Mar
26
2020
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Microsoft acquires 5G specialist Affirmed Networks

Microsoft today announced that it has acquired Affirmed Networks, a company that specializes in fully virtualized, cloud-native networking solutions for telecom operators.

With its focus on 5G and edge computing, Affirmed looks like the ideal acquisition target for a large cloud provider looking to get deeper into the telco business. According to Crunchbase, Affirmed raised a total of $155 million before this acquisition, and the company’s more than 100 enterprise customers include the likes of AT&T, Orange, Vodafone, Telus, Turkcell and STC.

“As we’ve seen with other technology transformations, we believe that software can play an important role in helping advance 5G and deliver new network solutions that offer step-change advancements in speed, cost and security,” writes Yousef Khalidi, Microsoft’s corporate vice president for Azure Networking. “There is a significant opportunity for both incumbents and new players across the industry to innovate, collaborate and create new markets, serving the networking and edge computing needs of our mutual customers.”

With its customer base, Affirmed gives Microsoft another entry point into the telecom industry. Previously, the telcos would often build their own data centers and stuff it with costly proprietary hardware (and the software to manage it). But thanks to today’s virtualization technologies, the large cloud platforms are now able to offer the same capabilities and reliability without any of the cost. And unsurprisingly, a new technology like 5G, with its promise of new and expanded markets, makes for a good moment to push forward with these new technologies.

Google recently made some moves in this direction with its Anthos for Telecom and Global Mobile Edge Cloud, too. Chances are we will see all of the large cloud providers continue to go after this market in the coming months.

In a somewhat odd move, only yesterday Affirmed announced a new CEO and president, Anand Krishnamurthy. It’s not often that we see these kinds of executive moves hours before a company announces its acquisition.

The announcement doesn’t feature a single hint at today’s news and includes all of the usual cliches we’ve come to expect from a press release that announces a new CEO. “We are thankful to Hassan for his vision and commitment in guiding the company through this extraordinary journey and positioning us for tremendous success in the future,” Krishnamurthy wrote at the time. “It is my honor to lead Affirmed as we continue to drive this incredible transformation in our industry.”

We asked Affirmed for some more background about this and will update this post if we hear more. Update: an Affirmed spokesperson told us that this was “part of a succession plan that had been determined previously.  So it was not related [to] any specific event.”

Mar
16
2020
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Torch & Everwise merge into affordable exec coaching for all

While companies might pay for a CEO coach, lower level employees often get stuck with lame skill-building worksheets or no mentorship at all. Not only does that limit their potential productivity, but it also makes them feel stagnated and undervalued, leading them to jump ship.

Therapy… err… executive coaching is finally becoming destigmatized as entrepreneurs and their teams realize that everyone can’t be crushing it all the time. Building a business is hard. It’s okay to cry sometimes. But the best thing you can do is be vulnerable and seek help.

Torch emerged from stealth last year with $18 million in funding to teach empathy to founders and C-suite execs. Since 2013, Everwise has raised $26 million from Sequoia and others for its peer-to-peer mentorship marketplace that makes workplace guidance accessible to rank-and-file staffers. Tomorrow they’ll official announce their merger under the Torch name to become a full-stack career coach for every level of employee.

“As human beings, we face huge existential challenges in the form of pandemics, climate change, the threats coming down the pipe from automation and AI” says Torch co-founder and CEO Cameron Yarbrough. “We need to create leaders at every single level of an organization and ignite these people with tools and human support in order to level up in the world.”

Startup acquisitions and mergers can often be train wrecks because companies with different values but overlapping products are jammed together. But apparently it’s gone quite smoothly since the products are so complementary, with all 70 employees across the two companies keeping their jobs. “Everwise is much more bottom up whereas Torch is about the upper levels, and it just sort of made sense” says Garry Tan, partner and co-founder of Initialized Capital that funded Torch’s Series A and is also a client of its coaching.

How does each work? Torch goes deep, conducting extensive 360-interviews with an executive as well as their reports, employees, and peers to assess their empathy, communication, vision, conflict resolution, and collaboration. Clients’ executives do extensive 360-interviews. It establishes quantifiable goals that executives work towards through video call sessions with Torch’s coaches. They learn about setting healthy workplace boundaries, staying calm amidst arguments, motivating staff without seeming preachy, and managing their own ego.

This coaching can be exceedingly valuable for the leaders setting a company’s strategy and tone. But the one-on-one sessions are typically too expensive to buy for all levels of employees. That’s where Everwise comes in.

