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FTC sues to block P&G’s acquisition of Billie, a razor startup for women
The Federal Trade Commission has sued to block Procter & Gamble’s acquisition of Billie, a NY-based startup that sells razors and body wash.
In the notice, the FTC alleged that the merger would “eliminate innovative nascent competitors for wet shave razors” to the loss of consumers.
Billie was founded in 2017 with the goal of fighting the “pink tax” on goods marketed to women, including razors and body wash. It went up against companies like P&G and Edgewell Personal Care by offering high-quality and cheap razors. The company announced its intent to be acquired by P&G after raising just $35 million in venture capital in June.
“As its sales grew, Billie was likely to expand into brick-and-mortar stores, posing a serious threat to P&G. If P&G can snuff out Billie’s rapid competitive growth, consumers will likely face higher prices,” Ian Conner, director of the FTC’s Bureau of Competition said in a statement.
P&G has been on a buying spree as of late. Along with the Billie news, Procter & Gamble acquired Walker & Company, which created Bevel, a grooming line for men of color, and Form, a hair-care line for women of color. In February 2019, P&G announced plans to acquire This is L, a feminine-care brand that sells tampons, pads and wipes.
If the FTC wins, this is another blow for direct-to-consumer brands on the base of competition dynamics. In May 2019, Edgewell Personal Care announced it intended to buy Harry’s, another direct-to-consumer shaving brand. In February 2020, the FTC filed a lawsuit to block the deal from happening, similarly citing how the deal would limit competition and innovation in the razor market.
Unlike Harry’s, Billie was bought before it broke into brick-and-mortar retail stores. If the deal doesn’t close, Billie lost precious time it could have used to expand into new locations and markets — and P&G will lose some of its competitive advantage in the women’s shaving world.
Harry’s and Billie’s blocks could negatively trickle down to hurt direct-to-consumer products looking at health and wellness more broadly.
Note that exit market isn’t as dull for all companies in the consumer packaged goods (CPG) world. We’ve seen deals close like Blue Bunny’s buy of Halo Top, Mars’ acquisition of Kind Bars and, of course, Unilever’s $1 billion acquisition of Dollar Shave Club.
Andrea Hernández, a founder and consultant on food and beverage CPG, says that DTC companies often need to partner with mega-businesses to get the distribution scale they need, focusing more on omni-channel presence versus a single seller point.
“It’s very limited for these companies to scale at the same level and grow without incurring debt or needing constant injections of [money],” she said. “Or [you can go] the preferred route which is having BigDaddyCorp come whisk you away. You get a success story and the resources to continue your journey.”
That said, the coronavirus has even impacted food CPG companies by forcing them to slash SKUs (or stock keeping units) and prioritize essential goods. Whereas before, CPG companies might stock a variety of goods for a variety of customer needs, they’re now prioritizing a smaller slice of the pie to manage uncertainty among consumer behavior. Long-term, this means that CPGs might be buying fewer of the Billies and Harry’s of the world and just focusing on what’s working now.
Regardless of how this plays out, today’s news shows that the FTC is paying more attention than ever to consumer and tech.
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Uber sells air taxi business Elevate to Joby Aviation, shedding its last moonshot
Uber has offloaded its air taxi enterprise Elevate to Joby Aviation, the last of several moonshots to be sold by the ride-hailing company in a pursuit to stick to its core business and reach profitability.
The transaction announced Tuesday is part of a complex deal that includes Uber investing $75 million into Joby and an expanded partnership between the two companies. Last year, Uber and Joby, which is developing an all-electric, vertical take-off and landing passenger aircraft, signed on as a vehicle partner for Uber’s Elevate initiative. Joby was the first partner to commit to deploying air taxi services by 2023.
The $75 million investment comes in addition to a previously undisclosed $50 million investment made as part of Joby’s Series C financing round in January 2020, Uber said. To date, Joby Aviation has raised $820 million. Uber has invested a total of $125 million into the startup.
Under the deal, which is expected to close in early 2021, the two parent companies have agreed to integrate their respective services into each other’s apps.
“Advanced air mobility has the potential to be exponentially positive for the environment and future generations,” Uber CEO Dara Khosrowshahi said in a statement. “This deal allows us to deepen our partnership with Joby, the clear leader in this field, to accelerate the path to market for these technologies.”
While Joby is considered one of the leaders, Elevate did play a role in shaping the nascent industry, including establishing some of the benchmarks used by competitors.
“The team at Uber Elevate has not only played an important role in our industry, they have also developed a remarkable set of software tools that build on more than a decade of experience enabling on-demand mobility,” Joby Aviation CEO JoeBen Bevirt said in a statement.” These tools and new team members will be invaluable to us as we accelerate our plans for commercial launch.”
