Acquired Episode 15: ExactTarget (acquired by Salesforce) with Scott Dorsey

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[17] now.

[18] This can be a great episode.

[19] This is going to be awesome.

[20] Yeah.

[21] I think Administrivia might only be asking for reviews.

[22] Should we keep doing that?

[23] Does it sound needy?

[24] Who got the truth?

[25] Is it you?

[26] Is it you?

[27] Is it you?

[28] Is it you?

[29] Is it you?

[30] Is it you?

[31] Sit me down.

[32] Say it straight.

[33] Another story.

[34] Welcome to episode 15 of Acquired.

[35] The podcast where we talk about technology acquisitions.

[36] I'm Ben Gilbert.

[37] I'm David Rosenthal.

[38] And we are your hosts.

[39] We'll be talking about the 2013 Salesforce acquisition of Exact Target.

[40] We have with us today Scott Dorsey.

[41] Scott was the founder and CEO of the Exact Target.

[42] And I actually interned at Exact Target for a summer when I was in college.

[43] And probably worth mentioning, Scott is also my cousin.

[44] So super, super excited to have family on the show.

[45] And welcome, Scott.

[46] Hey, thanks, Ben.

[47] Really appreciate it.

[48] and David, delight to be on the show, and proud to watch how your careers develop, Ben, and glad that you had a little stinted exact target along the way.

[49] That's pretty neat.

[50] Super, super fun.

[51] I met a lot of great people there, so.

[52] Wouldn't be here today without it.

[53] No, no, that's true.

[54] I think normally we talk about the acquisition history and facts, and David sort of reviews that, but I thought a really cool way of diving into the show today would be to kind of have David do a little bit of review of facts, but kind of go into a Q &A with Scott.

[55] Yeah, that's the plan since we're lucky enough to have the primary source here sitting with us.

[56] So for folks who don't know, Exact Target was founded by Scott and your co -founder is Chris Baggett and Peter McCormick in Indianapolis in December of 2000.

[57] So, Scott, December of 2000, how did you guys decide to start a tech company, the bubble had just burst.

[58] You know, you weren't in Silicon Valley.

[59] What was going through your minds?

[60] Exactly, David.

[61] It's a great question.

[62] And we're a classic, you know, kind of didn't know any better against long odds story in that we started exact target in December of 2000 under the toughest conditions.

[63] The internet bubble had burst.

[64] You know, VC funding had really dried up.

[65] And we were three first time software entrepreneurs, you know, starting a tech company in Indianapolis.

[66] And actually, none of us had a technical background.

[67] So we were against long odds for sure, but we had a real clear vision around what we were trying to accomplish.

[68] And it was actually my co -founder, Chris Baggett.

[69] And while we're kind of unpacking some family stories here, Chris is actually my brother -in -law.

[70] So we both married into this great family from Indianapolis.

[71] He's from Pittsburgh, and I'm from Chicago.

[72] And I had just finished my MBA at Kellogg over at Northwestern and really studied entrepreneurship and Internet business models and had just come back from our Capstone course, which was studying really the Silicon Valley ecosystem and figuring out how to apply that to Chicago and how to apply that to the Midwest.

[73] And Chris had this big idea around database marketing and how to apply database marketing principles to the Internet.

[74] And Chris is one of these just incredible visionaries and evangelists, and he's now done it multiple times, even post -exact target by founding a company called Compendium in the blogging software space, and now he's very deep into food tech and agriculture.

[75] But, you know, Chris had a real sense that the internet was going to transform marketing, and that email marketing in particular and permission -based email was going to be a very powerful way for small businesses to get to know their customers better and be able to build these kind of personalized relationships and be able to deliver relevant content that drove business.

[76] And he was right.

[77] So he was so passionate about the idea that he really convinced me to kind of quit my day job.

[78] I was working for an internet incubator in Chicago called Divine.

[79] And we sold the house and had two little ones and put the family in the car and drove to Indian Apples and said, let's give this a shot.

[80] Wow.

[81] That's a pretty crazy.

[82] Did you guys try and raise money from Silicon Valley B .C. at that point?

[83] So you raise some money from friends and family and a few local individuals.

[84] Bob Compton, I believe, was your lead investor.

[85] But, you know, I got to imagine in December of 2000, not many VCs are making any investments, let alone first -time tech entrepreneurs in Indianapolis.

[86] No, that's exactly right, David.

[87] We spun our wheels, you know, talking to a lot of different VCs in Indianapolis, Minneapolis, we really didn't head back to the valley in a meaningful way, but we certainly talked to a lot of VCs in the Midwest without.

[88] absolutely no luck.

[89] And then started talking to angel investors who are also kind of slow to move.

[90] So our first round of financing was just a classic friends and family round.

[91] We raised about $200 ,000 from, you know, those that loved us and trusted us.

[92] And that early investor roster was, you know, my parents and my brother and my father -in -law.

[93] And then pretty much all of Chris's neighbors.

[94] Chris has just this infectious enthusiasm.

[95] And it's not much of an exaggeration to say he went door to door with the PPM in his neighborhood and collected $5 ,000 checks.

[96] And we were so careful, you know, especially with Chris and I being family, we only wanted to raise small amounts of money from family members that if it didn't work out, you know, there'd be no hard feelings.

[97] We wouldn't have any discomfort, you know, around the Thanksgiving dinner table.

[98] So we scooped up a lot of $5 ,000 and $10 ,000 checks and cobbled together the first couple hundred thousand dollars in the business.

[99] And really cool story is that for those investors, that put 5 ,000 into that seed round and went the distance.

[100] And actually, a handful of them did.

[101] They held the stock all the way through the Salesforce acquisition.

[102] That $5 ,000 became well north of a million dollars.

[103] So lots of pools and home renovation projects started popping up in Chris's neighborhood.

[104] And we had a lot of happy family members.

[105] So that was really our first move.

[106] We were a bootstrapped startup.

[107] up, you know, the three of us worked without taking a salary for the first six months of the business.

[108] And then we were really fortunate to find Bob Compton.

[109] And Bob was a very accomplished venture capitalist and tech entrepreneur in his own right.

[110] Bob had invested in a company called Software Artistry, which was the first really Indiana software company to go public and then later was acquired by IBM.

[111] And then he was a venture capitalist at CID Equity.

