M&A
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Twilio acquires email API platform SendGrid for $2 billion in stock
Twilio, the ubiquitous communications platform, today announced its plan to acquire the API-centric email platform SendGrid for about $2 billion in an all-stock transaction. That’s Twilio’s largest acquisition to date, but also one that makes a lot of sense given that both companies aim to make building communications platforms easier for developers.
“The two companies share the same vision, the same model, and the same values,” said Twilio co-founder and CEO Jeff Lawson in today’s announcement. “We believe this is a once-in-a-lifetime opportunity to bring together the two leading developer-focused communications platforms to create the unquestioned platform of choice for all companies looking to transform their customer engagement.”
SendGrid will become a wholly owned subsidiary of Twilio and its common stock will be converted into Twilio stock. The companies expect the acquisition to close in the first half of 2019, after it has been cleared by the authorities.
Twilio’s current focus is on omnichannel communication, and email is obviously a major part of that. And while it offers plenty of services around voice, video and chat, email hasn’t been on its radar in the same way. This acquisition now allows it to quickly build up expertise in this area and expand its services there.
SendGrid went public in 2017. At the time, it priced its stock at $16. Today, before the announcement, the company was trading at just under $31, though that price obviously spiked after the announcement went public. That’s still down from a high of more than $36.5 last month, but that’s in line with the overall movement of the market in recent weeks.
Today’s announcement comes shortly before Twilio’s annual developer conference, so I expect we’ll hear a lot more about its plans for SendGrid later this week.
We asked Twilio for more details about its plans for SendGrid after the acquisition closes. We’ll update this post once we hear more.
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Palo Alto Networks to acquire RedLock for $173 M to beef up cloud security
Palo Alto Networks launched in 2005 in the age of firewalls. As we all know by now, the enterprise expanded beyond the cozy confines of a firewall long ago and vendors like Palo Alto have moved to securing data in the cloud now too. To that end, the company announced its intent to pay $173 million for RedLock today, an early-stage startup that helps companies make sure their cloud instances are locked down and secure.
The cloud vendors take responsibility for securing their own infrastructure, and for the most part the major vendors have done a decent job. What they can’t do is save their customers from themselves and that’s where a company like RedLock comes in.
As we’ve seen time and again, data has been exposed in cloud storage services like Amazon S3, not through any fault of Amazon itself, but because a faulty configuration has left the data exposed to the open internet. RedLock watches configurations like this and warns companies when something looks amiss.
When the company emerged from stealth just a year ago, Varun Badhwar, company founder and CEO told TechCrunch that this is part of Amazon’s shared responsibility model. “They have diagrams where they have responsibility to secure physical infrastructure, but ultimately it’s the customer’s responsibility to secure the content, applications and firewall settings,” Badhwar told TechCrunch last year.
Badhwar speaking in a video interview about the acquisition says they have been focused on helping developers build cloud applications safely and securely, whether that’s Amazon Web Services, Microsoft Azure or Google Cloud Platform. “We think about [RedLock] as guardrails or as bumper lanes in a bowling alley and just not letting somebody get that gutter ball and from a security standpoint, just making sure we don’t deviate from the best practices,” he explained.
“We built a technology platform that’s entirely cloud-based and very quick time to value since customers can just turn it on through API’s, and we love to shine the light and show our customers how to safely move into public cloud,” he added.
The acquisition will also fit nicely with Evident.io, a cloud infrastructure security startup, the company acquired in March for $300 million. Badhwar believes that customers will benefit from Evident’s compliance capabilities being combined with Red Lock’s analytics capabilities to provide a more complete cloud security solution.
RedLock launched in 2015 and has raised $12 million. The $173 million purchase would appear to be a great return for the investors who put their faith in the startup.
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Adobe gets its company, snaring Marketo for $4.75 billion
A week ago rumors were flying that Adobe would be buying Marketo, and lo and behold it announced today that it was acquiring the marketing automation company for $4.75 billion.
