M&A
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Last week, another container security startup came off the board when Rapid7 bought Alcide for $50 million. The purchase is part of a broader trend in which larger companies are buying up cloud-native security startups at a rapid clip. But why is there so much M&A action in this space now?
Palo Alto Networks was first to the punch, grabbing Twistlock for $410 million in May 2019. VMware struck a year later, snaring Octarine. Cisco followed with PortShift in October and Red Hat snagged StackRox last month before the Rapid7 response last week.
This is partly because many companies chose to become cloud-native more quickly during the pandemic. This has created a sharper focus on security, but it would be a mistake to attribute the acquisition wave strictly to COVID-19, as companies were shifting in this direction pre-pandemic.
It’s also important to note that security startups that cover a niche like container security often reach market saturation faster than companies with broader coverage because customers often want to consolidate on a single platform, rather than dealing with a fragmented set of vendors and figuring out how to make them all work together.
Containers provide a way to deliver software by breaking down a large application into discrete pieces known as microservices. These are packaged and delivered in containers. Kubernetes provides the orchestration layer, determining when to deliver the container and when to shut it down.
This level of automation presents a security challenge, making sure the containers are configured correctly and not vulnerable to hackers. With myriad switches this isn’t easy, and it’s made even more challenging by the ephemeral nature of the containers themselves.
Yoav Leitersdorf, managing partner at YL Ventures, an Israeli investment firm specializing in security startups, says these challenges are driving interest in container startups from large companies. “The acquisitions we are seeing now are filling gaps in the portfolio of security capabilities offered by the larger companies,” he said.
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Automattic, the for-profit company tied to open-source web publishing platform WordPress, is announcing that it has acquired analytics provider Parse.ly.
Specifically, Parse.ly is now part of WPVIP, the organization within Automattic that offers enterprise hosting and support to publishers, including TechCrunch. (We use Parse.ly, too.)
WPVIP CEO Nick Gernert described this as the organization’s first large enterprise software acquisition, reflecting a strategy that has expanded beyond news and media organizations — businesses like Salesforce (whose venture arm invested $300 million in Automattic back in 2019), the NBA, Condé Nast, Facebook and Microsoft now use WPVIP for their content and marketing needs.
Both companies, Gernert said, come from similar backgrounds, with “roots” in digital publishing and a “heavy focus on understanding the impact of content.”
“We’ve really started to shift more towards content marketing and starting to think more deeply beyond just what traditional page analytics provide,” he continued. That means doing more than measuring pageviews and time on site and “really starting to look more deeply at things like conversation, attribution, areas … that from a marketer’s perspective are impactful.”
WordPress and Parse.ly already work well together, but the plan is to make WPVIP features available to Parse.ly customers while also making more Parse.ly data available to WPVIP publishers. And Gernert said there are also opportunities to add more commerce-related data to Parse.ly, since Automattic also owns WooCommerce.
The goal, he said, is to “make Parse.ly better for WordPress and best for WPVIP.”
At the same time, he added, “There’s no plans here to make Parse.ly the only analytics solution that runs on our platform. We want to preserve the flexibility and interoperability [of WordPress], and we want to make sure from a Parse.ly perspective that it still exists as a standalone product. That’s key to its future and we will continue to invest in it.”
Parse.ly was founded in 2009 and has raised $12.9 million in funding from investors including Grotech Ventures and Blumberg Capital, according to Crunchbase. Parse.ly founders Sachin Kamdar and Andrew Montalenti are joining WPVIP, with Kamdar leading go-to-market strategy for Parse.ly and Montalenti leading product.
“We’ve always had deep admiration for WPVIP’s market position as the gold standard for enterprise content teams, and we’re thrilled to be able to join together,” Kamdar said in a statement. “From the culture and people, to the product, market and vision, we’re in lockstep to create more value for our customers. This powerful combination of content and intelligence will push the industry forward at an accelerated pace.”
The financial terms of the acquisition were not disclosed.
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Box announced this morning that it has agreed to acquire e-signature startup SignRequest for $55 million. The acquisition gives the company a native signature component it has been lacking and opens up new workflows for the company.
Box CEO Aaron Levie says the company has seen increased demand from customers to digitize more of their workflows, and this acquisition is about giving them a signature component right inside Box that will be known as Box Sign moving forward. “With Box Sign, customers can have a seamless e-signature experience right where their content already lives,” Levie told me.
