chief executive officer of Tesla Inc., arrives at the Axel Springer Award ceremony in Berlin, Germany, on Tuesday, Dec. 1, 2020. Tesla Inc. will be added to the S&P 500 Index in one shot on Dec. 21, a move that will ripple through the entire market as money managers adjust their portfolios to make room for shares of the $538 billion company. Photographer: Liesa Johannssen-Koppitz/Bloomberg via Getty Images

Image Credits: Bloomberg (opens in a new window) / Getty Images

Alex Wilhelm followed up his regular Friday column with another story that tries to find a well-grounded rationale for Tesla’s sky-high valuation of approximately $822 billion.

Meanwhile, GM just unveiled a new logo and tagline.

As ever, I learned something new while editing: A “melt up” occurs when investors start clamoring for a particular company because of acute FOMO (the fear of missing out).

Delivering 500,000 cars in 2020 was “impressive,” says Alex, who also acknowledged the company’s ability to turn GAAP profits, but “pride cometh before the fall, as does a melt up, I think.”

Note: This story has Alex’s original headline, but I told him I would replace the featured image with a photo of someone who had very “richest man in the world” face.

How Segment redesigned its core systems to solve an existential scaling crisis

Abstract glowing grid and particles

Image Credits: piranka / Getty Images

On Tuesday, enterprise reporter Ron Miller covered a major engineering project at customer data platform Segment called “Centrifuge.”

“Its purpose was to move data through Segment’s data pipes to wherever customers needed it quickly and efficiently at the lowest operating cost,” but as Ron reports, it was also meant to solve “an existential crisis for the young business,” which needed a more resilient platform.

Dear Sophie: Banging my head against the wall understanding the US immigration system

Image Credits: Sophie Alcorn

Dear Sophie:

Now that the U.S. has a new president coming in whose policies are more welcoming to immigrants, I am considering coming to the U.S. to expand my company after COVID-19. However, I’m struggling with the morass of information online that has bits and pieces of visa types and processes.

Can you please share an overview of the U.S. immigration system and how it works so I can get the big picture and understand what I’m navigating?

— Resilient in Romania

The first “Dear Sophie” column of each month is available on TechCrunch without a paywall.

Revenue-based financing: The next step for private equity and early-stage investment

Shot of a group of people holding plants growing out of soil

Image Credits: Hiraman (opens in a new window) / Getty Images

For founders who aren’t interested in angel investment or seeking validation from a VC, revenue-based investing is growing in popularity.

To gain a deeper understanding of the U.S. RBI landscape, we published an industry report on Wednesday that studied data from 134 companies, 57 funds and 32 investment firms before breaking out “specific verticals and business models … and the typical profile of companies that access this form of capital.”

Lisbon’s startup scene rises as Portugal gears up to be a European tech tiger

Man using laptop at 25th of April Bridge in Lisbon, Portugal

Image Credits: Westend61 (opens in a new window)/ Getty Images

Mike Butcher continues his series of European investor surveys with his latest dispatch from Lisbon, where a nascent startup ecosystem may get a Brexit boost.

Here are the Portugal-based VCs he interviewed:

  • Cristina Fonseca, partner, Indico Capital Partners
  • Pedro Ribeiro Santos, partner, Armilar Venture Partners
  • Tocha, partner, Olisipo Way
  • Adão Oliveira, investment manager, Portugal Ventures
  • Alexandre Barbosa, partner, Faber
  • António Miguel, partner, Mustard Seed MAZE
  • Jaime Parodi Bardón, partner, impACT NOW Capital
  • Stephan Morais, partner, Indico Capital Partners
  • Gavin Goldblatt, managing partner, Portugal Gateway

How late-stage edtech companies are thinking about tutoring marketplaces

Life Rings flying out beneath storm clouds are a metaphor for rescue, help and aid.

Image Credits: John Lund (opens in a new window)/ Getty Images

How do you scale online tutoring, particularly when demand exceeds the supply of human instructors?

This month, Chegg is replacing its seven-year-old marketplace that paired students with tutors with a live chatbot.

