Nov
03
2020
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How startups can shake up their first idea and still crush the market

When Quibi announced it was shutting its doors recently after raising $1.75 billion, it begged an obvious question: If the original idea didn’t work, why not adjust its model or do something completely different while it still had capital? It wouldn’t have been the first company to decide to shift gears. Perhaps because of the unusually large amount of money it burned through in just six months of public operation, pivoting wasn’t an option for Quibi, but it has been for countless other successful companies over the years. Sometimes an original idea simply doesn’t pan out, a market gets too crowded or a company’s founders stumble onto something they have built that is actually a better business than the original idea.

There are many such examples:

These examples — and many more — show that when your first approach doesn’t work, pivoting may be the the only logical course, but it takes courage from founders and patience from investors.

We spoke to several founders and VCs who have been through this to find out how pivots happen, and how all the parties involved adjust to shifting priorities.

Sometimes it’s a long and twisting road

A big part of founding a company is having vision. You need to believe in your idea of course, but that doesn’t mean it’s the right way to go. Sometimes it pays to move on. The king of pivots might be the aptly named Pivotal, which changed direction several times and even swapped owners before it went public and got acquired, all in the span of about 20 years. Ed Sim, co-founder at boldstart ventures was part of Dawntreader Ventures in the late 90s when his firm invested in an early version of the company called Metapa. Sim had a front row seat to every twist and turn in the company’s long and intricate history.

“Greenplum, which was sold to EMC and eventually became Pivotal Software, was initially called Metapa. Metapa was in the Akamai space and as the markets cratered in 2001 for funding infrastructure projects, Scott Yara (the company’s founder) and team bought a small company called Didera and turned it into Greenplum, the first petabyte scale data warehouse built on top of open-source technology,” Sim told TechCrunch. It didn’t end there though as Sim continued, “Once again, years later, Scott recruited his replacement CEO, Bill Cook, and they paired together to sell Greenplum to EMC and eventually spin back out and take the company public as Pivotal Software.

It’s worth noting that Pivotal eventually ran into financial problems when its stock tanked last year, but fellow Dell/EMC family member VMware saved the day by acquiring it for $2.7 billion.

Sometimes you stumble onto an idea

Segment, the customer-data platform company that was recently sold to Twilio for $3.2 billion was originally a college lecture sentiment platform, according to CEO and co-founder Peter Reinhardt. “Our first idea was a classroom lecture tool, ClassMetric, which gave students a button they could press in class to let professors know, in real-time, that they were confused. I like to think of it like a pulse monitor for class confusion,” Reinhardt told TechCrunch

That idea quickly failed when professors testing it found that inviting students to open their laptops to test their sentiment just led them to start playing Solitaire or checking Facebook. Professors weren’t thrilled and they moved on. The founders, who were MIT students at the time, decided they wanted to build an analytics tool instead, but it turned out that competition from Google Analytics and Mixpanel at the time proved too steep.

“We spent a year on development, but it was a crowded market and we struggled to carve out our own niche. We were rapidly running out of capital and the pressure was on to find something new,” he said. They were actually considering simply packing it in, but they had developed a tiny open-source tool called analytics.js, which they used to get data into their failed analytics product. At that point, desperate for an idea, one of the founders suggested posting the open-source tool on Hacker News.

Jun
09
2020
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Yugabyte lands $30M Series B as open source database continues to flourish

It’s been a big period of positive change for Yugabyte, makers of the open source, cloud native YugabyteDB database. Just last month they brought on former Pivotal president Bill Cook as CEO, and today the company announced it has closed a $30 million Series B.

8VC and strategic investor WiPro led the round with participation from existing investors Lightspeed Venture Partners and Dell Technologies Capital. Today’s investment brings the total raised to $55 million, according to the company.

The startup also announced that former Pivotal co-founder Scott Yara would be joining the company’s board. Along with Cook, that brings a distinct Pivotal influence to the company.