While Box has partnerships with other e-signature vendors, this gives it one to call its own, one that will be built into Box starting this summer. As we have learned during this pandemic, the more work we can do remotely, the safer it is. Even after the pandemic ends and we get back to more face-to-face interactions, being able to do things fully in the cloud and removing paper from the workflow will speed up everything.
“The massive push to remote work effectively instantly highlighted for every enterprise where their digital workflows were breaking down. And e-signature was a major part of that — too many industries still rely on paper-based processes,” he said.
Levie says that the signature component has been a key missing piece from the platform. “As for our platform, when you look at Snowflake, they’re the data cloud. Salesforce is the sales cloud. Adobe is the marketing cloud. We want to build the content cloud. Imagine one platform that can power the entire lifecycle of content. E-signature has been a major missing link for critical workflows,” he said.
He believes this will open up the platform for a number of scenarios, that while possible before, could not flow as easily between Box components. “Having SignRequest gets us more natively into mission-critical workflows like customer contracts, vendor onboarding, healthcare onboarding and supply chain collaboration,” Levie explained.
It’s worth noting that Dropbox acquired HelloSign for $230 million two years ago to provide it with a similar kind of functionality and workflow capability, but analyst Alan Pelz-Sharpe from Deep Analysis, a firm that follows the content management market, says this wasn’t really in reaction to that.
“I think what is interesting here is that Box is going to integrate SignRequest and bundle it as part of the standard service. That’s what really caught my eye as the challenge with e-sig is that it’s typically a separate product and so gets limited use. They bought it partly in response to Dropbox, but it was a hole that needed fixing regardless so would have done so anyway,” Pelz-Sharpe explained.
As for SignRequest, the company was founded in the Netherlands in 2014. Neither PitchBook nor Crunchbase has a record of it raising funds. The plan is for the company’s employees to join Box and help build the signature component that will become Box Sign. According to a message to customers on the company website, existing customers will have the opportunity over the next year to move to Box Sign, and get all of the other components of the Box platform.
Levie says the basic Box Sign function will be built into the platform at no additional charge, but there will be more advanced features coming that they could charge for. The deal is expected to close soon with the SignRequest team remaining in The Netherlands.
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Boston-based security operations company Rapid7 has been making moves into the cloud recently, and this morning it announced that it has acquired Kubernetes security startup Alcide for $50 million.
As the world shifts to cloud native using Kubernetes to manage containerized workloads, it’s tricky ensuring that the containers are configured correctly to keep them safe. What’s more, Kubernetes is designed to automate the management of containers, taking humans out of the loop and making it even more imperative that the security protocols are applied in an automated fashion as well.
Brian Johnson, SVP of Cloud Security at Rapid7 says that this requires a specialized kind of security product and that’s why his company is buying Alcide. “Companies operating in the cloud need to be able to identify and respond to risk in real time, and looking at cloud infrastructure or containers independently simply doesn’t provide enough context to truly understand where you are vulnerable,” he explained.
“With the addition of Alcide, we can help organizations obtain comprehensive, unified visibility across their entire cloud infrastructure and cloud-native applications so that they can continue to rapidly innovate while still remaining secure,” he added.
Today’s purchase builds on the company’s acquisition of DivvyCloud last April for $145 million. That’s almost $200 million for the two companies that allow Rapid7 to help protect cloud workloads in a fairly broad way.
It’s also part of an industry trend with a number of Kubernetes security startups coming off the board in the last year as bigger companies look to enhance their container security chops by buying talent and technology. This includes VMware nabbing Octarine last May, Cisco getting PortShift in October and Red Hat buying StackRox last month.
Alcide was founded in 2016 in Tel Aviv, part of the active Israeli security startup scene. It raised about $12 million along the way, according to Crunchbase data.
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Workday started the work day with some big news today. It’s acquiring employee feedback platform Peakon for $700 million in cash.
One thing we have learned during the pandemic is that organizations need to find new ways to build stronger connections with their employees, and that’s precisely what Peakon provides. “Bringing Peakon into the Workday family will be very compelling to our customers — especially following an extraordinary past year that has magnified the importance of having a constant pulse on employee sentiment in order to keep people engaged and productive,” Workday co-founder and co-CEO Aneel Bhusri, said in a statement.
Without the ability to have face-to-face meetings with employees, managers have struggled throughout 2020 to understand how COVID, working from home and all the trials and tribulations of the last year have affected the workforce.
