This weekend I resigned from the Spredfast board. It was a very hard thing to do. And, today, Spredfast has officially been acquired by Vista Equity Partners and merged with Lithium (a prior Shasta portfolio company). This ends a fantastic 7-year relationship with one of the best teams and companies that I've been involved with during my 18 years of venture capital.
Here are my takeaways from the investment and the acquisition:
Generation 2 Company
Spredfast is an example of how Gen 2 companies are often the most successful in a new market. In the case of Social Media Management (SMM), the Gen 2 companies (Spredfast, Sprinklr, Hootsuite) outperformed the Gen 1 companies in the space. In any market, it is the Gen 2 companies (the ones following a first wave of pioneering Gen 1 startups) that often emerge with the real software products to address emerging market needs. And, in the SMM space, with the exception of the failed Buddy Media acquisition during the initial hype cycle of the market, the Gen 2 companies will drive larger exits. Sprinklr and Hootsuite will both continue to grow and achieve nice outcomes.
Spredfast once again proved that laser focus on building a product that solves a critical pain point - and is well designed and easy to use - leads to customer delight. From the very start, my thesis was that Spredfast built the best enterprise-grade SMM platform. And they continued to innovate along the way.
Spredfast represents the second investment of mine to be acquired by Vista (Marketo was acquired in 2016). Also, two Shasta additional companies have been acquired by Vista. The Spredfast acquisition continues to demonstrate that private equity is an increasingly viable exit for software companies that are not destined to go public. Vista is the best in the business and I look forward to seeing what they can do with Spredfast and Lithium combined.
Austin remains an incredible location to start and build a software company. There is a vibrant entrepreneurial ecosystem with many prior successes that serve as examples to founders & CEOs on how to build great companies and provide countless options for experienced mentors and advisors. In addition, there are incredible resources like The Capital Factory for housing and accelerating new startups. But, Austin has changed a lot since 2005 when I first invested there in a company called Lombardi (acquired by IBM). Besides more traffic, the gorillas have moved into town (FB, Oracle, etc). And, like everywhere else, there are more startups and much more capital. As a result, competition for and the cost of talent has increased dramatically. But, relative to the Bay Area, employees are still more loyal to their companies and tend to stick through tough times. Austin will continue to be a core investment focus for me and Shasta (along with the Bay Area, Seattle and New York).
Spredfast reminded me again of what I look for in a management team. Ultimately, the reason I backed Spredfast (besides believing in the Gen 2 market opportunity in SMM) was the management team. Yes, they are experienced (built and sold Lombardi prior to Spredfast). Yes, they build great products. Yes, they can market and sell. But more than anything, they know how to build a company with the culture and the attitude to win - to persevere through the inevitable roadblocks and tough times that come with every startup. This is what it takes. And, after 10 years together and two companies, they are now my friends and I will miss working with them on this great company.
Thank you Rod, Jim, Dan, Manish, Virginia, Carol, Lynn, Eric and the whole Spredfast team for including me on your fantastic journey.