Kannan Muthukkaruppan, who was CEO, now holds the title of president. He says that the company has built “a fully open source, high performance distributed SQL database meant for transactional workloads in the cloud.”

Today, in addition to the open source product, it offers a private Database as a Service platform to enterprise customers. This can run on a variety of platforms including public, private, or hybrid cloud or Kubernetes infrastructure. The company also offers a fully managed cloud service, which is currently available on AWS and Google Cloud Platform with Azure support coming in the future.

The founders have quite a pedigree. Muthukkaruppan spent 13 years at Oracle helping build Oracle’s relational engine. Then he moved onto Facebook in the early days where he met co-founders Karthik Ranganathan and Mikhail Bautin. The founding team worked on database technology that helped scale Facebook from 40 million users to over a billion.

It was that background that really caught the attention of Cook. “First of all, there’s a huge market opportunity here that we think we fit into, and it is unique in the sense of the pedigree that this team has, and what they built and the expertise they have across that whole spectrum of being able to scale and have [a database that is] performant across [geographic] zones,” he said.

As the company gets this investment, it’s not only a period of change inside the organization, it is against the backdrop of the worldwide pandemic and economic fallout from that event, but Muthukkaruppan sees momentum here in spite of the macro conditions.

“With COVID-19, we actually saw an increased sense of urgency across many enterprises, wanting to move businesses to the cloud and improve their operational and go-to-market efficiency around the product that they were bringing to market,” he said. He believes that the company’s database can be a key part of that.

The company currently has 50 employees, but sees doubling that number in the next 12-18 months as interest in the products continues to grow. Cook says the company has a diverse workforce today, and he will continue to build on that in his hiring practices.

“The more inclusive you can be ties to all our principles and values [as a company] already so we’re not changing how we operate,” he says. He says diversity is not only the right thing to do from a human perspective, it also makes good business sense to have a diverse workforce.

Dec
30
2019
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Daily Crunch: VMware completes Pivotal acquisition

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. VMware completes $2.7 billion Pivotal acquisition

VMware is closing the year with a significant new weapon in its arsenal. (I restrained myself from using a “pivotal” pun here. You’re welcome.)

The acquisition — first announced in August — helps the company in its transformation from a pure virtual machine supplier into a cloud native vendor that can manage infrastructure wherever it lives. It fits alongside the acquisitions of Heptio and Bitnami, two other deals that closed this year.

2. Spotify to ‘pause’ running political ads, citing lack of proper review

The company told us that starting early next year, it will stop selling political ads: “At this point in time, we do not yet have the necessary level of robustness in our processes, systems and tools to responsibly validate and review this content.”

3. ‘The Mandalorian’ returns for Season 2 on Disney+ in fall 2020

The last episode of the first season of “The Mandalorian” went live on Disney+ on Friday, and showrunner Jon Favreau wasted very little time confirming when we can expect season two of the smash hit to land: next fall.

4. 2019 Africa Roundup: Jumia IPOs, China goes digital, Nigeria becomes fintech capital

The last 12 months served as a grande finale to 10 years that saw triple-digit increases in startup formation and VC on the continent. Here’s an overview of the 2019 market events that capped off a decade in African tech.

5. Maxar is selling space robotics company MDA for around $765 million

Maxar’s goal in selling the business is to help alleviate some of its considerable debt. The purchasing entity is a consortium of companies led by private investment firm Northern Private Capital, which will acquire the entirety of MDA’s Canadian operations — responsible for the development of the Canadarm and Canadarm2 robotic manipulators used on the Space Shuttle and the International Space Station, respectively.

6. Cloud gaming is the future of game monetization, not gameplay

Lucas Matney argues that as is so often the case with the next big thing in tech, cloud streaming is much more likely to become the next big feature of a more traditional platform, rather than the entire platform itself. (Extra Crunch membership required.)

7. This week’s TechCrunch podcasts

Equity took the week off, but we kept Original Content going with a review of Netflix’s new fantasy show “The Witcher.”