But this ability to check the pulse of employees goes beyond this crisis period. Managers of large organizations know that the bigger and more spread out your firm becomes, the more challenging it is to understand what’s happening across the company. The company uses weekly surveys to ask specific questions about the organization. For them it’s all about getting good data, and so far customers have used the platform to ask over 153 million questions since inception six years ago.
Peakon CEO and co-founder Phil Chambers sees Workday as a logical partner. “Workday excels at helping enable customers to leverage their data. Together, we’ll be able to help drive greater productivity, talent development and employee retention for our customers — and unify how employees interact with their organizations,” he said in a Workday blog post announcing the deal.
Peakon was founded in Copenhagen in 2014 and has raised $68 million along the way, according to Crunchbase data. Its most recent round was a $35 million Series B in March 2019. The deal is expected to close by the end of this quarter subject to typical regulatory review.
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IAC has acquired Confide, the encrypted mobile messaging that once made headlines for its use by White House staffers during the Trump administration. The deal, which closed on Dec. 1, 2020 but was not publicly announced, sees Confide joining Teltech, the makers of spam call-busting app Robokiller, which itself had joined IAC’s Mosaic Group by way of a 2018 acquisition.
Teltech confirmed the Confide acquisition, but declined to share the deal terms. The confidential mobile messaging app had raised just $3.5 million in funding, according to Crunchbase data, and had been valued between $10 to $50 million, as a result. (Pitchbook put the valuation at ~$14 million around the same time.)
According to Teltech, the deal was for the Confide IP and technology, but not the team.
The company believes Confide makes for a good fit among its growing group of mobile communication apps, including Robokiller and its latest app, SwitchUp, which offers users a second phone number for additional privacy and spam blocking purposes. Other Teletech apps include phone call recorder TapeACall and blocked call unmasker TrapCall.
Confide, however, may end up being one of the better-known additions among that group, thanks to being remembered as a favored tool of choice among frustrated Washington Republicans during the Trump years.
But despite the user growth that news had driven, things slowed in the months that followed, when researchers published a report that claimed Confide wasn’t as secure as it had promised. Confide quickly fixed its vulnerabilities but then a month later was facing a class action lawsuit (later dismissed by the plaintiff) over the security issues.
Teltech says it was aware of the security concerns, but it had conversations with the prior Confide team and understands that the earlier issues had been “quickly and effectively remediated.”
While IAC won’t speak to its specific plans for Confide’s future, the app will continue to offer users a safe and secure way to communicate. What it won’t do, though, is try to directly compete with Telegram or other private apps that offer large channels or group chats that support tens of thousands of people at once.
“I think one kind of key differentiators is that Confide is definitely more for one-on-one and smaller group communication, rather than with Signal and Telegram where there’s some larger chat dynamics,” notes Giulia Porter, Teltech’s VP of Marketing. “One thing that makes us a little bit different is just that we’re more personal,” she says.
Despite having hit some bumps in the road over the years, Confide as of the time of the acquisition, still had around 100,000 monthly active users. There’s now a team of around 10 assigned to work on the app, adding needed resources to its further development, and soon, an updated logo and branding.
Confide’s existing desktop and mobile apps will also continue to be available, but later updated with new features as part of Teltech’s efforts.
Investors and IAC alike have declined to talk about deal price, but that may speak for itself.
“With the absolute explosion in privacy over the past several years, Confide, which started as a side project, has become a mission-critical platform for sensitive communication throughout the world,” said Confide co-founder and President Jon Brod, in a statement shared with TechCrunch about Confide’s exit.
“We’re thrilled that IAC shares our passion for secure communication and recognizes the unique business we have built. IAC has a proven track record of providing fast-growing companies with the support to reach their full potential and we are excited to see IAC take Confide to the next level,” he said.
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Rumors have been flying this week that SAP was going to buy Berlin business process automation startup Signavio, and sure enough the company made it official today. The companies did not reveal the purchase price, but Bloomberg reported earlier this week that the deal could be worth $1.2 billion.
With Signavio SAP gets a cloud-native business process management tool. SAP CFO Luka Mucic sees a world where understanding and automating businesses processes has become a key part of a company’s digital transformation efforts.
“I cannot overstress the importance for companies to be able to design, benchmark, improve and transform business processes across the enterprise to support new capabilities and business models,” he said in a statement.