Everwise goes wide, offering a marketplace with 6,000 mentors across different job levels and roles that can provide more affordable personal guidance or group sessions with 10 employees all learning from each other. It also provides a mentorship platform where bigger companies can let their more senior staffers teach junior employees exactly what it takes to succeed. That’s all stitched together with a curated and personalized curriculum of online learning materials. Meanwhile, a company’s HR team can track everyone’s progress and performance through its Academy Builder dashboard.

“We know Gen Z has grown up with mentors by their side from SAT prep” says Torch CMO Cari Jacobs. Everwise lets them stay mentored, even at early stages of their professional life. “As they advance through their career, they might notch up to more executive private coaching.” Post-merger, Torch can keep them sane and ambitious throughout the journey. 

“It really allows us to move up market without sacrificing all the traction we’ve built working with startups and mid-market companies,” Yarbrough tells me. Clients have included Reddit and ZenDesk, but also giants like Best Buy, Genentech, and T-Mobile.

The question is whether Everwise’s materials are engaging enough to not become just another employee handbook buried on an HR site that no one ever reads. Otherwise, it could just feel like bloat tacked onto Torch. Meanwhile, scaling up to bigger clients pits Torch against long-standing pillars of the executive coaching industry like Aon and Korn Ferry that have been around for decades and have billions in revenue. Meanwhile, new mental health and coaching platforms are emerging like BetterUp and Sounding Board.

But the market is massive since so few people get great coaching right now. “No one goes to work and is like, ‘Man, I wish my boss was less mindful,’” Tan jokes. When Yarbrough was his coach, the Torch CEO taught the investor that while many startup employees might think they thrive on flexibility, “people really want high love and high structure.” In essence, that’s what Torch is trying to deliver — a sense of emotional camaraderie mixed with a prod in the direction of fulfilling their destiny.

Mar
10
2020
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Hitachi Vantara acquires what’s left of Containership

Hitachi Vantara, the wholly owned subsidiary of Hitachi that focuses on building hardware and software to help companies manage their data, today announced that it has acquired the assets of Containership, one of the earlier players in the container ecosystem, which shut down its operations last October.

Containership, which launched as part of our 2015 Disrupt New York Startup Battlefield, started as a service that helped businesses move their containerized workloads between clouds, but as so many similar startups, it then moved on to focus solely on Kubernetes and helping enterprises manage their Kubernetes infrastructure. Before it called it quits, the company’s specialty was managing multi-cloud Kubernetes deployments. The company wasn’t able to monetize its Kubernetes efforts quickly enough, though, the company said at the time in a blog post that it has now removed from its website.

Containership enables customers to easily deploy and manage Kubernetes clusters and containerized applications in public cloud, private cloud, and on-premise environments,” writes Bobby Soni, the COO for digital infrastructure at Hitachi Vantara. “The software addresses critical cloud native application issues facing customers working with Kubernetes such as persistent storage support, centralized authentication, access control, audit logging, continuous deployment, workload portability, cost analysis, autoscaling, upgrades, and more.”

Hitachi Vantara tells me that it is not acquiring any of Containership’s customer contracts or employees and has no plans to keep the Containership brand. “Our primary focus is to develop new offerings based on the Containership IP. We do hope to engage with prior customers once our new offerings become commercially available,” a company spokesperson said.

The companies did not disclose the price of the acquisition. Pittsburgh-based Containership only raised about $2.6 million since it was founded in 2014, though, and things had become pretty quiet around the company in the last year or two before its early demise. Chances are then that the price wasn’t all that high. Investors include Birchmere Ventures, Draper Triangle and Innovation Works.

Hitachi Vantara says it will continue to work with the Kubernetes community. Containership was a member of the Cloud Native Computing Foundation. Hitachi never was, but after this acquisition, that may change.

Mar
10
2020
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Dell spent $67B buying EMC — more than 3 years later, was it worth the debt?

Dell’s 2015 decision to buy EMC for $67 billion remains the largest pure tech deal in history, but a transaction of such magnitude created a mountain of debt for the Texas-based company and its primary backer, Silver Lake.

Dell would eventually take on close to $50 billion in debt. Years later, where are they in terms of paying that back, and has the deal paid for itself?

When EMC put itself up for sale, it was under pressure from activist investors Elliott Management to break up the company. In particular, Elliott reportedly wanted the company to sell one of its most valuable parts, VMware, which it believed would help boost EMC’s share price. (Elliott is currently turning the screws on Twitter and SoftBank.)