Dec
30
2019
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VMware completes $2.7 billion Pivotal acquisition

VMware is closing the year with a significant new component in its arsenal. Today it announced it has closed the $2.7 billion Pivotal acquisition it originally announced in August.

The acquisition gives VMware another component in its march to transform from a pure virtual machine company into a cloud native vendor that can manage infrastructure wherever it lives. It fits alongside other recent deals like buying Heptio and Bitnami, two other deals that closed this year.

They hope this all fits neatly into VMware Tanzu, which is designed to bring Kubernetes containers and VMware virtual machines together in a single management platform.

“VMware Tanzu is built upon our recognized infrastructure products and further expanded with the technologies that Pivotal, Heptio, Bitnami and many other VMware teams bring to this new portfolio of products and services,” Ray O’Farrell, executive vice president and general manager of the Modern Application Platforms Business Unit at VMware, wrote in a blog post announcing the deal had closed.

Craig McLuckie, who came over in the Heptio deal and is now VP of R&D at VMware, told TechCrunch in November at KubeCon that while the deal hadn’t closed at that point, he saw a future where Pivotal could help at a professional services level, as well.

“In the future when Pivotal is a part of this story, they won’t be just delivering technology, but also deep expertise to support application transformation initiatives,” he said.

Up until the closing, the company had been publicly traded on the New York Stock Exchange, but as of today, Pivotal becomes a wholly owned subsidiary of VMware. It’s important to note that this transaction didn’t happen in a vacuum, where two random companies came together.

In fact, VMware and Pivotal were part of the consortium of companies that Dell purchased when it acquired EMC in 2015 for $67 billion. While both were part of EMC and then Dell, each one operated separately and independently. At the time of the sale to Dell, Pivotal was considered a key piece, one that could stand strongly on its own.

Pivotal and VMware had another strong connection. Pivotal was originally created by a combination of EMC, VMware and GE (which owned a 10% stake for a time) to give these large organizations a separate company to undertake transformation initiatives.

It raised a hefty $1.7 billion before going public in 2018. A big chunk of that came in one heady day in 2016 when it announced $650 million in funding led by Ford’s $180 million investment.

The future looked bright at that point, but life as a public company was rough, and after a catastrophic June earnings report, things began to fall apart. The stock dropped 42% in one day. As I wrote in an analysis of the deal:

The stock price plunged from a high of $21.44 on May 30th to a low of $8.30 on August 14th. The company’s market cap plunged in that same time period falling from $5.828 billion on May 30th to $2.257 billion on August 14th. That’s when VMware admitted it was thinking about buying the struggling company.

VMware came to the rescue and offered $15.00 a share, a substantial premium above that August low point. As of today, it’s part of VMware.

Sep
11
2019
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Kubernetes co-founder Craig McLuckie is as tired of talking about Kubernetes as you are

“I’m so tired of talking about Kubernetes . I want to talk about something else,” joked Kubernetes co-founder and VP of R&D at VMware Craig McLuckie during a keynote interview at this week’s Cloud Foundry Summit in The Hague. “I feel like that 80s band that had like one hit song — Cherry Pie.”

He doesn’t quite mean it that way, of course (though it makes for a good headline, see above), but the underlying theme of the conversation he had with Cloud Foundry executive director Abby Kearns was that infrastructure should be boring and fade into the background, while enabling developers to do their best work.

“We still have a lot of work to do as an industry to make the infrastructure technology fade into the background and bring forwards the technologies that developers interface with, that enable them to develop the code that drives the business, etc. […] Let’s make that infrastructure technology really, really boring.”

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What McLuckie wants to talk about is developer experience and with VMware’s intent to acquire Pivotal, it’s placing a strong bet on Cloud Foundry as one of the premiere development platforms for cloud native applications. For the longest time, the Cloud Foundry and Kubernetes ecosystem, which both share an organizational parent in the Linux Foundation, have been getting closer, but that move has accelerated in recent months as the Cloud Foundry ecosystem has finished work on some of its Kubernetes integrations.