While traditional enterprise BPA tools have existed for years, having a cloud-native tool gives SAP a much more modern approach to attacking this problem, and being able to automate business processes via the cloud has become more important during the pandemic when many employees are working entirely from home.
SAP also sees Signavio as a key missing piece in the company’s business process intelligence unit. “The combination of business process intelligence from SAP and Signavio creates a leading end-to-end business process transformation suite to help our customers achieve the requirements needed to gain a competitive edge,” he said.
SAP has been making moves into process automation of late. In fact at SAP TechEd in December, the company announced SAP Intelligent Robotic Process Automation, its foray into the RPA space. This should fit in nicely alongside it.
Dr. Gero Decker, Savigno co-founder and CEO, sees SAP resources helping push the company beyond what it could have done on its own. “Considering the positioning of SAP, its geographical coverage and financial muscle, SAP is the biggest and best platform to bring process intelligence to every organization,” he said in a statement.
The increased resources and reach argument is one that just about every acquired company CEO makes, but being pulled into a company the size of SAP can be a double-edged sword. Yes, it has vast resources, but it also can be hard for an acquired company to find its place in such a large pond. How well they fit in and make that transition from startup to big company cog, will go a long way in determining the success of this transaction in the long run.
Signavio launched in 2009 in Berlin and has raised almost $230 million, according to Crunchbase data. Investors include Apax Digital and Summit Partners. The most recent investment was a July 2019 Series C for $177 million, which came in at a $400 million valuation.
Customers include Comcast, Bosch, Liberty Mutual and yes SAP. Perhaps it will be getting a discount now.
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Bloomreach, an API company that helps eCommerce customers with search and web site creation, announced a $150 million investment today from Sixth Street Growth. Today’s funding values the company at $900 million.
At the same time, the company announced it has acquired Exponea, a startup that gives Bloomreach a marketing automation component it had been missing. The two companies did not reveal the acquisition price, but along with the pure functionality, the company gains 200 additional employees, which is significant, considering Bloomreach had 300 prior to the acquisition. It also gains 250 net new customers, giving it a total of 750.
“Historically, we have had two major pillars of the business — the search part of it and the content part,” Bloomreach CEO and co-Founder Raj De Datta told TechCrunch. The content management component lets customers build websites, while the search powers the search box, navigation and merchandising. He points out that all of it is powered by an underlying data analysis engine that matches data to people and people to products.
Exponea will give the company more of a complete platform of services, allowing marketers to target and personalize their marketing messages across multiple channels. De Datta says the two companies had similar missions and made a good fit. “We have a common vision and common sort of product direction. […] Both companies are data-driven optimization technologies[…] and both are entrepreneurial product-driven companies,” he said.
It also helped that they had been partnering together for six months prior to the sale, which has now closed. Exponea was founded in 2016 in Slovakia and has raised over $57 million, according to Pitchbook data. The plan is to leave Exponea as a stand-alone product, while finding ways to integrate it more smoothly with the other components in the Bloomreach platform. They expect the integration parts to happen over the next year.
While De Datta did not want to share specific revenue figures, he did say that the company had a record second half as business was pushed online due to the pandemic. Michael McGinn, partner at Sixth Street and co-head at investor Sixth Street Growth doesn’t see the demand for eCommerce abating, even post-COVID, and that will drive a need for more customized online shopping experiences.
“Technology serving more bespoke customer experiences is a rapidly expanding market and we are pleased to join Bloomreach in its leadership of the digital commerce experience and marketing sector,” McGinn said in a statement.
De Datta says the money was used in part to buy Exponea, but he also plans to invest more in engineering to continue building the product line. The ultimate goal is an IPO, but as you would expect, he wasn’t ready to commit to any timeline just yet.
“I wouldn’t say we have a timeline, but our goal is that the company over the course of 2021 should make investments towards that, so that it’s an option for us.”
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Twenty years ago Drupal and Acquia founder Dries Buytaert was a college student at the University of Antwerp. He wanted to put his burgeoning programming skills to work by building a communications tool for his dorm. That simple idea evolved over time into the open-source Drupal web content management system, and eventually a commercial company called Acquia built on top of it.
Buytaert would later raise over $180 million and exit in 2019 when the company was acquired by Vista Equity Partners for $1 billion, but it took 18 years of hard work to reach that point.
When Drupal came along in the early 2000s, it wasn’t the only open-source option, but it was part of a major movement toward giving companies options by democratizing web content management.