One year ago, Uber’s business model could be categorized as an “all of the above approach,” a strategy to generate revenue from all forms of transportation, including ride-hailing, micromobility, logistics and package and food delivery. The COVID-19 pandemic and Khosrowshahi’s focus on profitability prompted the company to dump its moonshots and double down on delivery with its acquisition of Postmates.
Today, Uber is a company focused on ride-hailing and delivery while keeping its hand in micromobility, logistics and autonomous vehicles through a series of deals struck in 2020.
The Joby-Elevate terms are similar to two other Uber deals this year. In the spring, Uber led a $170 million funding round in micromobility startup Lime. As part of the deal, Lime acquired Uber’s micromobility subsidiary Jump. The majority of Jump’s 400 employees were laid off. Earlier this week, autonomous vehicle startup Aurora Innovation reached an agreement with Uber to buy the ride-hailing firm’s self-driving unit in a complex deal that will value the combined company at $10 billion.
Just like Uber’s deals with Lime and now Joby, Aurora isn’t paying cash for Uber ATG, a company that was last valued at $7.25 billion. Instead, Uber is handing over its equity in ATG and investing $400 million into Aurora, which will give it a 26% stake in the combined company, according to a filing with the U.S. Securities and Exchange Commission.
Uber said in October that it sold off a $500 million stake in its Uber Freight business to an investor group led by New York-based investment firm Greenbriar Equity Group. The deal valued the unit at $3.3 billion on a post-money basis. Uber has maintained its majority stake in Uber Freight, unlike the Jump, Elevate and ATG deals.
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Why Slack and Salesforce execs think they’re better together
When Salesforce bought Slack earlier this week for $27.7 billion, it was in some ways the end of a startup fairytale. Slack was the living embodiment of the Silicon Valley startup success fantasy. It started as a pivot from a game company, of all things. It raised $1.4 billion, went from zero to a $7 billion valuation to IPO, checking off every box on the startup founder’s wish list.
Then quite suddenly this week, Slack was part of Salesforce, plucked off the market for an enormous sum of money.
While we might not ever know the back (Slack) room maneuvering that went on to make the deal a reality, it is interesting to note that Slack CEO Stewart Butterfield told me in an interview this week that he was not actually trying to sell the company when he approached Salesforce president and COO Bret Taylor earlier this year. Instead, he wanted to buy something from them.
“I actually talked to Bret in the early days of the pandemic to see if they wanted to sell us Quip because I thought it would be good for us, and I didn’t really know what their plans were [for it]. He said he’d get back to me, and then got back to me six months later or so,” Butterfield said.
At that point, the conversation flipped and the companies began a series of discussions that eventually led to Salesforce acquiring Slack.
Big money, big expectations
From the Salesforce perspective, Taylor says that the Slack deal was worth the money because it really allows his company to bring together all the pieces of their platform, one that has expanded over the years from pure CRM to include marketing, customer service, data visualization, workflow and more. Taylor also said that having Slack gives Salesforce a missing communication layer on top of its other products, something especially important when interactions with customers, partners or fellow employees have become mostly digital.
“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.
Butterfield sees a natural connection between what people do in the course of their work, what machines do behind the scenes in these systems of record and engagement and how Slack can help bridge the gap between humans and machines.
He says that by putting Slack in the middle of business processes, you can begin to eliminate friction that occurs in complex enterprise software like Salesforce. Instead of moving stuff through email, clicking a link, opening a browser, signing in and then finally accessing the tool you want, the approval could be built into a single Slack message.
“If you have hundreds of those kinds of actions a day, there’s a real opportunity to increase the velocity, and that has an impact, and not just in the minutes saved by the person doing the approval, but the speed of how the whole business operates,” Butterfield said.
Competing with Microsoft
While neither executive said the deal was about competing with Microsoft, it was likely an underlying reason that the companies decided to join forces. They may prove better together than they are separately, and both have complicated histories with Microsoft.
Slack has had an ongoing battle with Microsoft and its Teams product for years. It filed suit against the company last summer in the EU over what it called unfairly bundling of Teams for free with Office 365. In an interview last year with The Wall Street Journal, Butterfield said that he believes Microsoft sees his company as an existential threat. Hyperbole aside, there is tension and competition between the two enterprise software companies.
Salesforce and Microsoft also have a long history, from lawsuits in the early days to making friends and working together when it makes sense after Satya Nadella took over in 2014, while still competing hard in the market. It’s hard not to see the deal in that context.
In a recent interview with TechCrunch, Battery Ventures general partner Neeraj Agrawal said the deal was at least partially about catching Microsoft.
“To get to a market cap of $1 trillion, Salesforce now has to take MSFT head on. Until now, the company has mostly been able to stay in its own swim lane in terms of products,” Agrawal told TechCrunch.
As for Butterfield, while he saw the obvious competition, he denied the deal was about putting his company in a better position to compete with his rival.