[112] And then actually ran one of their investments, Sophomore Danik, and Sophomore Danik sold the Medtronic and was a big exit.

[113] So Bob was a very accomplished investor and tech entrepreneur, and he became our lead angel investor and really became my mentor.

[114] He was chairman for the first seven or eight years of the business.

[115] And once Bob put money into the business, then raising capital got a lot easier.

[116] We had that stamp of credibility that we really needed.

[117] And with only 200 ,000 raised, I mean, this was the era before cloud computing.

[118] How did you invest that to build the business?

[119] It's a great question, Ben.

[120] And it's so different.

[121] You know, AWS didn't exist.

[122] So we were buying servers.

[123] You know, we were racking servers.

[124] We were buying networking equipment.

[125] You know, we really had to build the infrastructure.

[126] And ironically, our first $10 ,000 went to Liris, which later turned out to be an email marketing competitor.

[127] But Liris had a server -based solution for sending email at volume.

[128] and that was one of our early licensing purchases.

[129] So really most of the money went to building the product and building the early infrastructure.

[130] And then this was interesting.

[131] You always have to leverage your timing and your unique assets.

[132] And one of our unique assets in an element of the era was that we had a lot of awesome friends and colleagues that were looking for what was next.

[133] And a good number of them were with .com that didn't work out.

[134] and we ended up hiring our first sales team as kind of independent contractors where, you know, we convinced a friend that we had a big vision, this was a neat opportunity, and they would sell for us, and we gave them equity in the company, and they would sell for us, you know, really as an independent contractor, no salary, commission only, and they had to do it all.

[135] They had to find the lead, put the pitch deck together, sell the deal, collect the deal, implement the customer, and if they made it all the way through, we paid him a commission.

[136] So we actually built this really kind of seasoned sales team early, just on the back of the fact that we had a lot of really good friends that were kind of looking for something that was next in their career.

[137] And then once we got funded, they became real employees and we were able to provide benefits and all that good stuff.

[138] But we built a very scalable sales organization before we really could afford to.

[139] How much do you think that sort of original DNA of totally giving all, you know, pure commission based sales to those early sales folks?

[140] do you think kind of helped shape the way that that organization was built?

[141] Great question, Ben.

[142] A huge influence.

[143] We, from day one, we're a very sales -driven and customer -driven organization.

[144] And just the nature of the three founders, all sales, marketing leaders, kind of general management background, you know, everybody sold, everybody spent time with customers.

[145] And early on, we would describe ourselves as marketers building software for marketers.

[146] We had a very, very keen sense for what problem we were solving and what we wanted the product.

[147] to look like and how we wanted to function.

[148] So that was, you know, product management V1, you know, was really all driven by the founders.

[149] But we created a sales culture early on where the three of us were very aggressive in selling and working with customers.

[150] And it's perhaps my very favorite element of software as a service is that if you, you know, are a good listener and you work closely with customers, they will reveal your product roadmap for you, you know, And it's really your job to certainly bring your vision and your point of view, but you're really distilling feedback from many, many individuals and organizations, your customers and your prospects in the marketplace.

[151] And if you can distill that feedback in the right way and take action upon it, you can build an amazing solution that clients really want.

[152] So that was one of our, you know, I think one of our real strong suits was being very close to the customer and being great listeners and really helping them shape our product.

[153] But we were incredibly sales driven.

[154] And because of that kind of independent network of sales representatives that we built, we were very sales heavy early on.

[155] Actually, I looked back, I did a history of exact target chat a few months ago, and I looked back at one of our early decks.

[156] This was even staggering to me. But at the moment where we had 44 employees, we actually had 26 in sales.

[157] Wow.

[158] That's heavy.

[159] That's heavy.

[160] So we were very sales -driven.

[161] And then we also unlocked a channel far earlier than most software companies.

[162] We realized that digital agencies could be great partners of ours.

[163] They were building websites.

[164] They were writing copy and content, but they really didn't have tools for email marketing specifically.

[165] And we built a big channel program that allow these agencies to leverage our tech platform, rebranded or white label it where they needed to and build these recurring revenue streams that were advantageous for them.

[166] And that allowed us to start reaching into big Fortune 500 companies like General Mills and Home Depot became clients of ours.

[167] through their trusted agency at a time when we were still a small and scrappy company.

[168] So it helped us kind of punch way above our weight class early on.

[169] And that was a big drive of our early success.

[170] On that front, you know, we should say for our listeners, too, this is, I think, really our first or one of our first pure enterprise technology companies that we've covered.

[171] Oh, actually, I'd be curious on Scott's take on saying that.

[172] Well, well, but I want to come back to that because, you know, and I say that because, you know, as VCs, There's sort of this like trope when you're looking at, you know, investments in the enterprise that like there's this matrix of, you know, what, what your target customer is when you're when you're an enterprise, you know, software company and who you sell to and you need, you know, it's like a test.

[173] Like you need to, you need to have that nailed.

[174] It's like, are you enterprise or are you midmarket or are you SMB?

[175] Do you sell direct?

[176] Do you sell via the channel?

[177] You know, and and typically you need to have very clear answers to those.

[178] But it sounds like, you know, from the get -go, you guys were like, yes, to all of those.

[179] Was that deliberate?

[180] You know, how did you think about that?

[181] No, great question, David.

[182] We were very small business focused, very small business focused.

[183] In fact, our, you know, first wave of customers were literally restaurants, dry cleaners, peaches shops.

[184] We are very SMB and very retail -oriented.

[185] And the original problem we were trying to solve was that when the retailer, you know, turns their lights on and opens their door in the morning, they often have little visibility into who's walking in the door and who their customers are and how to build, you know, deeper relationships.

[186] And that was part of the background that Chris brought to the business.

[187] So early on, we were, you know, a thousand dollar a year subscription and very small business focused.

[188] And actually, a good number of the reasons why those early VCs said no is they just, they just couldn't picture that this could become a large business.

[189] And then over time through, you know, I think being crafty and agile and very sales and customer oriented, we started to realize, actually our first wave of expansion was, you know, to grab lots of small businesses at one time, you need to start selling to franchise organizations.

[190] So we started evolving to franchise organizations where the franchisor cared a great deal about centralized branding and content, but they wanted to give autonomy and authorship down to the franchisee.

[191] So we started to build kind of this parent -child relationship and this kind of enterprise architecture to serve franchise orgs, and that gave us a big boost.