A spokesperson said the move will “dramatically differentiate our offerings from our competitors and better service students,” but Natasha Mascarenhas identified two challenges to edtech automation.

“A chatbot won’t work for a student with special needs or someone who needs to be handheld a bit more,” she says. “Second, speed tutoring can only work for a specific set of subjects.”

Decrypted: How bad was the US Capitol breach for cybersecurity?

Image Credits: Treedeo (opens in a new window) / Getty Images

While I watched insurrectionists invade and vandalize the U.S. Capitol on live TV, I noticed that staffers evacuated so quickly, some hadn’t had time to shut down their computers.

Looters even made off with a laptop from Senator Jeff Merkley’s office, but according to security reporter Zack Whittaker, the damages to infosec wasn’t as bad as it looked.

Even so, “the breach will likely present a major task for Congress’ IT departments, which will have to figure out what’s been stolen and what security risks could still pose a threat to the Capitol’s network.”

Extra Crunch’s top 10 stories of 2020

On New Year’s Eve, I made a list of the 10 “best” Extra Crunch stories from the previous 12 months.

My methodology was personal: From hundreds of posts, these were the 10 I found most useful, which is my key metric for business journalism.

Some readers are skeptical about paywalls, but without being boastful, Extra Crunch is a premium product, just like Netflix or Disney+. I know, we’re not as entertaining as a historical drama about the reign of Queen Elizabeth II or a space western about a bounty hunter. But, speaking as someone who’s worked at several startups, Extra Crunch stories contain actionable information you can use to build a company and/or look smart in meetings — and that’s worth something.


By Walter Thompson

F5 snags Volterra multi-cloud management startup for $500M

F5, the applications networking company announced today that it is acquiring Volterra, a multi-cloud management startup for $500 million. That breaks down to $440 million in cash and $60 million in deferred and unvested incentive compensation.

Volterra emerged in 2019 with a $50 million investment from multiple sources including Khosla Ventures and Mayfield along with strategic investors like M12 (Microsoft’s venture arm) and Samsung Ventures. As the company described it to me at the time of the funding:

Volterra has innovated a consistent, cloud-native environment that can be deployed across multiple public clouds and edge sites — a distributed cloud platform. Within this SaaS-based offering, Volterra integrates a broad range of services that have normally been siloed across many point products and network or cloud providers.

The solution is designed to provide a single way to view security, operations and management components.

F5 president and CEO François Locoh-Donou sees Volterra’s edge solution integrating across its product line. “With Volterra, we advance our Adaptive Applications vision with an Edge 2.0 platform that solves the complex multi-cloud reality enterprise customers confront. Our platform will create a SaaS solution that solves our customers’ biggest pain points,” he said in a statement.

Volterra founder and CEO Ankur Singla, writing in a company blog post announcing the deal, says the need for this solution only accelerated during 2020 when companies were shifting rapidly to the cloud due to the pandemic. “When we started Volterra, multi-cloud and edge were still buzzwords and venture funding was still searching for tangible use cases. Fast forward three years and COVID-19 has dramatically changed the landscape — it has accelerated digitization of physical experiences and moved more of our day-to-day activities online. This is causing massive spikes in global Internet traffic while creating new attack vectors that impact the security and availability of our increasing set of daily apps,” he wrote.

He sees Volterra’s capabilities fitting in well with the F5 family of products to help solve these issues. While F5 had a quiet 2020 on the M&A front, today’s purchase comes on top of a couple of major acquisitions in 2019 including Shape Security for $1 billion and NGINX for $670 million.

The deal has been approved by both companies boards, and is expected to close before the end of March subject to regulatory approvals.


By Ron Miller

Lacework lands $525M investment as revenue grows 300%

As the pandemic took hold in 2020, companies accelerated their move to cloud services. Lacework, the cloud security startup, was in the right place at the right time as customers looked for ways to secure their cloud native workloads. The company reported that revenue grew 300% year over year for the second straight year.

It was rewarded for that kind of performance with a $525 million Series D today. It did not share an exact valuation, only saying that it exceeded $1 billion, which you would expect on such a hefty investment. Sutter Hill and Altimeter Capital led the round with help from D1, Coatue, Dragoneer Investment Group, Liberty Global Ventures, Snowflake Ventures and Tiger Capital. The company has now raised close to $600 million.