“I don’t think that was really an important part of the rationale, at least for me,” he said, adding “the competition with Microsoft is overblown. The challenge for us was the narrative. They’re just good PR or something that I couldn’t figure out,” he said.
While Butterfield cited a list of large clients in enterprise tech, insurance and banking, the narrative has always been that Slack was favored by developer teams, which is where it initially gained traction. Whatever the reality, with Salesforce, Slack is definitely in a better position to compete with any and all comers in the enterprise communications space, and while it will be part of Salesforce, the two companies also have to figure out how to maintain some separation.
Keeping Slack independent
Taylor certainly recognizes that Slack’s current customers are watching closely to see how they handle the acquisition, and his company will have to walk a fine line between respecting the brand and product independence on one hand, while finding ways to create and build upon existing hooks into Salesforce to allow the CRM giant to take full advantage of its substantial investment.
It won’t be easy to do, but you can see a similar level of independence in some of Salesforce’s recent big-money purchases like MuleSoft, the company it bought in 2018 for $6.5 billion, and Tableau, the company it bought last year for more than $15 billion. As Butterfield points out, those two companies have clearly maintained their brand identity and independence, and he sees them as role models for Slack.
“So there’s a layer of independence that’s like that [for Mulesoft and Tableau] because it’s not going to help anyone call us Chat Cloud or something like that. They paid a lot of money for us, so they want us to do more of what we were already doing,” he said.
Taylor, whose opinion matters greatly here, certainly sees it in similar terms.
“We want to make sure we have a real integrated value proposition, a real integrated platform for developers, but also maintain Slack’s technology independence, technology agnostic platform and its brand,” he said.
Better together
As for the companies coming together, both men see a lot of potential here to merge Slack communications with Salesforce’s enterprise software prowess to make something better, and Taylor sees Slack helping link the two with workflows and automations.
“When you think about automation, it’s event driven, these long-running processes, automations. If you look at what people are doing with the Slack platform, it’s essentially incorporating workflows and bots and all these things. The combination of the Salesforce platform where I think we have the best automation intelligence capabilities with the Slack platform is incredible,” Taylor said.
The challenge these two men now face as they move forward with this acquisition, and all of the expectations inherent in a deal this large, is making it work. Salesforce has a lot of experience with large acquisitions, and they have handled some well, and some not so well. It’s going to be imperative for both companies that they get this right. It’s now up to Taylor and Butterfield to make sure that happens.
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Thoma Bravo acquires Flexera for second time paying $2.85B
Thoma Bravo must really like Flexera, an IT asset management company out of Chicago. The private equity firm bought the company for the second time today. Sources told TechCrunch the price was $2.85 billion.
Technically, Thoma Bravo is getting a majority stake in the company, buying it from previous owners TA Associates and Ontario Teachers’ Pension Plan Board. The firm originally bought Flexera in 2008 from Macrovision for just $200 million. It turned it around just three years later in 2011 for $1 billion profit, according to reports.
While reports last year had the company’s investors looking for $3 billion, they didn’t quite reach that mark, but it’s still a hefty profit as the company continues to change hands, giving each of its owners a substantial return on investment.
At $2.85 billion, Thoma Bravo will have a bigger challenge on its hands to make that same kind of return, but it sees a company it liked before and it still likes it, especially the management team, which to some degree at least remains intact.
“Jim [Ryan] and his team have positioned Flexera for sustained growth by focusing on the strategic challenges enterprises face with complex IT infrastructures,” Seth Boro, managing partner at Thoma Bravo said in a statement.
Ryan was pleased to see the company’s value continue to rise and to connect once again with Thoma Bravo. “This is a resounding vote of confidence in the growth Flexera has shown and the strategic initiatives we’ve undertaken to address the exponential challenges faced by organizations today,” he said in a statement.
Flexera was founded in 2008 and has bought 12 companies along the way, including five in the last couple of years, according to Crunchbase data. The deal is expected to close in the first quarter of next subject to regulatory approvals.
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VSCO acquires mobile app Trash to expand into AI-powered video editing
VSCO, the popular photo and video editing app, today announced it has acquired AI-powered video editing app Trash, as the company pushes further into the video market. The deal will see Trash’s technology integrated into the VSCO app in the months ahead, with the goal of making it easier for users to creatively edit their videos.
Trash, which was co-founded by Hannah Donovan and Genevieve Patterson, cleverly uses artificial intelligence technology to analyze multiple video clips and identify the most interesting shots. It then stitches your clips together automatically to create a final product. In May, Trash added a feature called Styles that let users pick the type of video they wanted to make — like a recap, a narrative, a music video or something more artsy.
After Trash creates its AI-powered edit, users can opt to further tweak the footage using buttons on the screen that let them change the order of the clips, change filters, adjust the speed or swap the background music.