McLuckie argues that the Cloud Native Computing Foundation, the home of Kubernetes and other cloud-native, open-source projects, was always meant to be a kind of open-ended organization that focuses on driving innovation. And that created a large set of technologies that vendors can choose from.

“But when you start to assemble that, I tend to think about you building up this cake which is your development stack, you discover that some of those layers of the cake, like Kubernetes, have a really good bake. They are done to perfection,” said McLuckie, who is clearly a fan of the Great British Baking show. “And other layers, you look at it and you think, wow, that could use a little more bake, it’s not quite ready yet. […] And we haven’t done a great job of pulling it all together and providing a recipe that delivers an entirely consumable experience for everyday developers.”

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He argues that Cloud Foundry, on the other hand, has always focused on building that highly opinionated, consistent developer experience. “Bringing those two communities together, I think, is going to have incredibly powerful results for both communities as we start to bring these technologies together,” he said.

With the Pivotal acquisition still in the works, McLuckie didn’t really comment on what exactly this means for the path forward for Cloud Foundry and Kubernetes (which he still talked about with a lot of energy, despite being tired of it). But it’s clear that he’s looking to Cloud Foundry to enable that developer experience on top of Kubernetes that abstracts all of the infrastructure away for developers and makes deploying an application a matter of a single CLI command.

Bonus: Cherry Pie.

Aug
23
2019
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How Pivotal got bailed out by fellow Dell family member, VMware

When Dell acquired EMC in 2016 for $67 billion, it created a complicated consortium of interconnected organizations. Some, like VMware and Pivotal, operate as completely separate companies. They have their own boards of directors, can acquire companies and are publicly traded on the stock market. Yet they work closely within Dell, partnering where it makes sense. When Pivotal’s stock price plunged recently, VMware saved the day when it bought the faltering company for $2.7 billion yesterday.

Pivotal went public last year, and sometimes struggled, but in June the wheels started to come off after a poor quarterly earnings report. The company had what MarketWatch aptly called “a train wreck of a quarter.”

How bad was it? So bad that its stock price was down 42% the day after it reported its earnings. While the quarter itself wasn’t so bad, with revenue up year over year, the guidance was another story. The company cut its 2020 revenue guidance by $40-$50 million and the guidance it gave for the upcoming 2Q 19 was also considerably lower than consensus Wall Street estimates.

The stock price plunged from a high of $21.44 on May 30th to a low of $8.30 on August 14th. The company’s market cap plunged in that same time period falling from $5.828 billion on May 30th to $2.257 billion on August 14th. That’s when VMware admitted it was thinking about buying the struggling company.

Dec
07
2018
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Pivotal announces new serverless framework

Pivotal has always been about making open-source tools for enterprise developers, but surprisingly, up until now, the arsenal has lacked a serverless component. That changed today with the alpha launch of Pivotal Function Service.

Pivotal Function Service is a Kubernetes-based, multi-cloud function service. It’s part of the broader Pivotal vision of offering you a single platform for all your workloads on any cloud,” the company wrote in a blog post announcing the new service.

What’s interesting about Pivotal’s flavor of serverless, besides the fact that it’s based on open source, is that it has been designed to work both on-prem and in the cloud in a cloud native fashion, hence the Kubernetes-based aspect of it. This is unusual to say the least.

The idea up until now has been that the large-scale cloud providers like Amazon, Google and Microsoft could dial up whatever infrastructure your functions require, then dial them down when you’re finished without you ever having to think about the underlying infrastructure. The cloud provider deals with whatever compute, storage and memory you need to run the function, and no more.

Pivotal wants to take that same idea and make it available in the cloud across any cloud service. It also wants to make it available on-prem, which may seem curious at first, but Pivotal’s Onsi Fakhouri says customers want that same abilities both on-prem and in the cloud. “One of the key values that you often hear about serverless is that it will run down to zero and there is less utilization, but at the same time there are customers who want to explore and embrace the serverless programming paradigm on-prem,” Fakhouri said. Of course, then it is up to IT to ensure that there are sufficient resources to meet the demands of the serverless programs.