Lacework CEO Dan Hubbard says one of the reasons for such widespread interest from investors is the breadth of the company’s security solution. “We enable companies to build securely in the cloud, and we span across multiple different categories of markets, which enable the customers to do that,” he said.

He says that encompasses a range of services including configuration and compliance, security for infrastructure as code, build time and runtime vulnerability scanning and runtime security for cloud native environments like Kubernetes and containers.

As the company has grown revenue, it has been adding employees quickly. It started the year with 92 employees and closed with over 200 with plans to double that by the end of this year. As he looks at hiring, Hubbard is aware of the need to build a diverse organization, but acknowledges that tech in general hasn’t done a great job so far.

He says they are working with the various teams inside the company to try and change that, while also working to support outside organizations that are helping educate under represented groups to get the skills they need and then building from that. “If you can help solve the problem at an earlier stage, then I think you’ve got a bigger opportunity [to have a base of people to hire] there,” he said.

The company was originally nurtured inside Sutter Hill and is built on top of the Snowflake platform. It reports that $20 million of today’s total comes from Snowflake’s new venture arm, which is putting some money into an early partner.

“We were an alpha Snowflake customer, and they were an alpha customer of ours. Our platform is built on top of the Snowflake data cloud and their new venture arm has also joined the round with an investment to further strengthen the partnership there,” Hubbard said.

As for Sutter Hill, investor Mike Speiser sees Lacework as one of his firm’s critical investments. “[Much] like Snowflake at a similar point in its evolution, Lacework is growing revenue at over 300% per year making Lacework one of Sutter Hill Ventures’ most important and promising portfolio companies,” he said in a statement.


By Ron Miller

How Segment redesigned its core systems to solve an existential scaling crisis

Segment, the startup Twilio bought last fall for $3.2 billion, was just beginning to take off in 2015 when it ran into a scaling problem: It was growing so quickly, the tools it had built to process marketing data on its platform were starting to outgrow the original system design.

Inaction would cause the company to hit a technology wall, managers feared. Every early-stage startup craves growth and Segment was no exception, but it also needed to begin thinking about how to make its data platform more resilient or reach a point where it could no longer handle the data it was moving through the system. It was — in a real sense — an existential crisis for the young business.

The project that came out of their efforts was called Centrifuge, and its purpose was to move data through Segment’s data pipes to wherever customers needed it quickly and efficiently at the lowest operating cost.

Segment’s engineering team began thinking hard about what a more robust and scalable system would look like. As it turned out, their vision would evolve in a number of ways between the end of 2015 and today, and with each iteration, they would take a leap in terms of how efficiently they allocated resources and processed data moving through its systems.

The project that came out of their efforts was called Centrifuge, and its purpose was to move data through Segment’s data pipes to wherever customers needed it quickly and efficiently at the lowest operating cost. This is the story of how that system came together.

Growing pains

The systemic issues became apparent the way they often do — when customers began complaining. When Tido Carriero, Segment’s chief product development officer, came on board at the end of 2015, he was charged with finding a solution. The issue involved the original system design, which like many early iterations from startups was designed to get the product to market with little thought given to future growth and the technical debt payment was coming due.

“We had [designed] our initial integrations architecture in a way that just wasn’t scalable in a number of different ways. We had been experiencing massive growth, and our CEO [Peter Reinhardt] came to me maybe three times within a month and reported various scaling challenges that either customers or partners of ours had alerted him to,” said Carriero.

The good news was that it was attracting customers and partners to the platform at a rapid clip, but it could all have come crashing down if the company didn’t improve the underlying system architecture to support the robust growth. As Carriero reports, that made it a stressful time, but having come from Dropbox, he was actually in a position to understand that it’s possible to completely rearchitect the business’s technology platform and live to tell about it.

“One of the things I learned from my past life [at Dropbox] is when you have a problem that’s just so core to your business, at a certain point you start to realize that you are the only company in the world kind of experiencing this problem at this kind of scale,” he said. For Dropbox that was related to storage, and for Segment it was processing large amounts of data concurrently.