Image Credits: Trash
With the integration of Trash’s technology, VSCO envisions a way to make video editing even more approachable for newcomers, while still giving advanced users tools to dig in and do more edits, if they choose. As VSCO co-founder and CEO Joel Flory explains, it helps users get from that “point zero of staring at their Camera Roll…to actually putting something together as fast as possible.”
“Trash gets you to the starting point, but then you can dive into it and tweak [your video] to really make it your own,” he says.
The first feature to launch from the acquisition will be support for multi-clip video editing, expected in a few months. Over time, VSCO expects to roll out more of Trash’s technologies to its user base. As users make their video edits, they may also be able to save their collection of tweaks as “recipes,” like VSCO currently supports for photos.
“Trash brings to VSCO a deep level of personalization, machine learning and computer vision capabilities for mobile that we believe can power all aspects of creation on VSCO, both now and for future investments in creativity,” says Flory.
The acquisition is the latest in a series of moves VSCO has made to expand its video capabilities.
At the end of 2019, VSCO picked up video technology startup Rylo. A few months later, it had leveraged the investment to debut Montage, a set of tools that allowed users to tell longer video stories using scenes, where they could also stack and layer videos, photos, colors and shapes to create a collage-like final product. The company also made a change to its app earlier this year to allow users to publish their videos to the main VSCO feed, which had previously only supported photos.
More recently, VSCO has added new video effects, like slowing down, speeding up or reversing clips and new video capture modes.
As with its other video features, the new technology integrations from Trash will be subscriber-only features.
Today, VSCO’s subscription plan costs $19.99 per year, and provides users with access to the app’s video editing capabilities. Currently, more than 2 million of VSCO’s 100 million+ registered users are paid subscribers. And, as a result of the cost-cutting measures and layoffs VSCO announced earlier this year, the company has now turned things around to become EBITDA positive in the second half of 2020. The company says it’s on the path to profitability, and additional video features like those from Trash will help.
Image Credits: Trash
VSCO’s newer focus on video isn’t just about supporting VSCO’s business model, however, it’s also about positioning the company for the future. While the app grew popular during the Instagram era, today’s younger users are more often posting videos to TikTok instead. According to Apple, TikTok was the No. 2 most downloaded free app of the year — ahead of Instagram, Facebook and Snapchat.
Though VSCO doesn’t necessarily envision itself as only a TikTok video prep tool, it does have to consider that growing market. Similar to TikTok, VSCO’s user base consists of a younger, Gen Z demographic; 75% of VSCO’s user base is under 25, for example, and 55% of its subscribers are also under 25. Combined, its user base creates more than 8 million photos and videos per day, VSCO says.
As a result of the acquisition, Trash’s standalone app will shut down on December 18.
Donovan will join VSCO as Director of Product and Patterson as Head of Applied Research. Other Trash team members, including Karina Bernacki, Chihyu Chang and Drew Olbrich, will join as Chief of Staff, Engineering Manager and Sr. Software Engineer for iOS, respectively.
“We both believe in the power of creativity to have a healthy and positive impact on people’s lives,” said Donovan, in Trash’s announcement. “Additionally, we have similar audiences of Gen Z casual creators; and are focused on giving people ways to express themselves and share their version of the world while feeling seen, safe, and supported,” she said.
Trash had raised a total of $3.3 million — a combination of venture capital and $500,000 in grants — from BBG, Betaworks, Precursor and Dream Machine, as well as the National Science Foundation. (Multiple TechCrunch connections here: BBG is backed by our owner Verizon Media, while Dream Machine is the fund created by former TechCrunch editor Alexia Bonatsos.)
“Han and Gen and the Trash team have always paid attention to the needs of creators first and foremost. My hope is that the VSCO and Trash partnership will turn all of us into creators, and turn the gigabytes of latent videos on our phones from trash to treasures,” said Bonatsos, in a statement about the deal.
Flory declined to speak to the deal price, but characterized the acquisition as a “win-win for both the Trash team and for VSCO.”
Updated 12/3/20, 11:27 AM ET: VSCO alerted us that Patterson’s title is being updated to “Head of Applied Research.” We’ve updated the article accordingly.
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Everyone has an opinion on the $27.7B Slack acquisition
When the Salesforce-Slack deal was officially announced on Tuesday afternoon, and the number appeared, it was kind of hard to believe. Salesforce had shelled out more than $27 billion to buy Slack and bring it into the Salesforce family of products. The company sees a key missing piece in Slack, and that could explain why it was willing to spend such an astonishing amount of money to get it.
With Slack, Salesforce now has what CEO Marc Benioff called the interface to everything, something he says that the company has thought about for years. In 2010, they tried building it themselves with Chatter, a social tool that never really caught on in a big way. With Slack they finally have it.
“We’ve always had the vision of the social enterprise at Salesforce for more than a decade. Oh, we’ve had Dreamforces entirely dedicated to the vision of what a collaborative interface, a high production interface with applications and an ecosystem would look like wrapped on top of our Customer 360,” Benioff said.