The new package includes several key components for developers, including an environment for building, deploying and managing your functions, a native eventing ability that provides a way to build rich event triggers to call whatever functionality you require and the ability to do this within a Kubernetes-based environment. This is particularly important as companies embrace a hybrid use case to manage the events across on-prem and cloud in a seamless way.

One of the advantages of Pivotal’s approach is that Pivotal can work on any cloud as an open product. This is in contrast to the cloud providers like Amazon, Google and Microsoft, which provide similar services that run exclusively on their clouds. Pivotal is not the first to build an open-source Function as a Service, but they are attempting to package it in a way that makes it easier to use.

Serverless doesn’t actually mean there are no underlying servers. Instead, it means that developers don’t have to point to any servers because the cloud provider takes care of whatever infrastructure is required. In an on-prem scenario, IT has to make those resources available.

May
09
2018
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StubHub bets on Pivotal and Google Cloud as it looks to go beyond tickets

StubHub is best known as a destination for buying and selling event tickets. The company operates in 48 countries and sells a ticket every 1.3 seconds. But the company wants to go beyond that and provide its users with a far more comprehensive set of services around entertainment. To do that, it’s working on changing its development culture and infrastructure to become more nimble. As the company announced today, it’s betting on Google Cloud and Pivotal Cloud Foundry as the infrastructure for this move.

StubHub CTO Matt Swann told me that the idea behind going with Pivotal — and the twelve-factor app model that entails — is to help the company accelerate its journey and give it an option to run new apps in both an on-premise and cloud environment.

“We’re coming from a place where we are largely on premise,” said Swann. “Our aim is to become increasingly agile — where we are going to focus on building balanced and focused teams with a global mindset.” To do that, Swann said, the team decided to go with the best platforms to enable that and that “remove the muck that comes with how developers work today.”

As for Google, Swann noted that this was an easy decision because the team wanted to leverage that company’s infrastructure and machine learning tools like Cloud ML. “We are aiming to build some of the most powerful AI systems focused on this space so we can be ahead of our customers,” he said. Given the number of users, StubHub sits on top of a lot of data — and that’s exactly what you need when you want to build AI-powered services. What exactly these will look like, though, remains to be seen, but Swann has only been on the job for six months. We can probably expect to see more for the company in this space in the coming months.

“Digital transformation is on the mind of every technology leader, especially in industries requiring the capability to rapidly respond to changing consumer expectations,” said Bill Cook, President of Pivotal . “To adapt, enterprises need to bring together the best of modern developer environments with software-driven customer experiences designed to drive richer engagement.”

Stubhub has already spun up its new development environment and plans to launch all new ups on this new infrastructure. Swann acknowledged that they company won’t be switching all of its workloads over to the new setup soon. But he does expect that the company will hit a tipping point in the next year or so.

He also noted that this over transformation means that the company will look beyond its own walls and toward working with more third-party APIs, especially with regard to transportation services and merchants that offer services around events.

Throughout our conversation, Swann also stressed that this isn’t a technology change for the sake of it.

Apr
21
2018
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Pivotal CEO talks IPO and balancing life in Dell family of companies

Pivotal has kind of a strange role for a company. On one hand its part of the EMC federation companies that Dell acquired in 2016 for a cool $67 billion, but it’s also an independently operated entity within that broader Dell family of companies — and that has to be a fine line to walk.

Whatever the challenges, the company went public yesterday and joined VMware as a  separately traded company within Dell. CEO Rob Mee says the company took the step of IPOing because it wanted additional capital.

“I think we can definitely use the capital to invest in marketing and R&D. The wider technology ecosystem is moving quickly. It does take additional investment to keep up,” Mee told TechCrunch just a few hours after his company rang the bell at the New York Stock Exchange.