In the build-versus-buy equation, Carriero knew that he had to build his way out of the problem. There was nothing out there that could solve Segment’s unique scaling issues. “Obviously that led us to believe that we really need to think about this a little bit differently, and that was when our Centrifuge V2 architecture was born,” he said.

Building the imperfect beast

The company began measuring system performance, at the time processing 8,442 events per second. When it began building V2 of its architecture, that number had grown to an average of 18,907 events per second.


By Ron Miller

Chronosphere nabs $43M Series B to expand cloud native monitoring tool

Chronosphere, the scalable cloud native monitoring tool launched in 2019 by two former Uber engineers, announced a $43.4 million Series B today. The company also announced that their service was generally available starting today.

Greylock, Lux Capital and venture capitalist Lee Fixel, all of whom participated in the startup’s $11 million Series A in 2019, led the round with participation from new investor General Atlantic. The company has raised $54.4 million.

The two founders, CEO Martin Mao and CTO Rob Skillington, created the open source M3 monitoring project while they were working at Uber, and left in 2019 to launch Chronosphere, a startup based on that project. As Mao told me at the time of the A round, the company wanted to simplify the management of running the open source project:

“M3 itself is a fairly complex piece of technology to run. It is solving a fairly complex problem at large scale, and running it actually requires a decent amount of investment to run at large scale, so the first thing we’re doing is taking care of that management,” Mao said.

He said that the company spent most of last year iterating the product and working with beta customers, adding that they certainly benefited from building the commercial service on top of the open source project.

“I think we’re lucky that we have the foundation already from the open source project, but we really wanted to focus a lot on building a product on top of that technology and really have this product be differentiated, so that was most of the focus of 2020 for us,” he said.

Mao points out that he and Skillington weren’t looking for this new round of funding as they still had money left from the A round, but the company’s previous investors approached them and they decided to strike to add additional money to the balance sheet, which would help grow the company, attract employees and help reassure customers they had plenty of capital to continue building the product and the company.

As the company has developed over the last year, it has been adding employees at a rapid clip, growing from 13 at the time of the A round in 2019 to 50 today with plans to double that by the end of next year. Mao says the founders have been thinking about how to build a diverse company from its early days.

“So […] beginning last year we were making sure we were hiring the right leaders, and the right recruiting team who also care about diversity, then following that we made company-wide goals and targets for both gender and ethnic diversity, and then [we have been] holding ourselves accountable on these particular goals and tracking against them,” Mao said.

The company has been spread out from the beginning, even before COVID, with offices in Seattle, New York and Lithuania, and that has helped in terms of having a broader base to recruit from. Mao wants to remain mostly remote whenever it’s possible to return to the office, but maintain hubs on each coast where employees can meet and see each other in person.

With the product generally available today, the company will look to expand its customer base, and with the open source project to drive interest, they have a proven way to attract new customers to the commercial product.


By Ron Miller

Salesforce has built a deep bench of executive talent via acquisition

When Salesforce acquired Quip in 2016 for $750 million, it gained CEO and co-founder Bret Taylor as part of the deal. Taylor has since risen quickly through the ranks of the software giant to become president and COO, second in command behind CEO Marc Benioff. Taylor’s experience shows that startup founders can sometimes play a key role in the companies that acquire them.

Benioff, 56, has been running Salesforce since its founding more than 20 years ago. While he hasn’t given any public hints that he intends to leave anytime soon, if he wanted to step back from the day-to-day running of the company or even job share the role, he has a deep bench of executive talent including many experienced CEOs, who like Taylor came to the company via acquisition.

One way to step back from the enormous responsibility of running Salesforce would be by sharing the role.

He and his wife Lynne have been active in charitable giving and in 2016 signed The Giving Pledge, an initiative from the The Bill and Melinda Gates Foundation, to give a majority of their wealth to philanthropy. One could see him wanting to put more time into pursuing these charitable endeavors just as Gates did 20 years ago. As a means of comparison, Gates founded Microsoft in 1975 and stayed for 25 years until he left in 2000 to run his charitable foundation full time.