He added that ironically in a building right next door to Salesforce Park you’ll find Slack headquarters. They won’t have to go far to collaborate (or you know, they can just use Slack).
From Chatter to Slack
Neeraj Agrawal, general partner at Battery Ventures, says that Benioff has had an interest in enterprise social going back years, and this is his way of finally delivering. “Remember Chatter? Benioff was dead on with this trend. He lost Yammer to Microsoft (when Microsoft acquired it for $1.2 billion) about 7-8 years ago, and then launched Chatter. It was a huge bet, but didn’t work. Slack is really Chatter 2.0,” he said.
Chuck Ganapathi, CEO and co-founder at Tact.ai, was product lead on the Chatter product at Salesforce in the 2009 time frame. He wrote in a soon-to-be-published blog post he shared with TechCrunch that it failed for a lot of reasons, but mostly because at its core, Salesforce was still a bunch of database guys and enterprise social was a very different animal.
“Some of the issues were technical — Salesforce is a database-centric company, founded by Oracle alums on a relational DB foundation. DB applications and unstructured communication applications like Chatter or Slack represent completely different branches of computer science with little overlap,” he wrote. Because of that, he felt that they lacked the expertise to build the application correctly, and it never really caught on, with so many similar products in the market at the time.
But Benioff never lost interest in the concept of incorporating social into the Salesforce platform. It just took another 10 years or so and a bushel of money to make it happen.
A good match or not?
Leyla Seka, a partner at Operator Capital, who formerly ran the AppExchange at Salesforce, sees good things ahead with a combined Slack and Salesforce. “Salesforce and Slack together will offer a powerful duo of applications that will help companies work more effectively together. I think that COVID-19 has shown us how critical it is to get employees the data they need to do their job, but also the community they need to thrive at their job. The marriage of Salesforce and Slack promises to do just that,” Seka told me.
Brent Leary, principal analyst at CRM Essentials, was knocked out by the price tag, but says it shows that Salesforce is not afraid to go after what it wants, even if it has to pay a hefty price to get it. “This goes to show Salesforce has absolutely no fear in them when it comes to this deal. They are willing to throw down the big bucks on this acquisition because they see a huge payoff by adding this piece into their platform,” he said.
As for Slack, he sees it as a way for them to take the fast track to the enterprise big leagues. “And for Slack they go from competing with AMOSS (Adobe, Microsoft, Oracle, SAP, Salesforce) to joining one of them, and the company that really made the most sense for them to team up with,” he said.
Laurie McCabe, an analyst and founder at SMB Group, agrees with Leary’s take, saying Salesforce doesn’t hesitate when it thinks the value is there. “In this case, Slack gives them a strong collaboration offering that will help them compete more effectively against Microsoft’s growing cloud portfolio, which of course includes CRM and Teams,” she said.
Show me the money
Battery’s Agrawal believes this deal is all about generating revenue, and it was willing to pay a premium to move the needle in billion-dollar chunks. The end game he believes is about catching Microsoft, or at the very least getting to $1 trillion (with a T, folks) in market cap.
It’s worth noting that investors are not showing signs, initially at least, of liking this deal, with the stock down over 8% today and 16.5% since the rumor of Salesforce’s interest in Slack surfaced last week before the Thanksgiving holiday. That translates into more than $18 billion in lost market cap — probably not the reaction they were hoping for. But Salesforce is big enough that it can afford to play a long game, and reach its financial goals with the help of Slack.
“To get to a market cap of $1 trillion, Salesforce now has to take MSFT head on. Until now, the company has mostly been able to stay in its own swim lane in terms of products. […] To get to a trillion dollars in market cap, Salesforce needs to try to grow in two massive markets,” Agrawal said. Those would be either knowledge worker/desktop (see the 2016 Quip acquisition) or cloud (see the Hyperforce announcement). Agrawal says chances are the company’s best bet is the former, and it was willing to pay top dollar to get it.
“The deal will help Salesforce maintain a 20%+ growth rate over the next few years,” he said. Ultimately, he sees it moving the revenue needle, which should eventually drive market cap higher and help achieve those goals.
It’s worth noting that Salesforce president and CEO Bret Taylor said while they intend to integrate Slack deeply into the Salesforce product family, they recognize the power and utility of Slack as a standalone product and they don’t intend to do anything that would mess with that.
“Fundamentally, we want to make sure that Slack remains as a kind of technology-agnostic platform. We know that Slack is used by millions and millions of people every day to connect every tool under the sun. The most remarkable thing is just how many customers have also just integrated their own custom internal tools as well into this is really kind of the central nervous system for the teams that use it, and we would never want to change that,” he said.