It was a pretty nice return for Vista Equity partners, which purchased Marketo in May 2016 for $1.8 billion in cash. They held onto it for two years and hauled in a hefty $2.95 billion in profit.
We published a story last week, speculating that such a deal would make sense for Adobe, which just bought Magento in May for $1.6 billion. The deal gives Adobe a strong position in enterprise marketing as it competes with Salesforce, Microsoft, Oracle and SAP. Put together with Magento, it gives them marketing and ecommerce, and all it cost was over $6 billion to get there.
“The acquisition of Marketo widens Adobe’s lead in customer experience across B2C and B2B and puts Adobe Experience Cloud at the heart of all marketing,” Brad Rencher, executive vice president and general manager, Digital Experience at Adobe said in a statement.
Ray Wang, principal analyst and founder at Constellation Research sees it as a way for Adobe to compete harder with Salesforce in this space. “If Adobe takes a stand on Marketo, it means they are serious about B2B and furthering the Microsoft-Adobe vs Salesforce-Google battle ahead,” he told TechCrunch. He’s referring to the deepening relationships between these companies.
Brent Leary, senior analyst and founder at CRM Essentials agrees, seeing Microsoft as also getting positive results from this deal. “This is not only a big deal for Adobe, but another potential winner with this one is Microsoft due to the two companies growing partnership,” he said.
Adobe reported its earnings last Thursday announcing $2.29 billion for the third quarter, which represented a 24 percent year over year increase and a new record for the company. While Adobe is well on its way to being a $10 billion company, the majority of its income continues to come from Creative Cloud, which includes Photoshop, InDesign and Illustrator, among other Adobe software stalwarts.
But for a long time, the company has wanted to be much more than a creative software company. It’s wanted a piece of the enterprise marketing pie. Up until now, that part of the company, which includes marketing and analytics software, has lagged well behind the Creative Cloud business. In its last report, Digital Experience revenue, which is where Adobe counts this revenue represented $614 million of total revenue. While it continues to grow, up 21 percent year over year, there is much greater potential here for more.
Adobe had less than $5 billion in cash after the Magento acquisition, but it has seen its stock price rise dramatically in the last year rising from $149.96 last year at this time to $266.05 as of publication.
The acquisition comes as there is a lot of maneuvering going on this space and the various giant companies vie for market share. Today’s acquisition gives Adobe a huge boost and provides them with not only a missing piece, but Marketo’s base of 5000 customers and the opportunity to increase revenue in this part of their catalogue, while allowing them to compete harder inside the enterprise.
The deal is expected to close in Adobe’s 4th quarter. Marketo CEO Steve Lucas will join Adobe’s senior leadership team and report to Rencher.
It’s also worth noting that the announcement comes just days before Dreamforce, Salesforce’s massive customer conference will be taking place in San Francisco, and Microsoft will be holding its Ignite conference in Orlando. While the timing may be coincidental, it does end up stealing some of their competitors’ thunder.
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Cluep, a Canadian startup that raised just $500K, acquired for $40M
Everyone loves a tale of a bootstrapped startup founder’s journey to an eight-figure exit.
The team at Toronto-based Cluep have a good one.
The founders of the adtech startup raised less than $500,000 from angel investors before selling their company to Impact Group for $40 million ($53 million CAD) this week.
Founded in 2012, Karan Walia, Sobi Walia and Anton Mamonov were just 21, 17 and 16 years old, respectively, when they started the digital advertising platform, which uses artificial intelligence to help brands connect and engage with people based on what they are sharing, how they are feeling and the places they’ve been.
They, being so young, struggled initially to get the company off the ground. At one point, the trio hacked into computers at a university in Toronto to train the neural networks on large amounts of data sets because they didn’t have enough money to buy their own tech. On a shoe-string budget, they would split meals at Popeyes to get by.
“No one wanted to give us money at that time so we had to live off of my student loans,” Walia told TechCrunch. “We did pretty much everything, whether it was programming and building the product, or going out and selling. I was our first sales rep and I was pretty bad early on but I learned.”