[192] Then we started realizing that really every organization in the world is going to need to use email and digital marketing to communicate with their customers, whether you were a nonprofit or Microsoft on the enterprise side.

[193] There really were a common set of needs, and we just built more and more sophisticated technology.

[194] And then ironically, we were a Salesforce customer from the inception of our business.

[195] So we were students of Salesforce.

[196] We really watched how Salesforce built and scaled their business, and we admired that they were a multi -tenant SaaS platform that served small businesses all the way up to large enterprises.

[197] And I just fell in love with the idea that you could essentially build software once and sell and deploy it over and over again and that you could build features that could be, every feature we ever built had a switchboard.

[198] We had an on -off button where we could deploy the software and package it in a really flexible.

[199] a way that was very simple for the small business, or we could turn on all the advanced capabilities for the more sophisticated enterprise, and to have essentially one code base where we have clients, you know, paying $1 ,000 a year, and clients, we had a lot of seven -figure clients and even some eight -figure clients essentially using the same platform.

[200] That's just a remarkable level of scale and flexibility.

[201] And there's a lot of tension that applies to the organization around segmentation.

[202] Who are you building products for?

[203] How do you build your services org?

[204] What are your support models?

[205] These are all the things BCs are afraid of, right?

[206] Oh, yeah, yeah, absolutely.

[207] But so we started small and then we disrupted, we really disrupted the incumbents by kind of inching our way up market.

[208] And I think they often underestimated us.

[209] But it was that flexibility that was strong.

[210] And I really, I wanted to be a part of that democratization of software.

[211] I wanted to deliver compelling software to small businesses in an affordable way.

[212] And I always felt that our market opportunity would be a lot bigger if we could continue to serve SMB to enterprise.

[213] And then the really neat thing is small businesses become big businesses and marketers leave small companies and go to big companies.

[214] So we had a lot of pull through.

[215] Actually, one of our largest customers over time was Groupon.

[216] And Groupon came into our small business inside sales team when they were barely just getting started and they were able to scale with us nearly every step of the way.

[217] So there are a lot of neat success stories where that SMB to Enterprise range, yeah, was a big differentiator for us.

[218] Yeah.

[219] So I'm curious, so, you know, moving, so you know, you have a few years of bootstrapping.

[220] You start really small, you know, dry cleaners, you know, pizza shops, as you're saying.

[221] And then, you know, things go well, a couple years, well, four years later, 2004, you end up raising 10 .5 million from Insight.

[222] By 2006, you raise another $7 million.

[223] And at that point, you're doing, you know, sort of 40 -ish million in revenue.

[224] What, you know, On that kind of stair step up, you know, how long did it take to get to, you know, from the individual little guys to the franchisees to up to, I would assume by the time you're doing, you know, 40 -ish million in revenue, you're probably already at the enterprise.

[225] They're starting to hit the enterprise at that point.

[226] Were there like specific break points along the way?

[227] I'm thinking perhaps like, you know, Microsoft is one of your biggest customers.

[228] How did that conversation start?

[229] How did they come into the fold?

[230] Yeah, that's a great question, David.

[231] And maybe I'll first start with just kind of going back to that time frame.

[232] So in December of 2007, we actually filed to go public.

[233] We were 48 million.

[234] Yeah, we were 48 million in revenue.

[235] We were profitable.

[236] And we were just starting to kind of reach the enterprise space.

[237] And we were extraordinarily capital efficient.

[238] So the fundraising that you referenced is all accurate, but actually can be a little deceiving because each of those rounds was a mix of primary and secondary capital.

[239] So we often had a secondary component to our fundraising to provide founders, employees, and early investors an opportunity to take a little bit of money off the table along the way.

[240] And I was so grateful we did that actually because we, especially because of how we bootstrap the business and how our three co -founders worked for a very long period of time without paying ourselves, having an opportunity to take a little bit of money off the table along in the way was powerful because it just allowed us to sleep all at night knowing that we had some level of financial security for our family and we'd be able to send our kids to college and all those good things.

[241] But then it just got us hungry to really want to take the business to distance and make sure we didn't prematurely sell the business.

[242] So what was interesting is when we filed in December of 07, we had only raised $6 million in primary capital and we had nearly as much on a balance sheet.

[243] So we had been extraordinary capital efficient up to that point.

[244] So we filed the go public in December of 07, the public equity market just fell apart in early 08.

[245] And we actually stayed on file all of 08 and ultimately decided to pull the IPO in early 2009.

[246] And that's a whole other story.

[247] I'd be happy to jump into.

[248] But I would say it was that time frame where we started reaching up into the enterprise and the nature of our business was shifting.

[249] We started building more professional services capability.

[250] And the fundamentals of the business started shifting.

[251] and in addition to the equity markets not being very favorable, it actually was a huge blessing for us because it gave us a chance to stay private, bring more capital in the business, and, you know, kind of recalibrate toward the enterprise, and it was much easier to do that as a private company.

[252] Yeah, and that's where I wanted to go next to you kind of leading up to, so you finally go public in December of 2007, and this was the days before the Jobs Act, which, you know, hard to imagine now that, well, easy because we all lived through it.

[253] But, you know, your prospectus was standing, you know, out there in the public domain from December of 2007, you know, well, still to this day, but until May of 2009, you were on file and all your competitors could come read your S -1 and, you know, see all your financials.

[254] And then you ultimately didn't go public then, I assume because of the financial crisis in large part, you know, there were no IPO happening then.

[255] What was that like?

[256] It was so difficult.

[257] It was so difficult.

[258] You're exactly, right.

[259] You know, all the press, I'm sure you could read everything about you and, you know, you're still a private company, but you have none of the benefits of being a public company, but all the downsides.

[260] That's exactly right.

[261] I would, I would commonly say we had, we had, you know, all the burden and cost and pressure of being a public company with none of the benefits, you know, zero, because you're exactly right.

[262] This was pre -jobs act.

[263] And, you know, we had a report every quarter just as if we were a public company.

[264] So the silver lining is we had a great training ground of how to set quarterly expectations, how to work with the street, how to work with analysts.

[265] We had to do quarterly, you know, earnings calls, you know, with the analysts that would be covering our stock.

[266] But it was very, very difficult.

[267] And a testament to the strength of our team and our company culture that we kept everybody focused.

[268] We kept everybody very positive.