Even if this remains purely speculative for the moment, there is a group of people behind him with deep industry experience, who could be well-suited to take over should the time ever come.

Resurrecting the co-CEO role

One way to step back from the enormous responsibility of running Salesforce would be by sharing the role. In fact, for more than a year starting in 2018, Benioff actually shared the top job with Keith Block until his departure last year. When they worked together, the arrangement seemed to work out just fine with Block dealing with many larger customers and helping the software giant reach its $20 billion revenue goal.

Before Block became co-CEO, he had a myriad other high-level titles including co-chairman, president and COO — two of which, by the way, Taylor has today. That was a lot of responsibility for one person inside a company the size of Salesforce, but promoting him to co-CEO from COO gave the company a way to reward his hard work and help keep him from jumping ship (he eventually did anyway).

As Holger Mueller, an analyst at Constellation Research points out, the co-CEO concept has worked out well at major enterprise companies that have tried it in the past, and it helped with continuity. “Salesforce, SAP and Oracle all didn’t miss a beat really with the co-CEO departures,” he said.

If Benioff wanted to go back to the shared responsibility model and take some work off his plate, making Taylor (or someone else) co-CEO would be one way to achieve that. Certainly, Brent Leary, lead analyst at CRM Essentials sees Taylor gaining increasing responsibility as time goes along, giving credence to the idea.

“Ever since Quip was acquired Taylor seemed to be on the fast track, becoming president and chief product officer less than a year-and-a-half after the acquisition, and then two years later being promoted to chief operating officer,” Leary said.

Who else could be in line?

While Taylor isn’t the only person who could step into Benioff’s shoes, he looks like he has the best shot at the moment, especially in light of the $27.7 billion Slack deal he helped deliver earlier this month.

“Taylor being publicly praised by Benioff for playing a significant role in the Slack acquisition, Salesforce’s largest acquisition to date, shows how much he has solidified his place at the highest levels of influence and decision-making in the organization,” Leary pointed out.

But Mueller posits that his rapid promotions could also show something might be lacking with internal options, especially around product. “Taylor is a great, smart guy, but his rise shows more the product organization bench depth challenges that Salesforce has,” he said.


By Ron Miller

Looking ahead after 2020’s epic M&A spree

When we examine any year in enterprise M&A, it’s tempting to highlight the biggest, gaudiest deals — and there were plenty of those in 2020. I’ve written about 34 acquisitions so far this year. Of those, 15 were worth $1 billion or more, 12 were small enough to not require that the companies disclose the price and the remainder fell somewhere in between.

Four deals involving chip companies coming together totaled over $100 billion on their own. While nobody does eye-popping M&A quite like the chip industry, other sectors also offered their own eyebrow-raising deals, led by Salesforce buying Slack earlier this month for $27.7 billion.

We are likely to see more industries consolidate the way chips did in 2020, albeit probably not quite as dramatically or expensively.

Yet in spite of the drama of these larger numbers, the most interesting targets to me were the pandemic-driven smaller deals that started popping up in May. Those small acquisitions are the ones that are so insignificant that the company doesn’t have to share the purchase price publicly. They usually involve early-stage companies being absorbed by cash-rich concerns looking for some combination of missing technology or engineering talent in a particular area like security or artificial intelligence.

It was certainly an active year in M&A, and we still might not have seen the last of it. Let’s have a look at why those minor deals were so interesting and how they compared with larger ones, while looking ahead to what 2021 M&A might look like.

Early-stage blues

It’s always hard to know exactly why an early-stage startup would give up its independence by selling to a larger entity, but we can certainly speculate on some of the reasons why this year’s rapid-fire dealing started in May. While we can never know for certain why these companies decided to exit via acquisition, we know that in April, the pandemic hit full force in the United States and the economy began to shut down.

Some startups were particularly vulnerable, especially companies low on cash in the April timeframe. Obviously companies fail when they run out of funding, and we started seeing early-stage startups being scooped up the following month.