It’s hard to judge a deal this large until we have some hindsight and see how well the two companies have meshed, how well they can incorporate Slack into the Salesforce ecosystem, while allowing that independence Taylor alluded to. If they can find a way to walk that line and Slack becomes that wrapper, that operating system, that glue that holds the Salesforce ecosystem together, it will be a good deal, but if Slack stops innovating and withers under the weight of its corporate overlords, then it might not be money well spent.
Time will tell which is the case.
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Salesforce buys Slack in a $27.7B megadeal
Salesforce, the CRM powerhouse that recently surpassed $20 billion in annual revenue, announced today it is wading deeper into enterprise social by acquiring Slack in a $27.7 billion megadeal. Rumors of a pending deal surfaced last week, causing Slack’s stock price to spike.
Salesforce co-founder and CEO Marc Benioff didn’t mince words on his latest purchase. “This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world,” Benioff said in a statement.
Slack CEO Stewart Butterfield was no less effusive than his future boss. “As software plays a more and more critical role in the performance of every organization, we share a vision of reduced complexity, increased power and flexibility, and ultimately a greater degree of alignment and organizational agility. Personally, I believe this is the most strategic combination in the history of software, and I can’t wait to get going,” Butterfield said in a statement.
Every worker at every company needs to communicate, something that Slack can ably empower. What’s more, it also facilitates external communication with customers and partners, something that should be quite useful for a company like Salesforce and its family of offerings.
Ultimately, Slack was ripe for the taking. Entering 2020 it had lost around 40% of its value since it went public. Consider that after its most recent earnings report, the company lost 16% of its value, and before the Salesforce deal leaked, the company was worth only a few dollars per share more than its direct listing reference price. Toss in net losses of $147.6 million during the two quarters ending July 31, 2020, Slack’s uninspiring public valuation and its winding path to profitability and it was a sitting target for a takeover like this one. The only surprise here is the price.
Slack’s current valuation, according to both Yahoo and Google Finance, is just over $25 billion, which, given its very modest price change after-hours means that the market priced the company somewhat effectively. Slack is up around 48% from its valuation that preceded the deal becoming known.
The new deal also puts Salesforce more on par — and in competition — with its arch rival and sometime friend Microsoft, whose Teams product has been directly challenging Slack in the market. Microsoft, which passed on buying Slack in the past for a fraction of what Salesforce is paying today, has made Teams a key priority in recent quarters, loathe to cede any portion of the enterprise software market to another company.
What really has set Slack apart from the pack, at least initially, was its ability to integrate with other enterprise software. When you combined that with bots, those intelligent digital helpers, the company could potentially provide Salesforce customers with a central place to work without changing focus because everything they need to do can be done in Slack.
Today’s deal comes after Salesforce’s purchase of Quip in 2016 for $750 million. Quip brought to the SaaS giant a way of socially sharing documents, and when paired with the Slack acquisition gives Salesforce a much more robust social story to tell than its internal option Chatter, an early attempt at enterprise social that never really caught on.
It’s worth noting that Salesforce was interested in Twitter in 2016, the same year that Microsoft was reportedly interested in Slack, but eventually walked away from that deal when shareholders objected, not wanting to deal with the controversial side of the social platform.
Slack was founded in 2013, but its origins go back to an online multiplayer game company called Glitch that was founded in 2009. While the game was ultimately a failure, the startup developed an internal messaging system in the process of building that company that later evolved into Slack.
The company’s historic growth helped Slack raise more than $1 billion while private, earning an impressive $7 billion valuation before going public last year. But while the Glitch-to-unicorn story appears simple, Slack has always faced entrenched competition from the likes of not only Microsoft, but also Cisco, Facebook, Google and even Asana and Monday.com.
For Slack, the path to the public markets was fraught with hype and outsized expectation. The company was famous, or as famous as an enterprise software company can be. At the time it felt like its debut was the start of a long tenure as an indie company. Instead, that public life has been cut short by a huge check. Such is the dog-eat-dog world of tech.
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Vista acquires Gainsight for $1.1B, adding to its growing enterprise arsenal
Vista Equity Partners hasn’t been shy about scooping up enterprise companies over the years, and today it added to a growing portfolio with its purchase of Gainsight. The company’s software helps clients with customer success, meaning it helps create a positive customer experience when they interact with your brand, making them more likely to come back and recommend you to others. Sources pegged the price tag at $1.1 billion.
As you might expect, both parties are putting a happy face on the deal, talking about how they can work together to grow Gainsight further. Certainly, other companies like Ping Identity seem to have benefited from joining forces with Vista. Being part of a well-capitalized firm allowed them to make some strategic investments along the way to eventually going public last year.
Gainsight and Vista are certainly hoping for a similar outcome in this case. Monti Saroya, co-head of the Vista Flagship Fund and senior managing director at the firm, sees a company with a lot of potential that could expand and grow with help from Vista’s consulting arm, which helps portfolio companies with different aspects of their business like sales, marketing and operations.