[269] And 08 was just a difficult year for running the business in general, given the economic crisis.

[270] Our churn numbers went up because a lot of our small business customers were going out of business.

[271] Renewals got tougher, upsells got tougher, new business.

[272] There was a lot of price pressure.

[273] So, you know, we had a good year in 08, but it was a very different year, you know, from the prior years of our business.

[274] But it was a great learning and growth opportunity for us.

[275] In early 2009, it just became evident we were not going to get out.

[276] We certainly didn't want to, we didn't need the capital.

[277] We didn't want to go public unless we were very confident it was going to be a successful IPO.

[278] And then to my earlier comment, the business really started shifting more to the enterprise.

[279] And I also learned a valuable lesson.

[280] We were profitable at that time.

[281] And, you know, the public markets really want to see margin expansion.

[282] And it became really evident that if we were to go public, we were going to have to show margin, both gross margin and operating income.

[283] And it was going to make it very difficult for us to make the strategic investments in the business that we wanted.

[284] We were very passionate about moving beyond email into a pure digital marketing platform.

[285] We were ready for international expansion.

[286] We were ready to start a couple of our acquisitions.

[287] And all of that became a lot easier as a private company.

[288] So we pulled our IPO in early nine in conjunction with a large.

[289] A large round of capital led by battery and scale and the later TCV came on board as well.

[290] And our internal tagline was better than an IPO.

[291] And we really outlined for our employees.

[292] Between that and then a later round you did in 2011, I think you raised more money than in the private markets than you ultimately did in your IPO.

[293] Yeah, we raised $145 million in 2009.

[294] And once again, there was a large secondary component.

[295] But it gave us a war chest to really get aggressive in expanding the business.

[296] And we created a vision we called Accelerate 2013 where we became very specific around the company what we wanted to look like in 2013.

[297] We started with the end in mind and then worked our way back.

[298] And very counterintuitive.

[299] This was the time where Sequoia sent out their favorite kind of famous deck around kind of the good times.

[300] Yes, yes, good times are over, almost mandating.

[301] you know, 20 % headcount reduction across all their portfolio companies.

[302] And as all of our competitors were pulling back, we hit the accelerator.

[303] We got very aggressive in investing in R &D development, building big sales capacity.

[304] Ultimately, we built, you know, a sales organization that was, you know, three or four times larger than aneer's competitors.

[305] So we kind of hyper -invested in the business in 09 and 10, counting on the fact that when the economy came rolling back, we were going to be the best position to take advantage of it.

[306] And that happened.

[307] And then we actually rolled into our IPO, which was March of 2012 with just huge momentum.

[308] We had accelerating growth rates.

[309] We had grown in that 08 time frame, 08, 09, around 30 percent.

[310] And then we moved up to the 40s.

[311] And then we were mid -50s as we kind of rolled into the public markets in early 12.

[312] So that hyperinvestment and that decision to stay private paid big dividends for us.

[313] Yeah.

[314] And then talking about accelerating growth, one of the things that always struck me as really unique about ET was how deliberately you expanded the business internationally and using channel partners as the way to grow.

[315] I think we haven't really talked about international expansion at all in the show, and it'd be really interesting to kind of hear how you thought about that.

[316] They'll be happy to, and you're exactly right, Ben, this was kind of a derivative of our channel and agency program and that we knew we could get reach into markets that we likely wouldn't be able to address directly through channel partners.

[317] And we did the same thing internationally.

[318] So we found a partner in the UK and they spun up essentially an exact target reseller.

[319] And we did the same in Australia.

[320] And as those great teams and later became friends, you know, they built their business and really scaled it around the exact target platform.

[321] When they started to reach some critical mass of customers and employees, we then acquired the business.

[322] So it was kind of a low cost, low risk way for us to expand internationally before we would have been able to do otherwise, you know, as it's kind of a small capital -efficient company.

[323] And we really validated with these partners that there was a market for our software and our services, you know, outside the United States.

[324] And then we started working with multinationals like Nike and Expedia and Microsoft.

[325] And it became imperative if we're going to grow those relationships that we had in the international presence.

[326] So, yeah, three years in a row, we actually acquired every August.

[327] First, we acquired our reseller in the UK and used that as a beachhead to expand through Europe.

[328] And then the next August, we acquired our reseller in Australia.

[329] And then the next August, we acquired a reseller in Sao Paulo, Brazil, and gave us a great reach into that marketplace.

[330] So we did six acquisitions over the course of exact target history and three were product expansion and three were geo expansion.

[331] Cool.

[332] Yeah.

[333] So you go through this period of kind of from a, you know, a dead IP.

[334] that wasn't going to happen, you pull back, you raise a bunch of money at a time when nobody could raise money, you accelerate the business, come out and you go public in March of 2012, and then it's just a little over a year later that the acquisition happens.

[335] The topic of our show, we want to, and we'll get to category and tech themes and everything else in a minute, but I want to spend a little bit of time we were talking with Scott before the show.

[336] One of the things we love to do on Acquired is dig into these legal court cases and SEC documents and all sorts of stuff.

[337] And luckily, an exact targets case, I don't think there are any major court cases, but one of the things that happens when a public company is acquired is there, you're required, and this will be coming out for LinkedIn soon, I can't wait to dive in, you're required to disclose to the SEC the play -by -play of exactly how the acquisition happened.

[338] And so we'll link to it in the show notes.

[339] It's this amazing document about how the exact target acquisition happened.

[340] And I'd love to just, you know, ask you to talk a little bit about that process of, you know, how it started and, you know, again, all of its documented publicly.

[341] Like there were three other bidders that we can't talk about their identities.

[342] They're referred to as party A, party B, and party C in the document.

[343] But multiple offers going back and forth.

[344] I mean, that must have been such a stressful time for you.

[345] How did you navigate through it?

[346] It was incredible learning experience and exhilarating and nerve -wracking at the same time for sure.

[347] So we had been a public company for five quarters and life was good.

[348] We actually, we had a great time.

[349] Our IPO was super successful.

[350] We came out of the New York Stock Exchange at north of a billion dollar valuation and our IPO was heavily oversubscribed and we felt like we had all the right investors supporting us from day one and all that learning that happened in 2008 and 2009 were able to really apply to the S -1 and filing process and IPO and how to pick the right banks and the right analysts and we just had it we had an amazing time going public and really loved it and then five quarters of the public company more of the same you know we kind of met an exceeded plan every quarter we were really embraced by Wall Street and had a great investor base.