Whatever the reason, once the company went up for sale, Dell and private equity firm Silver Lake came ‘a callin with an offer EMC CEO Joe Tucci couldn’t refuse. The arrangement represented great returns for his shareholders, and Tucci got to exit on his terms, telling Elliott to take a hike (even if it was Elliott that got the ball rolling in the first place).

Dell eventually took itself public again in late 2018, probably to help raise some of the money it needed to pay off its debts. We are more than three years past the point where the Dell-EMC deal closed, so we decided to take a look back and see if Dell was wise to take on such debt or not.

What it got with EMC

Mar
02
2020
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Thoma Bravo completes $3.9B Sophos acquisition

Thoma Bravo announced today that it has closed its hefty $3.9 billion acquisition of security firm Sophos, marking yet another private equity deal in the books.

The deal was originally announced in October. Stockholders voted to approve the deal in December.

They were paid $7.40 USD per share for their trouble, according to the company, and it indicated that as part of the closing, the stock had ceased trading on the London Stock Exchange. It also pointed out that investors who got in at the IPO price in June 2015 made a 168% premium on that investment.

Sophos hopes its new owner can help the company continue to modernize the platform. “With Thoma Bravo as a partner, we believe we can accelerate our progress and get to the future even faster, with dramatic benefits for our customers, our partners and our company as a whole,” Sophos CEO Kris Hagerman said in a statement. Whether it will enjoy those benefits or not, time will tell.

As for the buyer, it sees a company with a strong set of channel partners that it can access to generate more revenue moving forward under the Thoma Bravo umbrella. Sophos currently partners with 53,000 resellers and managed service providers, and counts more than 420,000 companies as customers. The platform currently helps protect 100 million users, according to the company. The buyer believes it can help build on these numbers.

The company was founded way back in 1985, and raised over $500 million before going public in 2015, according to PitchBook data. Products include Managed Threat Response, XG Firewall and Intercept X Endpoint.

Feb
27
2020
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DocuSign acquires Seal Software for $188M to enhance its AI chops

Contract management service DocuSign today announced that it is acquiring Seal Software for $188 million in cash. The acquisition is expected to close later this year. DocuSign, it’s worth noting, previously invested $15 million in Seal Software in 2019.

Seal Software was founded in 2010, and, while it may not be a mainstream brand, its customers include the likes of PayPal, Dell, Nokia and DocuSign itself. These companies use Seal for its contract management tools, but also for its analytics, discovery and data extraction services. And it’s these AI smarts the company developed over time to help businesses analyze their contracts that made DocuSign acquire the company. This can help them significantly reduce their time for legal reviews, for example.

“Seal was built to make finding, analyzing, and extracting data from contracts simpler and faster,” Seal Software CEO John O’Melia said in today’s announcement. “We have a natural synergy with DocuSign, and our team is excited to leverage our AI expertise to help make the Agreement Cloud even smarter. Also, given the company’s scale and expansive vision, becoming part of DocuSign will provide great opportunities for our customers and partners.”

DocuSign says it will continue to sell Seal’s analytics tools. What’s surely more important to DocuSign, though, is that it will also leverage the company’s AI tools to bolster its DocuSign CLM offering. CLM is DocuSign’s service for automating the full contract life cycle, with a graphical interface for creating workflows and collaboration tools for reviewing and tracking changes, among other things. And integration with Seal’s tools, DocuSign argues, will allow it to provide its customers with a “faster, more efficient agreement process,” while Seal’s customers will benefit from deeper integrations with the DocuSign Agreement Cloud.

Feb
27
2020
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DocuSign acquires Seal Software for $188M to enhance its AI chops

Contract management service DocuSign today announced that it is acquiring Seal Software for $188 million in cash. The acquisition is expected to close later this year. DocuSign, it’s worth noting, previously invested $15 million in Seal Software in 2019.

Seal Software was founded in 2010, and, while it may not be a mainstream brand, its customers include the likes of PayPal, Dell, Nokia and DocuSign itself. These companies use Seal for its contract management tools, but also for its analytics, discovery and data extraction services. And it’s these AI smarts the company developed over time to help businesses analyze their contracts that made DocuSign acquire the company. This can help them significantly reduce their time for legal reviews, for example.

