Quickly Unpacking A Wild Week Of Big Exits – Gainsight, Kustomer, Slack

For usual readers of this blog, by now you’re perhaps used to seeing a new post “Quickly Unpacking” the latest technology startup acquisition, usually of the billion-dollar plus category. Throughout the history of the modern startup ecosystem, “billion dollar exits” drove the model, the returns, and the narrative of how startups go from cradle to rocketship.

However, as the last decade drew to a close, technology exits ballooned – think massive private deals, from Whatsapp to Facebook for $22B or LinkedIn, as a private company, being acquired by Microsoft for $26B, all during a time where recently-IPO’d companies like Shopify, Twilio, Docusign, and Zoom all began their new lives as public, single-digit billion-dollar plus companies.

As the technology industry has grown, and as end markets have been proven to be much bigger than most imagined, and with the next decade’s digital acceleration pulled forward to the present due to pandemic shutdowns, big deals are happening at a furious pace. Just this past week, we saw not one, but two, billion-dollar SaaS exits, and then a mega-acquisition of another public SsaS company. Let’s very briefly unpack those deals:

Facebook buys Kustomer for $1B+. My quick takeaways mostly relate to what this says about Facebook’s product intentions. Kustomer, an enterprise technology startup focused on using automation to help their users manage customer service. Facebook famously tried to shoehorn business-focused chatbots into Messenger, but that didn’t really work. Today, scores of small and medium businesses communicate with their customers via Messenger or Whatsapp — recall that Facebook will also unify all their messaging properties, including Instagram — into one channel to each individual. This year, Facebook also saw an uptick of usage for new forays such as Marketplace and Shops, where individuals and small/medium businesses can conduct commerce. A platform like Kustomer helps Facebook beef up its own internal capabilities on the B2B side, and as their @ Work platform continues to grow. On a personal note for Haystack, this marks one of the first mega-exits for 1/ our old friends at Social Leverage (congrats Howie!) and 2/ our close friends at NYC fund Boldsart — but this is just the beginning, with many more exits coming down the pipe.

Vista buys out Gainsight for $1.1B. My quick takeaways here are mostly driven by Vista and Gainsight’s leadership. Vista is one of the preeminent technology and SaaS buyout shop with a terrific track record, so their purchase of Gainsight for over $1B must lead them to believe they can help grow accounts and build more value into the franchise before either selling the company to another large technology platform and/or spinning out Gainsight to go public. Come to think of it, maybe even Vista could go public itself – who knows. Despite gritty execution, Gainsight fought within a tricky market that turned out to be not as big as some dreamed of, but also one that faced myriad startup challengers coming into customer success using machine learning, automation, data modeling, and more. On a more personal note for Haystack, Gainsight’s journey to Vista is spearheaded by Nick Mehta, an old friend who led a terrific team over many years through tricky waters, and also the first big exit for a friend who helped me start Haystack many years ago, Nakul Mandan. (Nakul led the investment for Lightspeed, where I am a venture partner.)

And, drumroll…. Salesforce announced its intention to acquire Slack for $28B. It immediately reminded me of Microsoft buying LinkedIn a few years back. This deal has extra juice in the startup world for a variety of reasons — Salesforce is on an absolute market tear, triggering whispers around a march toward a trillion-dollar valuation; the company’s leader Marc Benioff is a living legend and famously a big deal whale hunter; it combines two of the most powerful SaaS companies in the enterprise right now; and it marks the end of Slack as we know it as an independent, public company. Slack’s trajectory over the last 5-7 years has been nothing short of heroic — a pivot, lots of time to find product-market fit, and then unlocking new behaviors, distribution, and business models within the workplace. There were many pieces written on the product potential of such a tie-up, with Salesforce riding the all-time high for its stock to help purchase another great software asset.

If you’re interested in digging into the potential for this deal on the product side, would recommend you listen to the most recent episode (#14) of The All In Podcast — briefly, David Sacks, who in a previous life co-founded Yammer (an social feed for enterprise workers, which was bought by Microsoft), suggests that if one had to nitpick a terrific company and outcome, they could point to the hesitance of building out a true enterprise sales motion. If Sacks is right in pinpointing this detail, we may look back on this week and zoom out — that it’s the largest technology companies using their cash and rising stock to extend its product reach into new markets. Facebook, Salesforce, and whomever ultimately acquires Gainsight once Vista is done with it, represent the technology giants who can aggregate new cutting edge products and networks to grow and grow.