[351] We had completed two acquisitions, one called IGO Digital in the predictive analytics space and a second part -dot in the B2B marketing automation.

[352] And life was great.

[353] We're very happy, you know, as an independent public company and we were growing, you know, north of 40 % year over year.

[354] What started to really happen, you know, across the, you know, kind of software ecosystem is that marketing cloud solutions started really garnering more attention.

[355] And I would say really the largest probably five or six software companies in the world, we're really all shifting to the cloud and publicly stating an intent to go a lot deeper into marketing.

[356] So that started happening in a big way.

[357] And for us at Exact Target, a big part of our strategy had been to build a very open platform, robust APIs and lots of integrated partnerships.

[358] So our premise was that marketers need one place to store all the data they have on their customers and then to use that data to drive more personalized and relevant communications and relationships.

[359] So even literally before the app exchange even existed, we integrated into Salesforce and we integrated into Microsoft Dynamics and we had great relationships with Adobe and Omnature and kind of many others across the industry.

[360] So it was very logical that we were attending shows and conferences and co -selling and co -marketing kind of with all these companies.

[361] But Salesforce, you know, we've had this really rich relationship with from being a customer to being an integrated partner to doing lots of things together in the market.

[362] And, you know, we got to know Mark and the team.

[363] And, you know, Salesforce had made a big push into marketing with the Radian 6 and Buddy Media acquisitions and really, you know, had a social first strategy.

[364] And over time, it just became apparent that their customers wanted more, you know, that social was an important channel, but they really wanted a multi -channel platform.

[365] They wanted greater data capabilities, and they wanted a platform that was not only oriented for B2B customers, but also B2C.

[366] So we, you know, we always had a close relationship with Salesforce, and it would always kind of share product roadmaps and vision and direction.

[367] and it just became apparent they were going to make a bigger investment in marketing and knocked on our door and said, hey, we'd like to, we'd like to collaborate and take a closer look at the kind of joining forces.

[368] And you're absolutely right, David, when you're a public company and you get that kind of inbound inquiry, you know, the level of governance and processed is at a very different level.

[369] Yeah, and I'm curious.

[370] And really, for our list, we'll link to this document, you should read it.

[371] It's like a, you know, it's like a legally used version of like high drama of like Shakespearean drama.

[372] But did some somebody hand you a playbook and be like, okay, you know, here's what you do in this situation, or were you guys, you know, figuring it out as you went along?

[373] Clearly it was a first time experience for me, but fortunately we had an excellent, you know, set of advisors and board members that had quite a bit of experience, you know, in this area to make sure that we really followed the right process and did what was ultimately in the best interests of our shareholders, you know, and for me as, you know, as founder and CEO, it certainly can be, you know, kind of an emotional and even a bittersweet process.

[374] And I had hoped that the premium we were offered would be so substantial that it was really an excellent outcome for our shareholders and for our employees.

[375] And then I'd really hope that we ended up with an acquirer that was very strategic and would continue to invest in the business.

[376] And Salesforce became that and a whole lot more.

[377] So the process was amazing.

[378] It was fast and exhilarating and certainly had a lot of pressures.

[379] associated with it.

[380] But I was very, very comfortable that this was the best decision for our shareholders and for our employees and all of our constituents.

[381] And now that we're able to, you know, see what's transpired over the last three years, I have 100 % confidence that this was a huge win for Salesforce and for exact target and everybody involved with the company along the way.

[382] Yeah, I'm really curious.

[383] You guys sold for about a 50 % premium over what you've been trading at publicly, there's got to be a bunch of offers sort of coming in from investment bankers or perhaps even CEOs calling you and saying, hey, you know, I think this might work out.

[384] What number do you start actually paying attention at listening?

[385] Like, when do you form the subcommittee?

[386] And we should say, too, so the acquisition happened in June of 2013, $2 .5 billion, $33 .75 a share.

[387] and your IPO price, I believe, was $19 just over a year before.

[388] And I think trading at 22 or so day before.

[389] Yeah, that's about right.

[390] That's about right.

[391] Our IPO price was 19.

[392] We came out at 23 and a nickel.

[393] And then, you know, largely traded, you know, in the 20s.

[394] And we're kind of in the low 20s, you know, when Salesforce, you know, first put their first offer of $26 a share.

[395] front of us.

[396] And I'll tell you, Ben, it was less about even coming up with a number that was interesting.

[397] We were really just focused on making sure that when you get that, you know, first level of inbound interest that we take it seriously and really handle the process in a way that's above approach and that we're, you know, kind of following every step you need to as a public company and let the process run.

[398] And then ultimately let the subcommittee and the board make the best decision at the end of the process.

[399] And it helps, too, I think you guys, during the negotiation process, released, you beat Q1 earnings and up to guidance.

[400] And that's, that's always a good thing to do.

[401] It's, as you were saying, you know, too, about like, when you pulled the IPO the first time, you know, and then went out, raised all the money and then went out afterwards with the accelerating growth, like, you know, great acquisitions happen when companies get bought not sold, you know, when you had a bright future ahead of you and things were going great and didn't need anybody, you know, that's, that's the, no, that's exactly right.

[402] And you really, you maximize value.

[403] Yeah, when you are operating from a position of strength and you have multiple parties that are really interested in either making a venture investment or ultimately acquiring the company.

[404] And unfortunately, we, we had that, you know, we had that in a big way.

[405] And we just fit so beautifully into Salesforce.

[406] You know, they had a big vision around the marketing cloud.

[407] We were a perfect complement to the two acquisitions they had already made.

[408] And we really brought this, you know, data architecture that was very consumer oriented to the table.

[409] So we give Salesforce a big entree into into the B to C side of the industry.

[410] We brought, you know, this multi -channel marketing platform where by that time we'd expanded, you know, beyond email into mobile and social and web analytics.

[411] We had, we had a really broad, you know, kind of digital, multi -channel platform.

[412] We were, you know, the largest and the fastest growing marketing software company really in the world, and we were able to fill a big gap for them.

[413] And then silver lining was that we had recently acquired Pardot, and Pardot was this just gem of a company in Atlanta that we acquired for right around $100 million, and they were B2B marketing automation player tightly integrated into Salesforce.