We don’t know for sure of course if there is a direct correlation between April’s economic woes and the flurry of deals that started in May, but we can reasonably speculate that there was. For some percentage of them, I’m guessing it was a fire sale or at least a deal made under less than ideal terms. For others, maybe they simply didn’t have the wherewithal to keep going under such adverse economic conditions or the partnerships were just too good to pass up.

It’s worth noting that I didn’t cover any deals in April. But, beginning on May 7, Zoom bought Keybase for its encryption expertise; five days later Atlassian bought Halp for Slack integration; and the day after that VMware bought cloud native security startup Octarine — and we were off and running. Granted the big companies benefited from making these acquisitions, but the timing stood out.


By Ron Miller

IBM snags Nordcloud to add multi-cloud consulting expertise

IBM has been busy since it announced plans to spin out its legacy infrastructure management business in October, placing an all-in bet on the hybrid cloud. Today, it built on that bet by acquiring Helsinki-based multi-cloud consulting firm Nordcloud. The companies did not share the purchase price.

Nordcloud fits neatly into this strategy with 500 consultants certified in AWS, Azure and Google Cloud Platform; giving the company a trained staff of experts to help as they move away from an IBM -centric solution to choosing to work with the customer however they wish to implement their cloud strategy.

This hybrid approach harkens back to the $34 billion Red Hat acquisition in 2018, which is really the lynchpin for this approach, as CEO Arvind Krishna told CNBC’s Jon Fortt in an interview last month. Krishna is in the midst of trying to completely transform his organization, and acquisitions like this are meant to speed up that process.

“The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.”

John Granger, senior vice president for cloud application innovation and COO for IBM Global Business Services says that IBM’s customers are increasingly looking for help managing resources across multiple vendors, as well as on premises.

“IBM’s acquisition of Nordcloud adds the kind of deep expertise that will drive our clients’ digital transformations as well as support the further adoption of IBM’s hybrid cloud platform. Nordcloud’s cloud-native tools, methodologies and talent send a strong signal that IBM is committed to deliver our clients’ successful journey to cloud,” Granger said in a statement.

After the deal closes, which is expected in the first quarter next year subject to typical regulatory approvals, Nordcloud will become an IBM company and operate to help continue this strategy.

It’s worth noting that this deal comes on the heels several other small recent deals including acquiring Expertus last week and Truqua and Instana last month. These three companies provide expertise in digital payments, SAP consulting and hybrid cloud applications performance monitoring respectively.

Nordcloud, which is based in Helsinki with offices in Amsterdam, was founded 2011 and raised over $26 million, according to Pitchbook data.

 


By Ron Miller

Thoma Bravo to acquire RealPage property management platform for $10.2B

The busy year in M&A continued this weekend when private equity firm Thoma Bravo announced it was acquiring RealPage for $10.2B.

In RealPage, Thoma Bravo is getting a full-service property management platform with services like renter portals, site management, expense management and financial analysis for building and property owners. Orlando Bravo, Founder and a Managing Partner of Thoma Bravo sees a company that they can work with and build on its previous track record.

“RealPage’s industry leading platform is critical to the real estate ecosystem and has tremendous potential going forward,” Bravo said in a statement.

As for RealPage, company CEO Steve Winn, who will remain with the company, sees the deal as a big win for stock holders, while giving them the ability to keep investing in the product. “This will enhance our ability to focus on executing our long-term strategy and delivering even better products and services to our clients and partners,”  Winn said in a statement.

RealPage, which was founded in 1998 and went public in 2010, is a typical kind of mature platform that a private equity firm like Thoma Bravo is attracted to. It has a strong customer base with over 12,000 customers and respectable revenue, growing at a modest pace. In its most recent earnings statement, the company announced $298.1 million in revenue, up 17% year over year. That puts it on a run rate of over $1 billion.

Under the terms of the deal, Thoma Bravo will pay RealPage stockholders $88.75 in cash per share. That is a premium of more 30% over the $67.83 closing price on December 18th. The transaction is subject to standard regulatory review, and the RealPage board will have a 45-day “go shop” window to see if it can find a better price. Given the premium pricing on this deal, that isn’t likely, but it will have the opportunity to try.


By Ron Miller