As for that relationship of being a Dell company, he said that Michael Dell let him know early on after the EMC acquisition that he understood the company’s position. “From the time Dell acquired EMC, Michael was clear with me: You run the company. I’m just here to help. Dell is our largest shareholder, but we run independently. There have been opportunities to test that [since the acquisition] and it has held true,” Mee said.

Mee says that independence is essential because Pivotal has to remain technology-agnostic and it can’t favor Dell products and services over that mission. “It’s necessary because our core product is a cloud-agnostic platform. Our core value proposition is independence from any provider — and Dell and VMware are infrastructure providers,” he said.

That said, Mee also can play both sides because he can build products and services that do align with Dell and VMware offerings. “Certainly the companies inside the Dell family are customers of ours. Michael Dell has encouraged the IT group to adopt our methods and they are doing so,” he said. They have also started working more closely with VMware, announcing a container partnership last year.

Photo: Ron Miller

Overall though he sees his company’s mission in much broader terms, doing nothing less than helping the world’s largest companies transform their organizations. “Our mission is to transform how the world builds software. We are focused on the largest organizations in the world. What is a tailwind for us is that the reality is these large companies are at a tipping point of adopting how they digitize and develop software for strategic advantage,” Mee said.

The stock closed up 5 percent last night, but Mee says this isn’t about a single day. “We do very much focus on the long term. We have been executing to a quarterly cadence and have behaved like a public company inside Pivotal [even before the IPO]. We know how to do that while keeping an eye on the long term,” he said.

Apr
20
2018
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Pivotal Software closed up 5% following IPO, raised $555 million

Stock market investors showed lukewarm enthusiasm for Pivotal Software’s debut on Friday. After pricing the IPO at $15, the company closed the day at $15.73.

Although it didn’t “pop” for new investors, pricing at the midpoint of its proposed range allowed Pivotal to raise $555 million. Its public company market cap exceeded $3 billion.

The enterprise cloud computing company has been majority-owned by Dell, which came about after its merger with EMC in 2016. It was spun off from Dell, EMC and VMware in April 2013.

After that, it raised $1.7 billion in funding from Microsoft, Ford and General Electric.

Here’s how it describes its business in the S-1 filing:

Pivotal looks to “provide a leading cloud-native platform that makes software development and IT operations a strategic advantage for our customers. Our cloud-native platform, Pivotal  Cloud Foundry (‘PCF’), accelerates and streamlines software development by reducing the complexity of building, deploying and operating new cloud-native applications and modernizing legacy applications.”

According to the filing, Pivotal brought in $509.4 million in revenue for its fiscal year ending in February. This is up from $416.3 million in revenue for 2017 and $280.9 million in revenue the year before.

The company is still losing a lot of money, however. Losses for fiscal 2018 stood at $163.5 million, improved from the than the negative $232.5 million seen in 2017 and $282.5 million in 2016.

“We have incurred substantial losses and may not be able to generate sufficient revenue to achieve and sustain profitability,” the company warned in the requisite “risk factors” section of its IPO filing.

Pivotal also acknowledged that it faces competition from “legacy application infrastructure and middleware form vendors” like IBM and Oracle. The company says it additionally competes with “open-source based offerings supported by vendors” like RedHat. Pivotal also faces challenges from SAP Cloud Platform, Amazon Web Services and Microsoft Azure.

The company says it believes it will stand out from the pack because of its strong security and easy-to-use platform. Pivotal also claims to have strong brand awareness and a good reputation. It has 118 U.S. patents and 73 pending and is betting that it will remain innovative.

Morgan Stanley and Goldman Sachs served as lead underwriters. Davis Polk and Fenwick & West worked as counsel.

The company listed on the New York Stock Exchange under the ticker “PVTL.”

It has been an active spring for tech IPOs, after a slow winter. Dropbox, Spotify and Zuora are amongst the companies that have gone public in recent weeks. DocuSign, Smartsheet, Carbon Black and Pluralsight are all expected to debut within the next month.

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