[414] So Salesforce, you know, not only was able to get all the benefits that exact target brought to the table, but Pardot was a great snap in that put Salesforce in a position.

[415] where they could compete with Elocua and Marquetto and other players in that, kind of that slice of the industry as well.

[416] Cool.

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[438] Well, I think this is about time we move to our next section of acquisition category.

[439] And what we'll kind of do is David and I will kind of make our picks between people, technology, product, business line, or other.

[440] And then Scott would let me get your take.

[441] We all are encompassing other.

[442] Yeah, it's always kind of cheap.

[443] Yeah.

[444] Well, I think, I mean, I think for me, it's got obviously your word is most important here.

[445] But clearly this is a business line acquisition for Salesforce, you know, going from.

[446] And it's interesting, this is going to go into my tech theme in a minute, but, you know, having been selling into the sales organization for so long and developed these huge accounts and big scale business that Salesforce had to pick up exact target.

[447] And as you were mentioning, Pardot and everything else along with it, to now be able to sell into the CMO and the marketing side was clearly a business line and a great one for them.

[448] Yeah, I mean, I've nothing to disagree with there.

[449] I mean, exact target clearly had, it was not just a product, but a suite of products.

[450] I think when I was finishing out my tenure there, we were launching the digital marketing hub and that include SMS and email marketing, microsites.

[451] We had social with co -tweet, and it became clear that like, you know, there was their own exact target had channel to a lot of different customers that then Salesforce could expand into, but really a whole whole suite of products to add to Salesforce's representation.

[452] too.

[453] And if it weren't more clear that this is a business line, Salesforce actually still, you know, calls this the salesports marketing cloud business line that they break out into results.

[454] And Scott, you ran it when you, when you came there, right?

[455] Correct.

[456] Correct.

[457] I would, I would, I would absolutely agree, guys.

[458] There's no question that we, you know, brought a tremendous group of people and talent and culture to Salesforce and a lot of really unique and proprietary technology.

[459] But I would, I would agree if you had to classify the acquisition into category, I would call it business line because we just fit so beautifully into their marketing cloud strategy and brought a sizable amount of recurring revenue.

[460] You know, we were 300 million in recurring revenue moving to 400 and for Salesforce that their size and their growth velocity and now you see it with demandware, you know, they have to make large acquisitions, you know, that are meaningful, you know, that actually are relevant and can contribute to that top line growth.

[461] And we were able to do that in a big way.

[462] And it's made me really proud that, mark on a number of occasions with Jim Kramer on Mad Money and other places that said that exact target's been the most successful acquisition that Salesforce has ever completed and I believe that to be true.

[463] It's just gone remarkably well and the leaders that were on my team that are now leading kind of big functional areas within Salesforce and the marketing cloud.

[464] They're happy and having a tremendous amount of success and really growing the business in a big way and committing to Indianapolis, which is really, really cool.

[465] Salesforce just recently announced that in addition to the 1 ,400 employees they have in downtown Indy, they're going to add 800 new positions over the next few years.

[466] And then I don't know if you've heard this, Ben, but the tallest building in Indiana is the Chase Tower.

[467] Salesforce is going to consolidate and move employees into that tower, and it's actually going to be renamed the Salesforce Tower.

[468] So to have the...

[469] What does the thing about towers, too?

[470] Oh, yes, yes, yeah.

[471] No, absolutely.

[472] Mark likes his towers.

[473] Mark and the team, they love their towers.

[474] But it's going to be so fantastic for our tech community that the tallest building in the city and the state is actually a tech building.

[475] So it's going to be a big boost and accelerated to our tech community, which I'm very happy about.

[476] And I always remember, too, there's so many unique things about exact target for the region.

[477] There's this big, like, drumbeat from, I think, maybe your first or second office that it was about being an urban company and that people needed to, you know, we were in Monument Circle, which was like this incredibly cool, historic, like, center of down.

[478] town, big statue, exact target had a building with this cool roof deck that looked out over it.

[479] And I remember thinking, well, I never want to work in an office park again.

[480] And I think that like a lot of exact target employees got super spoiled in that way.

[481] No, that's exactly right, Ben.

[482] Our real estate strategy was to really build around this urban core and build a, build a campus and a work environment that was super appealing, you know, really to the, the millennial, the younger generation, and it's been really fun.

[483] Over the last decade, you know, downtown Indianapolis has had this huge resurgence of housing and amazing, you know, restaurants and, you know, kind of a lot of arts and culture and sports.

[484] And exact target, you know, has been a part of that fabric of downtown Indianapolis.

[485] And I really felt that to build, you know, high growth category leading company in a market like Indianapolis, we had to be in the urban core to really take advantage of just the the energy, the vitality, the ability to recruit, you know, top -notch people from all over the country.

[486] And then even to bring in, you know, partners and VCs and customers that could fly into Indianapolis and, you know, take a 15, 20 -minute cab ride to downtown Indy and then be able to just enjoy all the benefits that that downtown setting has.

[487] And that's, that's been neat.

[488] And I'll tell you, one of the neat legacy elements of the exact target is for years we've worked on getting a nonstop flight in place from Indianapolis to San Francisco and not having, it's been a real barrier.

[489] Our West Coast investors, you know, have to jump through lots of hoops to make it make it in Indy for a board meeting.

[490] And it makes just fundraising for all companies here in Indy more difficult.

[491] And right around the time of the acquisition, we actually got it done with United Airlines and have had a nonstop flight back and forth to San Francisco, which might seem trivial, but it's actually been a game changer for our tech community and sales forces appreciated it as well.

[492] No, I totally believe it.

[493] I think a lot of a lot of credence is paid to Seattle proximity to San Francisco as a competitive advantage in fundraising and starting a company in general.

[494] And I think that kind of quick direct flight has just a tremendous amount to do with that.

[495] It's so true.

[496] It's so true.

[497] And the same is happening at Salt Lake City.

[498] You know, Salt Lake is this amazing tech ecosystem, you know, with Omnature and Adobe.

[499] And now you've got, you know, almost a dozen, I would say, you know, kind of unicorn level valuations.

[500] And so much of that is, you know, Salt Lake and Park City are kind of a wonderful place to be.

[501] But it's such a short hop away from Silicon Valley that you're able to raise capital and get those investors really engaged in the business.

[502] Yeah.

[503] Moving to the next section, what would have happened otherwise is sort of two alternate futures here.