“We are excited to partner with the Gainsight team in its next phase of growth, helping the company to expand the category it has created and deliver even more solutions that drive retention and growth to businesses across the globe,” Saroya said in a statement.
Gainsight CEO Nick Mehta likes the idea of being part of Vista’s portfolio of enterprise companies, many of whom are using his company’s products.
“We’ve known Vista for years, since 24 of their portfolio companies use Gainsight. We’ve seen Gainsight clients like JAMF and Ping Identity partner with Vista and then go public. We believe we are just getting started with customer success, so we wanted the right partner for the long term and we’re excited to work with Vista on the next phase of our journey,” Mehta told TechCrunch.
Brent Leary, principle analyst at CRM Essentials, who covers the sales and marketing space, says that it appears that Vista is piecing together a sales and marketing platform that it could flip or go public in a few years.
“It’s not only the power that’s in the platform, it’s also the money. And Vista seems to be piecing together an engagement platform based on the acquisitions of Gainsight, Pipedrive and even last year’s Acquia purchase. Vista isn’t afraid to spend big money, if they can make even bigger money in a couple years if they can make these pieces fit together,” Leary told TechCrunch.
While Gainsight exits as a unicorn, the deal might not have been the outcome it was looking for. The company raised more than $187 million, according to PitchBook data, though its fundraising had slowed in recent years. Gainsight raised $50 million in April of 2017 at a post-money valuation of $515 million, again per PitchBook. In July of 2018 it added $25 million to its coffers, and the final entry was a small debt investment raised in 2019.
It could be that the startup saw its growth slow down, leaving it somewhere between ready for new venture investment and profitability. That’s a gap that PE shops like Vista look for, write a check, shake up a company and hopefully exit at an elevated price.
Gainsight hired a new chief revenue officer last month, notably. Per Forbes, the company was on track to reach “about” $100 million ARR by the end of 2020, giving it a revenue multiple of around 11x in the deal. That’s under current market norms, which could imply that Gainsight had either lower gross margins than comparable companies, or as previously noted, that its growth had slowed.
A $1.1 billion exit is never something to bemoan — and every startup wants to become a unicorn — but Gainsight and Mehta are well known, and we were hoping for the details only an S-1 could deliver. Perhaps one day with Vista’s help that could happen.
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As Slack acquisition rumors swirl, a look at Salesforce’s six biggest deals
The rumors ignited last Thursday that Salesforce had interest in Slack. This morning, CNBC is reporting the deal is all but done and will be announced tomorrow. Chances are this is going to a big number, but this won’t be Salesforce’s first big acquisition. We thought it would be useful in light of these rumors to look back at the company’s biggest deals.
Salesforce has already surpassed $20 billion in annual revenue, and the company has a history of making a lot of deals to fill in the road map and give it more market lift as it searches for ever more revenue.
The biggest deal so far was the $15.7 billion Tableau acquisition last year. The deal gave Salesforce a missing data visualization component and a company with a huge existing market to feed the revenue beast. In an interview in August with TechCrunch, Salesforce president and chief operating officer Bret Taylor (who came to the company in the $750 million Quip deal in 2016), sees Tableau as a key part of the company’s growing success:
“Tableau is so strategic, both from a revenue and also from a technology strategy perspective,” he said. That’s because as companies make the shift to digital, it becomes more important than ever to help them visualize and understand that data in order to understand their customers’ requirements better.
Next on the Salesforce acquisition hit parade was the $6.5 billion MuleSoft acquisition in 2018. MuleSoft gave Salesforce access to something it didn’t have as an enterprise SaaS company — data locked in silos across the company, even in on-prem applications. The CRM giant could leverage MuleSoft to access data wherever it lived, and when you put the two mega deals together, you could see how you could visualize that data and also give more fuel to its Einstein intelligence layer.
In 2016, the company spent $2.8 billion on Demandware to make a big splash in e-commerce, a component of the platform that has grown in importance during the pandemic when companies large and small have been forced to move their businesses online. The company was incorporated into the Salesforce behemoth and became known as Commerce Cloud.
In 2013, the company made its first billion-dollar acquisition when it bought ExactTarget for $2.5 billion. This represented the first foray into what would become the Marketing Cloud. The purchase gave the company entrée into the targeted email marketing business, which again would grow increasingly in importance in 2020 when communicating with customers became crucial during the pandemic.
Last year, just days after closing the MuleSoft acquisition, Salesforce opened its wallet one more time and paid $1.35 billion for ClickSoftware. This one was a nod to the company’s Service cloud, which encompasses both customer service and field service. This acquisition was about the latter, and giving the company access to a bigger body of field service customers.
