These big deals are cutting into my sleep! Another day, another interesting deal in startup-land. This one wasn’t quite as big as the $35b Uber-Didi deal, but it’s still big. Quip was just acquired by Salesforce, reportedly for $750m. Quip raised two rounds of VC totally $45m (per Crunchbase) and was a deal that didn’t really hit the VC market as Bret Taylor has been known and tracked for years as a top-flight product designer and entrepreneur.
1/ Front-End Collaboration: Dropbox has Hackpad, Microsoft has Office Suite, Google has Docs, and so forth. Quip gives Salesforce a well-crafted front-end collaboration tool to distribute to its ecosystem. The common thread here is apps sitting on databases to move higher up the stack for value.
2/ Consumer-Grade Product and Design Chops: Benioff noted in a few interviews that he’s had his eye on Quip’s CEO, Bret Taylor, who boasts a top-flight product design resume from Stanford, Google (Maps), and most recently Facebook, where he was a top exec. Elite product design is the ultimate skill in startup-land. Any one of the enterprise companies listed above would’ve paid up to have Taylor and his team folded into their offering — we can assume most put in a bid and that Salesforce probably bid the highest. (Benioff was also an investor in the company.)
3/ Capital Efficient VC For Top-Tier Talent: Taylor was and is a highly sought-after target for VC investment. If we assume he gave up 33% for $15m up front to work with Benchmark as a lead, that would put the return at 16.67x in 3 years time. Put another way, that $15m turned into $250m in three years. (To clarify, lots of assumptions here — it’s possible the $15m raise was much less dilutive for Quip — I don’t know those details. We also don’t know usage numbers, but Quip had a pricing model similar to Slack’s in that you can use it for free until your team got to a certain size. Benioff may have seen the retention numbers on the product be very sticky and translated that to dollar signs when pumped into the Salesforce ecosystem.)
4/ M&A Echo Chamber Chatter: In the last month, there have been more posts and tweets hinting at more M&A from incumbents, who are sitting on cash, all-time stock market highs, and potentially fearful of the future in terms of product innovation. As news hits every week about a mega-merger in Asia or a huge talent deal like this, the shot of liquidity gets peoples’ blood moving and there’s more chatter amongst investors about potential “special situations” to see liquidity in what’s been obviously an illiquid climate.
5/ Creating Something Simple Is Difficult: I wasn’t an avid Quip user, but many good friends were. They would consistently talk about using the product but never rave about it in the same way as other apps or services. I wonder if that’s because so much of Quip’s elegance in design shielded the user from those details. From the times I used it, I could tell it would sync across apps and servers almost instantaneously (it reminded me of Orchestra) and allowed people to collaborate with many people on a document and use design to strip away the noise.