[504] And I kind of want to pose both questions to you.

[505] One is, do you think exact target would have made sense with any other acquirer?

[506] And then two, exact target competed against responses and many other companies that started as email marketing solutions for a long time.

[507] do you think there was anyone besides the exact target that could have made sense at Salesforce?

[508] I think yes to both questions.

[509] We certainly could have fit in well with a number of kind of the other largest software companies in the world that have been focused on going a lot deeper into marketing tech and saw it as a big growth area.

[510] And then there's no question that Salesforce looked at lots of different players over the course of time to potentially acquire.

[511] And, you know, one element that's interesting when you go through that evaluation process is a public company and really try to make the best decision for your shareholders is you really have to do a lot of financial modeling and a lot of thinking about what does life as an independent company look like.

[512] And we ultimately did come to the conclusion that being a part of Salesforce was a better outcome, higher probability outcome for our employees for our shareholders.

[513] But there are a number of different ways that our future, you know, could have played out.

[514] But I was very, very happy the way it played out.

[515] And I'll tell you, the other other interest to mention as a public company, we would get an enormous amount of pressure around email.

[516] The, you know, when is the end of email coming and these new channels are going to cannibalize email?

[517] Oh my gosh, it's just, I, you know, it's kind of like if I had a nickel for every time I answered that question, but it was, it was just a heavy theme.

[518] And even sometimes I'd say a cloud over our company where we were thought of as such an email -centric company that even as we expanded around the world and expanded into all these other adjacent technologies that you referenced, Ben, we were.

[519] we're still thought of as an email company.

[520] And I think often didn't get credit for being a broad, multi -channel, omni -channel platform.

[521] But email was such a powerhouse for marketers that that line of business just kept booming.

[522] And our other lines were growing, but they could never even get close to the email side of the business because it's just the most powerful tool that a marketer has.

[523] And as e -commerce has exploded with growth, emails become even more relevant.

[524] Yeah.

[525] I'm curious when you're forecasting what does life look like as an independent company.

[526] I mean, let's say you could continue to grow 40 % year over a year, indefinitely, or at least to the top of some S -curve.

[527] Easy to say on paper, hard to do in fact.

[528] That's right.

[529] That's right.

[530] It gets tougher with a lot of big numbers.

[531] Yeah, yeah.

[532] So at what point do you, one, factor in the top of the S -curve, and then two, how many years out, you know, what do you look at as like sort of the payback period of that premium?

[533] say like, well, they're giving us 50 % premium, and we don't think that we will reach that market cap for 20 years, and we're only looking at a 10 -year time horizon or something like that.

[534] Yeah, I'll tell you, that's where, you know, that's really where the bankers and advisors and, you know, kind of independent committee come in because they had a lot of expertise in how to build those financial models and what time horizon, you know, makes the most sense in order to, in order to kind of predict your independent path versus joining forces within others.

[535] So I probably can't provide a lot more detail than that.

[536] But you're exactly right, Ben.

[537] That's exactly the process that you go through.

[538] That's right.

[539] Yeah.

[540] I'm curious that before we move on from this, and this also bleeds into my tech theme, you don't have to say whether you considered it or not, but do you think looking back most of the big data -driven marketing companies of that generation, exact target being one of if not the leader, you know, got really big.

[541] We're growing really fast on a great trajectory.

[542] but then they all got swallowed up by other big enterprise companies, whether it's Oracle and Elyquah or Exact Target in Salesforce.

[543] Do you think there was any way that, you know, if maybe there have been consolidation among the companies into, you know, could there have been a giant, you know, there's so few giant enterprise software companies.

[544] Could one have been built in the marketing category?

[545] Yeah, that's a great question.

[546] I think why it didn't happen is, overlapping functionality.

[547] You know, that when you take a look at, and there were certainly a lot of conversations that ensued along the way, could you stack together, you know, some of these kind of large marketing tech companies become something bigger and something more meaningful.

[548] And where it starts or where it starts to run a foul or kind of collapse is that you just have a lot of duplication of functionality.

[549] So, you know, an amateur, you know, got kind of pulled into Adobe early, you know, there certainly could have been a fit between, let's say, email and digital marketing channels and analytics.

[550] You know, that would have been a logical connection point, but they kind of got pulled into Adobe early.

[551] But when you looked at, you know, us and responses and some of the B2B marketing automation companies, you often had, you know, kind of a lot of redundant functionality.

[552] But we were headed down that path ourselves, you know, and that's really why the partout acquisition made sense.

[553] And we kind of kept moving deeper into data and analytics and the web and really trying to build out that robust platform to make all these channels work together.

[554] And what's really interesting is the big product we built that stitched it all together is a product called Journey Builder and Salesforce has really embraced that Journey Builder platform and is applying it even across different clouds within Salesforce and using it lots of unique ways.

[555] Cool.

[556] Cool, cool, cool.

[557] David, do you have anything before we go into Tech Trends?

[558] No, I don't think.

[559] So the only commentist that's got on what you were saying is it's interesting you're seeing so many startups now that are emerging that are next generation marketing automation but they're all taking the approach that you said of marrying it up with data and analytics you know i'm thinking you know anything from mixed panel and segment is part of this ecosystem in a different way but um you know so many you know customer dot i o in portland you know intercom um it's funny they're taking exactly the approach that you're saying scott no it's fun it's fun to see it evolve.

[560] You know, one other topic that you asked me about, David, but I think I jumped into another category, but it's kind of a fun story.

[561] I'd love to tell you about it.

[562] It's just the nature of our Microsoft relationship.

[563] Do you mind if I just touch on that real quick?

[564] Yeah, I would love that.

[565] Yes, that was a really fun story.

[566] So we really became the largest cloud company running on Microsoft technology.

[567] We were early users of SQL and dot net, and really everything we built was on the Microsoft framework, and we pushed Microsoft technology, I think, to the edge, you know, as we were building a super transactionally intensive, you know, multi -tenant platform.

[568] But through that, we really built this wonderful relationship.

[569] And then we started integrating into Microsoft Dynamics and had a really nice relationship there.

[570] And then ultimately, Microsoft became a customer.

[571] And it's a really fun story.

[572] Microsoft had an internal platform, an internal email platform called Penns, that really kind of powered marketing automation and email marketing specifically for Microsoft business units.