Ultimately, Cluep was able to raise enough from angels to pay themselves a salary, hire a few engineers and sales representatives and move into an actual office. From that point, their revenue began growing significantly YoY.
- 2015: $2 million CAD in revenue
- 2016: $6 million CAD in revenue
- 2017: $14.5 million CAD in revenue
- 2018: On track to bring in ~$30 million CAD
They fielded offers from VCs toward the end of 2015 and considered raising a proper Series A round of capital, but ultimately decided staying independent would lead to the best exit.
“This way allowed us to basically maintain control and exit on our terms,” Walia said.
Impact Group, a Boise, Idaho-based grocery sales and marketing agency, will operate Cluep independently.
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Why rumors that Adobe could be in talks to buy Marketo make sense
Adobe could be shopping for another piece of the digital marketing puzzle, as reports surfaced today that the company might be in talks with Vista Equity Partners to buy Marketo, a company the private equity firm purchased in May 2016 for $1.8 billion in cash. Reuters was first to report the rumor.
While the report states the talks are early, and nothing is imminent, and none of the companies involved would comment (understandably), it is a deal that makes sense for Adobe. The company has been trying to build out its digital marketing business for some time, including buying Magento in May for $1.8 billion to help beef up the ecommerce piece.
Assuming that Vista wants to flip Marketo for a profit, a good bet, it would likely need to come in at $2 billion at a minimum and probably more. There are only a few companies out there that could afford the price tag, who would be interested in a property like Marketo: Adobe, Salesforce, Microsoft, SAP and Oracle.
If Adobe really wanted to go for the digital marketing jugular, it could fork over the cash and buy Marketo. Brent Leary, who covers this industry as the principle at CRM Essentials, says this would be a way for Adobe to grab a chunk of enterprise marketing automation business at a time when the market is getting highly competitive.
“Marketo would give Adobe a leader in the marketing automation space at the enterprise customer level, particularly in the B2B space.” Leary explained.
While nothing is clear yet, Adobe has the resources if it wants to do it. The company currently has $6.3 billion in cash on hand, according to data on Yahoo finance, and has seen its stock price rise significantly in the last year from $156.24 to $269.58 (as of publication today).
Adobe Creative Cloud has always been the primary money maker for Adobe over the years, generating $1.3 billion in the last report (pdf) in June out of $2.2 billion in total revenue. Digital Experience, which includes marketing products, generated $586 million, and although it’s trending up, it has so much more potential.
We have been seeing more M&A action in this space as companies try to fill in various parts of the sale-service-marketing triumvirate. Just last week, we saw Zendesk, the company that concentrates on cloud customer service, enter the sales automation and CRM part of the space with the purchase of Base. Earlier this month, Thoma Bravo bought Apttus, a company which covers the quote-to-cash part of the sales cycle.
Adobe finds itself competing with other giant organizations with the previously mentioned companies all lining up for a piece of the digital marketing business. Getting Marketo certainly has the potential to help push that Digital Experience revenue line up further as the fight for marketshare gets ever more intense. Whether that happens remains to be seen, but Marketo is certainly a company that would match up well with Adobe if it wanted to make such a move.
It’s worth mentioning that Adobe will be reporting its latest earnings this afternoon.
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iHeartMedia is acquiring HowStuffWorks
iHeartMedia has agreed to acquire Stuff Media, the company that owns the HowStuffWorks podcasting business.
The companies did not disclose the financial terms of the deal, but both the Wall Street Journal and Variety are reporting that the acquisition price was $55 million.
According to the announcement, Stuff Media podcasts will retain their branding and the organization will remain headquartered in Atlanta, while President and CEO Conal Byrne joins iHeartMedia as the head of its podcasting division.