The final billion-dollar deal (until we hear about Slack perhaps) is the $1.33 billion Vlocity acquisition earlier this year. This one was a gift for the core CRM product. Vlocity gave Salesforce several vertical businesses built on the Salesforce platform and was a natural fit for the company. Using Vlocity’s platform, Salesforce could (and did) continue to build on these vertical markets giving it more ammo to sell into specialized markets.
While we can’t know for sure if the Slack deal will happen, it sure feels like it will, and chances are this deal will be even larger than Tableau as the Salesforce acquisition machine keeps chugging along.
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Kahoot drops $50M on Drops to add language learning to its gamified education stable
After raising $215 million from SoftBank to double down on the surge of interest in online learning, Kahoot has made an acquisition to expand the scope of subjects that it covers. The popular startup, which lets people build and share educational games, has picked up Drops, a startup that helps people learn languages by way of short picture and word-based games. The plan is to integrate more Kahoot features into Drops’ apps, and to bring some of Drops’ content into the main Kahoot platform.
Kahoot, which trades a part of its shares through Norway’s alternative exchange the Merkur Market and currently has a market cap of over $3 billion, said in an announcement that it would pay $31 million in cash, plus up to $19 million more in cash and shares, based on Drops meeting certain targets between now and 2022. The deal is expected to close this month, and is the company’s biggest to date.
Drops makes three main apps. First is an eponymous freemium app, with free and paid features, that helps adults learn new languages, currently some 42 in all, with a focus on vocabulary, built around five-minute, “snackable” sessions. A second app, Scripts, is aimed at learning to read, write and sign, and it covers four alphabets and four character-based writing systems. A third, Droplets, is aimed specifically at language learning for learners aged between eight and 17. Altogether Drops has clocked up 25 million users.
Notably, one reason it might be off TechCrunch’s (and the startup world’s) radar is that it was bootstrapped. (It did go through an accelerator, GameFounders.) But it has had some notable accolades, including getting named app of the year by Google in 2018.
The startup was founded in Estonia and has 21 employees, with no “head office” as such, with the team spread across Estonia, U.S., U.K., Spain, Italy, France, Germany, Sweden, the Netherlands, Hungary, Ukraine and Russia. This could be one reason why it’s kept costs low: in 2019 it reported gross revenues of $7.5 million (€6.3 million), with cash conversion of 40%.
For some more context, Kahoot — which is also backed by the likes of Microsoft, Disney and Northzone — says that in the last 12 months, more than 1 billion participating players in over 200 countries attended over 200 million Kahoot sessions. That figure includes both educational users of its free services, as well as enterprises, which pay to build and use games (for example related to professional development or business compliance) on the platform.
“We are thrilled to welcome Drops to the expanding Kahoot! family as we advance towards our vision to become the leading learning platform in the world,” said Eilert Hanoa, the CEO of Kahoot, in a statement. “Drops’ offerings and innovative learning model are a perfect match to Kahoot!’s mission of making learning awesome through a simple, game-based approach. Drops and language learning becomes the latest addition to our growing offering of learning apps for learners of all ages and abilities. We will continue to expand in new areas to make Kahoot! the ultimate learning destination, at home, school or work, and to make learning awesome!”
The COVID-19 pandemic has led to a bonanza for educational apps, which are collectively seeing a huge rush of usage in the last year.
For students, educators and parents, they have become a way of connecting and teaching at a time when physical schools are either closed, or drastically curtailed in what they can do, in order to help limit the spread of the novel coronavirus.
Businesses and other organizations, on the other hand, are leaning on e-learning as a way of keeping connected with staff, engaging them and training them at a time when many are working from home.
It might seem ironic that at a time when travel has been drastically limited, if not completely halted altogether, for many of us, language learning has seen an especially big boom.
Maybe it’s about making hay — that is, using the moment to get yourself ready for a time in the future when you might actually get to use your newly acquired foreign language skills. Or maybe it’s just another option for distracting or occupying ourselves in a more constructive way. Whatever might be the motivation or cause, the effect is that language learning is on the up.
Most recently, Duolingo — which incidentally also uses game-based concepts, where you enter a leaderboard for your learning and your daily sessions become winning streaks — raised $35 million on a $2.4 billion valuation, a huge jump for the company.
Kahoot cites figures that predict that digital language learning will be an $8 billion+ market by 2025 and describes Drops as “one of the fastest-growing language platforms in the world.”
“The entire Drops team has spent the last five years building a new way to learn language, and we’re just getting started,” said Daniel Farkas, co-founder and CEO, Drops, in a statement. “We’ve introduced millions of users across the globe to our playful, dynamic approach to language learning. Kahoot! is doing the same for all types of learning. We’re excited to work with such a mission-aligned company to introduce the Drops platform to game-loving learners everywhere.”
This is Kahoot’s fourth acquisition, and its biggest to date. As with Drops, previous M&A deals were made to bolt on new areas of expertise to the platform, such as maths learning for students and more tools to manage enterprise users.
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