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.
Product Focus
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.
Private Equity
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
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).
Team
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.