HowStuffWorks was originally founded in 1998 and had a number of owners before spinning out as an independent company and raising a $15 million Series A last year. In recent years, its focus has shifted from explainer articles and videos to podcasts, and in fact, it says those podcasts receive more than 61 million downloads and streams each month, with Stuff You Should Know surpassing 500 million downloads this year.
iHeartMedia, meanwhile, filed for bankruptcy earlier this year. (The media company was formerly known as Clear Channel.) Prior to announcing the acquisition, it was already working with Stuff Media on its true crime podcast Atlanta Monster.
“Stuff Media is the original trailblazer of the podcasting industry, and we’ve been impressed by its ability to grow a massive, loyal audience over the past decade, led by a strong, experienced and cohesive management team, who we welcome to iHeartMedia,” said iHeartMedia’s chairman and CEO Bob Pittman in the announcement. “This strategic acquisition will pair Stuff Media’s wildly popular content and strong creative capabilities with iHeartMedia’s extensive resources and massive scale through our digital platforms, social reach and broadcast radio stations, introducing podcasts to the vast majority of the country and offering even more unique opportunities for advertisers to reach their consumers.”
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Twilio’s contact center products just got more analytical with Ytica acquisition
Twilio, a company best known for supplying a communications APIs for developers has a product called Twilio Flex for building sophisticated customer service applications on top of Twilio’s APIs. Today, it announced it was acquiring Ytica (pronounced Why-tica) to provide an operational and analytical layer on top of the customer service solution.
The companies would not discuss the purchase price, but Twilio indicated it does not expect the acquisition to have a material impact on its “results, operations or financial condition.” In other words, it probably didn’t cost much.
Ytica, which is based in Prague, has actually been a partner with Twilio for some time, so coming together in this fashion really made a lot of sense, especially as Twilio has been developing Flex.
Twilio Flex is an app platform for contact centers, which offers a full stack of applications and allows users to deliver customer support over multiple channels, Al Cook, general manager of Twilio Flex explained. “Flex deploys like SaaS, but because it’s built on top of APIs, you can reach in and change how Flex works,” he said. That is very appealing, especially for larger operations looking for a flexible, cloud-based solution without the baggage of on-prem legacy products.
What the product was lacking, however, was a native way to manage customer service representatives from within the application, and understand through analytics and dashboards, how well or poorly the team was doing. Having that ability to measure the effectiveness of the team becomes even more critical the larger the group becomes, and Cook indicated some Flex users are managing enormous groups with 10,000-20,000 employees.
Ytica provides a way to measure the performance of customer service staff, allowing management to monitor and intervene and coach when necessary. “It made so much sense to join together as one team. They have huge experience in the contact center, and a similar philosophy to build something customizable and programmable in the cloud,” Cook said.
While Ytica works with other vendors beyond Twilio, CEO Simon Vostrý says that they will continue to support those customers, even as they join the Twilio family. “We can run Flex and can continue to run this separately. We have customers running on other SaaS platforms, and we will continue to support them,” he said.
The company will remain in Prague and become a Twilio satellite office. All 14 employees are expected to join the Twilio team and Cook says plans are already in the works to expand the Prague team.
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Global M&A activity is flat so far in 2018
U.S. tech companies continue to be the most active acquirers in the world, says a new report from Crunchbase and Mind the Bridge.
The pair crunched data on 22,000 startup exits since 2010, recording about 4,200 so far this year. U.S. companies, though less active this year than last, have acquired approximately 2x more startups than their European counterparts.
Overall, 2018 is a flat year for M&A activity, despite a record-setting 2017. 
Here are a few key takeaways from the report, which you can read in full here.
- There was a slight decrease in activity in the U.S., but Europe has really pulled back. European companies have completed 11 percent fewer M&A deals YoY.
- U.S. and European companies continue to make up the bulk of M&A deals. More than three-quarters of the transactions and the money spent involved startups from North America and Europe.
- Twenty-two of the top 30 world acquirers are from the U.S., which remains the most active acquirer of European startups, though Europe is closing the gap.
- Google, Facebook, Apple and Microsoft are the world’s most active acquirers.