“Seal was built to make finding, analyzing, and extracting data from contracts simpler and faster,” Seal Software CEO John O’Melia said in today’s announcement. “We have a natural synergy with DocuSign, and our team is excited to leverage our AI expertise to help make the Agreement Cloud even smarter. Also, given the company’s scale and expansive vision, becoming part of DocuSign will provide great opportunities for our customers and partners.”

DocuSign says it will continue to sell Seal’s analytics tools. What’s surely more important to DocuSign, though, is that it will also leverage the company’s AI tools to bolster its DocuSign CLM offering. CLM is DocuSign’s service for automating the full contract life cycle, with a graphical interface for creating workflows and collaboration tools for reviewing and tracking changes, among other things. And integration with Seal’s tools, DocuSign argues, will allow it to provide its customers with a “faster, more efficient agreement process,” while Seal’s customers will benefit from deeper integrations with the DocuSign Agreement Cloud.

Feb
26
2020
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Freshworks acquires AnsweriQ

Customer engagement platform Freshworks today announced that it has acquired AnsweriQ, a startup that provides AI tools for self-service solutions and agent-assisted use cases where the ultimate goal is to quickly provide customers with answers and make agents more efficient.

The companies did not disclose the acquisition price. AnsweriQ last raised a funding round in 2017, when it received $5 million in a Series A round from Madrona Venture Group.

Freshworks founder and CEO Girish Mathrubootham tells me that he was introduced to the company through a friend, but that he had also previously come across AnsweriQ as a player in the customer service automation space for large clients in high-volume call centers.

“We really liked the team and the product and their ability to go up-market and win larger deals,” Mathrubootham said. “In terms of using the AI/ML customer service, the technology that they’ve built was perfectly complementary to everything else that we were building.”

He also noted the client base, which doesn’t overlap with Freshworks’, and the talent at AnsweriQ, including the leadership team, made this a no-brainer.

AnsweriQ, which has customers that use Freshworks and competing products, will continue to operate its existing products for the time being. Over time, Freshworks, of course, hopes to convert many of these users into Freshworks users as well. The company also plans to integrate AnsweriQ’s technology into its Freddy AI engine. The exact branding for these new capabilities remains unclear, but Mathrubootham suggested FreshiQ as an option.

As for the AnsweriQ leadership team, CEO Pradeep Rathinam will be joining Freshworks as chief customer officer.

Rathinam told me that the company was at the point where he was looking to raise the next round of funding. “As we were going to raise the next round of funding, our choices were to go out and raise the next round and go down this path, or look for a complementary platform on which we can vet our products and then get faster customer acquisition and really scale this to hundreds or thousands of customers,” he said.

He also noted that as a pure AI player, AnsweriQ had to deal with lots of complex data privacy and residency issues, so a more comprehensive platform like Freshworks made a lot of sense.

Freshworks has always been relatively acquisitive. Last year, the company acquired the customer success service Natero, for example. With the $150 million Series H round it announced last November, the company now also has the cash on hand to acquire even more customers. Freshworks is currently valued at about $3.5 billion and has 2,7000 employees in 13 offices. With the acquisition of AnsweriQ, it now also has a foothold in Seattle, which it plans to use to attract local talent to the company.

Feb
25
2020
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Salesforce grabs Vlocity for $1.33B, a startup with $1B valuation

It’s been a big news day for Salesforce . It announced that co-CEO Keith Block would be stepping down, and that it had acquired Vlocity for $1.33 billion in an all-cash deal.

It’s no coincidence that Salesforce targeted this startup. It’s a firm that builds six industry-specific CRMs on top of Salesforce — communications, media and entertainment, insurance and financial services, health, energy and utilities and government and nonprofits — and Salesforce Ventures was also an investor. This would appear to have been a deal waiting to happen.

Brent Leary, founder and principal analyst at CRM Essentials, says Salesforce saw this as an important target to keep building the business. “Salesforce has been beefing up their abilities to provide industry-specific solutions by cultivating strategic ISV partnerships with companies like Vlocity and Veeva (which is focused on life sciences). But this move signals the importance of making these industry capabilities even more a part of the platform offerings,” Leary told TechCrunch.

Ray Wang, founder and principal analyst at Constellation Research, also liked the deal for Salesforce. “It’s a great deal. Vlocity gives them the industries platform they need. More importantly, it keeps Google from buying them and [could generate] $10 billion in additional industries revenue growth over next four years,” he said.

Vlocity had raised about $163 million on a valuation of around $1 billion as of its most recent round, a $60 million Series C last March. If $1.33 billion seems a little light, given what Vlocity is providing the company, Wang says it’s because Vlocity needed Salesforce more than the other way around.