Many startups are built on open source today, but back in the early 2000s, there were only a few trail blazers and none that had taken the path that Acquia took. Buytaert and his co-founders decided to reduce the complexity of configuring a Drupal installation by building a hosted cloud service.
That seems like a no-brainer now, but consider at the time in 2009, AWS was still a fledgling side project at Amazon, not the $45 billion behemoth it is today. In 2021, building a startup on top of an open-source project with a SaaS version is a proven and common strategy. Back then nobody else had done it. As it turned out, taking the path less traveled worked out well for Acquia.
Moving from dorm room to billion-dollar exit is the dream of every startup founder. Buytaert got there by being bold, working hard and thinking big. His story is compelling, but it also offers lessons for startup founders who also want to build something big.
In the days before everyone had internet access and a phone in their pockets, Buytaert simply wanted to build a way for him and his friends to communicate in a centralized way. “I wanted to build kind of an internal message board really to communicate with the other people in the dorm, and it was literally talking about things like ‘Hey, let’s grab a drink at 8:00,’” Buytaert told me.
He also wanted to hone his programming skills. “At the same time I wanted to learn about PHP and MySQL, which at the time were emerging technologies, and so I figured I would spend a few evenings putting together a basic message board using PHP and MySQL, so that I could learn about these technologies, and then actually have something that we could use.”
The resulting product served its purpose well, but when graduation beckoned, Buytaert realized if he unplugged his PC and moved on, the community he had built would die. At that point, he decided to move the site to the public internet and named it drop.org, which was actually an accident. Originally, he meant to register dorp.org because “dorp” is Dutch for “village or small community,” but he mistakenly inverted the letters during registration.
Buytaert continued adding features to drop.org like diaries (a precursor to blogging) and RSS feeds. Eventually, he came up with the idea of open-sourcing the software that ran the site, calling it Drupal.
About the same time Buytaert was developing the basis of what would become Drupal, web content management (WCM) was a fresh market. Early websites had been fairly simple and straightforward, but they were growing more complex in the late 90s and a bunch of startups were trying to solve the problem of managing them. Buytaert likely didn’t know it, but there was an industry waiting for an open-source tool like Drupal.
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Fyllo has acquired DataOwl, a company offering marketing and loyalty tools for cannabis retailers.
Fyllo said it already works with 320 cannabis retailers across 25 states (plus Puerto Rico and Jamaica). According to Chief Marketing Officer Conrad Lisco, this acquisition allows the company to offer the industry’s “first end-to-end marketing solution,” combining consumer data, digital advertising, regulatory compliance (thanks to Fyllo’s acquisition of CannaRegs last year) and, through DataOwl, CRM and loyalty tied into a business’ point-of-sale system.
As an example, founder and CEO Chad Bronstein (previously the chief revenue officer at digital marketing company Amobee) said that retailers will be able to use the Fyllo platform to send promotional texts to regular customers while, crucially, ensuring those campaigns are fully in compliance with state and local regulations. He added that eventually, the platform could be used beyond cannabis, in other regulated industries.
“Beauty, gambling, etc. — the same things need to happen in every regulated industry, they would all benefit from loyalty and compliance automation,” Bronstein said.
In addition, he argued that mainstream brands are increasingly interested in using data around cannabis and CBD consumers, as borne out in a Forrester study commissioned by Fyllo.
Lisco said this acquisition comes at a crucial time for the cannabis industry, with dispensaries classified as essential businesses in many states, as well as continuing momentum behind marijuana legalization.
“In 2020, cannabis came of age,” he said. “We would say it went from illicit to essential in 10 months … 2021 is really about watching endemic [marijuana] brands try to scale, so that they can capitalize on the explosive growth. They’ve historically been excluded from the kinds of integrated marketing capabilities that other non-endemic [mainstream] brands get to use when they go to market.”
Bronstein said Fyllo aims to bring those capabilities to marijuana brands, first by bringing its compliance capabilities into the DataOwl product. The company also aims to create a national cannabis loyalty platform, allowing a marijuana retailer in one state to easily expand its marketing capabilities into other states in a compliant fashion.
The financial terms of the acquisition were not disclosed. DataOwl co-founders Dan Hirsch and Vartan Arabyan are joining Fyllo, as is the rest of their team, bringing the company’s total headcount to 110.
“By integrating with Fyllo, DataOwl’s solutions will reach the widest possible audience via the industry’s most innovative marketing platform,” Hirsch said in a statement.
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