- The most active European acquirer is Paris-based Publicis Groupe, which is 20th on the list of top global acquirers. That’s a step up from last year, when the most active European acquirer was Germany’s SAP — 33rd on the list.
- European companies are increasingly buying more of their European counterparts. This year, 81 percent of European acquisitions were domestic versus 75 percent last year.
- Of the startups that exited, 55 percent were between five and 15 years old and had raised between $10 million and $100 million.
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Zendesk expands into CRM with Base acquisition
Zendesk has mostly confined itself to customer service scenarios, but it seems that’s not enough anymore. If you want to truly know the customer behind the interaction, you need a customer system of record to go with the customer service component. To fill that need, Zendesk announced it was acquiring Base, a startup that has raised over $50 million.
The companies did not share the purchase price, but Zendesk did report that the acquisition should not have a significant impact on revenue.
While Base might not be as well known as Salesforce, Microsoft or Oracle in the CRM game, it has created a sophisticated sales force automation platform, complete with its own artificial intelligence underpinnings. CEO Uzi Shmilovici claimed his company’s AI could compete with its more well-heeled competitors when it was released in 2016 to provide salespeople with meaningful prescriptive advice on how to be more successful.
Zendesk CEO Mikkel Svane certainly sees the value of adding a company like Base to his platform. “We want to do for sales what Zendesk has already done for customer service: give salespeople tools built around them and the customers they serve,” he said in a statement.
If the core of customer data includes customer service, CRM and marketing, Base gives Zendesk one more of those missing components, says Brent Leary, owner at CRM Essentials, a firm that keeps close watch on this market.
“Zendesk has a great position in customer service, but now to strengthen their position with midmarket/enterprise customers looking for integrated platforms, Base adds a strong mobile sales force automation piece to their puzzle,” Leary told TechCrunch.
As he points out, we have seen HubSpot make a similar move with HubSpot Apps, while SugarCRM, which was recently sold to Accel-KKR, could be shopping too, with its new owner’s deeper pockets. “This is almost like a CRM enterprise software Hunger Games going on,” he joked. But he indicates that we should be expecting more consolidation here as these companies try to acquire missing pieces of their platforms to offer more complete solutions.
Matt Price, who previously had the title of senior vice president for product portfolio at Zendesk will lead the Base team moving forward.
Base was founded in 2009 and boasts more than 5,000 customers. It’s worth pointing out that Base was already available for sale in the company app marketplace, so there was some overlap here, but the company intends to try to move existing customers to Base, of course.
Zendesk has indicated it will continue to support all Base customers. In addition, Base’s 125 employees have been invited to join Zendesk, so there will be no blood-letting here.
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Branch pairs up with TUNE to create a supersized marketing and measurement platform
Branch announced today that it has acquired TUNE‘s attribution analytics team and business, a part of the SaaS platform that focuses on optimizing and accurately attributing ad spend. Terms of the deal were not disclosed.
TUNE, a Seattle-based startup founded in 2009, helps ad platforms tie marketing investments to measurable outcomes.
Backed by Android co-founder Andy Rubin’s Playground Ventures, Branch creates links between websites and mobile apps, called deep links. The deal will help the company, which supports 40,000 apps with roughly 3 billion monthly users, expand its portfolio of linking and attribution analytics tools to become the ultimate marketing and measurement platform for businesses.
“TUNE has always been a steward of Branch’s core values, especially when it comes to putting user experience and privacy first,” Branch CEO Alex Austin said in a statement. “Combining TUNE’s years of learning with Branch’s innovation, raw product execution, and key strategic partnerships is the beginning of a new era of mobile marketing. It’s going to be an incredible ride.”
Formerly known as HasOffers, TUNE was founded by twin brothers Lucas and Lee Brown. Peter Hamilton joined the startup in 2012 and has served as the CEO since.
The performance marketing company completed a $9.4 million Series A investment in 2013 led by Accel, followed by a $27 million Series B in 2015 led by ICON Ventures. For its part, Branch is in the process of raising a fresh round of venture capital funding at a unicorn valuation.
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