“Vlocity on its own doesn’t have as big a future without Salesforce. They have to be together. So Salesforce doesn’t need to buy them. They could keep building out, but it’s better for them to buy them now,” Wang said.

Still, the company was valued at $1 billion just under a year ago, and sold for $1.33 billion after raising $163 million. That means it received 8.2x total invested capital ($1.33 billion/ $163 million invested capital), which isn’t a bad return.

In a blog post on the Vlocity website, founder and CEO David Schmaier put a positive spin on the deal. “Upon the close of the transaction, Vlocity — this wonderful company that we, as a team, have created, built, and grown into a transformational solution for six of the most important industries in the enterprise — will become part of Salesforce,” he wrote.

Per usual, the deal will be predicated on regulatory approval and close some time during Salesforce’s second quarter in fiscal 2021.

Feb
25
2020
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HP offers its investors billions in shareholder returns to avoid a Xerox tie-up

To ward off a hostile takeover bid by Xerox, which is a much smaller company, HP (not to be confused with Hewlett Packard Enterprise, a separate public company) is promising its investors billions and billions of dollars.

All investors have to do to get the goods is reject the Xerox deal.

In a letter to investors, HP called Xerox’s offer a “flawed value exchange” that would lead to an “irresponsible capital structure” that was being sold on “overstated synergies.” Here’s what HP is promising its owners if they do allow it to stay independent:

  • About $16 billion worth of “capital return” between its fiscal 2020 and fiscal 2022 (HP’s Q1 fiscal 2020 wrapped January 31, 2020, for reference). According to the company, the figure “represents approximately 50% of HP’s current market capitalization.” TechCrunch rates that as true, before the company’s share-price gains posted after this news became known.
  • That capital return would be made up of a few things, including boosting the company’s share repurchase program to $15 billion (up from $5 billion, previously). More specifically, HP intends to “repurchase of at least $8 billion of HP shares over 12 months” after its fiscal 2020 meeting. The company also intends to raise its “target long-term return of capital to 100% of free cash flow generation,” allowing for the share purchases and a rising dividend payout (“HP intends to maintain dividend per share growth at least in line with earnings.”)

If all that read like a foreign language, let’s untangle it a bit. What HP is telling investors is that it intends to use all of the cash it generates to reward their ownership of shares in its business. This will come in the form of buybacks (concentrating future earnings on fewer shares, raising the value of held equity) and dividends (rising payouts to owners as HP itself makes more money), powered in part by cost-cutting (boosting cash generation and profitability).

HP is saying, in effect: Please do not sell us to Xerox; if you do not, we will do all that we can to make you money. 

Shares of HP are up 6% as of the time of writing, raising the value of HP’s consumer-focused spinout to just under $34 billion. We’ll see what investors choose for the company. But now, how did we get here?

The road to today

You may ask yourself, how did we get here (to paraphrase Talking Heads). It all began last Fall when Xerox made it known that it wanted to merge with HP, offering in the range of $27 billion to buy the much larger company. As we wrote at the time:

What’s odd about this particular deal is that HP is the company with a much larger market cap of $29 billion, while Xerox is just a tad over $8 billion. The canary is eating the cat here.

HP never liked the idea of the hostile takeover attempt and the gloves quickly came off as the two companies wrangled publicly with one another, culminating with HP’s board unanimously rejecting Xerox’s offer. It called the financial underpinnings of the deal “highly conditional and uncertain.” HP also was unhappy with the aggressive nature of the offer, writing that Xerox was, “intent on forcing a potential combination on opportunistic terms and without providing adequate information.”

Just one day later, Xerox responded, saying it would take the bid directly to HP shareholders in an attempt to by-pass the board of directors, writing in yet another public letter, “We plan to engage directly with HP shareholders to solicit their support in urging the HP Board to do the right thing and pursue this compelling opportunity.”

In January, the shenanigans continued when Xerox announced it was putting forth a friendly slate of candidates for the HP board to replace the ones that had rejected the earlier Xerox offer. And more recently, in an attempt to convince shareholders to vote in favor of the deal, Xerox sweetened the deal to $34 billion or $24 a share.

Xerox wrote that it had on-going conversations with large HP shareholders, and this might have gotten HP’s attention— hence the most recent offer on its part to make an offer to shareholders that would be hard to refuse. The company’s next shareholder meeting is taking place in April when we will finally find out the final reckoning.

 

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