[573] And the internal solution was, was not well -liked across Microsoft.

[574] So when we were fortunate to land Microsoft and really go through our adoption, we built like an 18 to 24 -month implementation period where we would be onboarding different business units of Microsoft onto exact target and off -boarding them on the internal system of pens.

[575] And we set a joint goal.

[576] It was an acronym for personalized email something, something.

[577] notification system.

[578] You had to beat it if you're competing against pens.

[579] That's right.

[580] That's right.

[581] So we actually set a goal with the Microsoft implementation team, and they were incredible to work with that when we got to the end of the implementation and we're literally able to turn the lights off on pens, you know, retire this internal system that was not well liked across the enterprise, that we'd have a celebration, we'd have a party.

[582] And we did.

[583] We actually on the Microsoft campus had.

[584] a huge tent that was erected in an event that was just catered to the fullest, I mean beautiful wine, beer, food, and the Microsoft team, they had to get Fire Marshal approval, but they actually pulled the servers that were running pens out of Microsoft data centers and brought them, seriously, brought them to the party, and we sledge hammered them.

[585] We all strapped on goggles and just beat the tar out of these servers.

[586] It was an office space.

[587] It seriously was.

[588] It was total office space.

[589] It was just like a spectacular way to retire their internal system.

[590] It was a blast.

[591] Wow, that couldn't be like a better segue into what technology themes does this illustrate for you.

[592] And that's like a very physical, visceral manifestation of the one that I want to touch on.

[593] And that's businesses using software as a service to outsource anything that's not their core competency.

[594] This keeps coming up in episodes over and over again where businesses now, you know, with the advent of cloud computing, and the general cost of starting a company going down, companies operate using tens of other companies' infrastructure and software, often even starting at a free tier or on some kind of premium pricing structure.

[595] And, you know, it's different at that sort of scale, where they're actually migrating from something they built in -house.

[596] But I kind of wanted to open it up to you since, you know, what you do at high alpha is start these new software as a service companies.

[597] How do you identify where are the sort of holes where we can take something that a whole bunch of companies are doing and do it on one platform and they can all just pay us to use our platform?

[598] No, it's an exciting part of high alpha.

[599] So, you know, High Alpha, we're a venture studio.

[600] We started a year ago and we're a venture studio focus on starting new cloud companies.

[601] And we actually have two sides to High Alpha.

[602] High Alpha Studio is our startup studio.

[603] And we've signed up to start eight to ten new companies over the next three to four years.

[604] years.

[605] And then high alpha capital is our kind of second arm.

[606] And that's a venture fund that is utilized to fund our own companies when they're ready to reach scale.

[607] And then, and then also fund other great SaaS entrepreneurs around the country.

[608] So you're right, Ben, we spent a lot of time by just ideation, you know, looking for unmet needs, you know, within the enterprise cloud space.

[609] And we do that through our own ideas.

[610] We do that through entrepreneurs that approach us.

[611] We spend a lot of time with corporate innovation groups and universities and just, you know, know, tech visionaries that, you know, have a sense for where the market's going.

[612] And this whole notion that every employer is a buyer of software, something radically different, you know, you kind of think back to, you know, the client server days pre -cloud.

[613] And, you know, tech spending and buying was tightly controlled, you know, tightly, tightly controlled by the CIO and the IT department.

[614] And then, you know, with the advent of cloud, it starts to kind of open up to different, you know, business unit or business line owners can make decisions within a framework.

[615] And now we're in an era where every employee is a buyer, you know, with freemium and an employee credit card, you know, you can spin up Slack channels and lots of other solutions.

[616] And it's, it's creating lots of opportunity, but it's also creating quite a few unintended consequences.

[617] So you'll get a kick out of this where you actually have started a new business.

[618] We haven't announced it yet that essentially is a SaaS platform for managing SaaS applications.

[619] SaaS applications.

[620] It really is.

[621] And it's targeted at the chaos and kind of the over overcrowding of SaaS spend.

[622] It's a huge problem.

[623] And we are our MVP is about ready to go live with our first group of pilot customers.

[624] But it brings together SaaS spend, SaaS utilization, and then user sentiment, user feedback.

[625] So it brings those three variables into one platform.

[626] So organizations can at a minimum actually understand what they're using.

[627] You know, what they paid for, what's being utilized across the enterprise, what if maybe they paid for but isn't being utilized?

[628] Where do they have overlapping products and platforms?

[629] Where's there maybe something cool happening?

[630] Where's their innovation happening within one group or department that should be thought about across that organization?

[631] So that's kind of a cool company that we're excited about to help organizations kind of get their arms around how their business is using SaaS and use it in the most optimized way.

[632] So the tech theme that I've been referencing a bunch, and this is another perfect lead -in.

[633] is there's been this sort of historically in the enterprise space, which again, we haven't talked as much about on the show.

[634] There's been the, there kind of been sort of fourish giants, right?

[635] Like there's Microsoft, there's SAP, there's Oracle, and then there's Salesforce, which emerged as sort of the most recently as one of these giants.

[636] And there's this concept of like account control and like there are lots of startups in the space, but ultimately those, for companies are by far the biggest, and they have the account control with the CIOs and increasingly CMOs and heads of sales and CEOs where they can push all sorts of products through their channel.

[637] An exact target, as we talked about being a business line acquisition, was a perfect fit with Salesforce as one of their first forays into a new product sending through their guerrilla channel, or guerrilla -sized channel.

[638] Do you think that's, you know, how do you react to that and or one of the main the pieces I think of SaaS enterprise investors is that with SaaS, like, that's changing, right?

[639] Like you don't, you know, people can buy stuff freemium like individual employees and account control is being eroded.

[640] I don't know, how do you think about that being on both nights now?

[641] I definitely see both.

[642] I definitely see both sides of it.

[643] And you're totally spot on, David.

[644] it's one of the big reasons why the exact target acquisition has been successful is that Salesforce just has these amazing executive level relationships with the biggest companies around the world and they know Salesforce, they trust them, they want to buy more products, they want to buy more products that are tightly integrated.

[645] And, you know, when you look at the Salesforce marketing cloud numbers, they're booming and they're really booming because they have all those trusted CEO and CIO relationships.

[646] And then the market in the team, they're just incredible innovators and amazing at executing, scaling the business.

[647] So that's real.

[648] There's no question about that.

[649] However, there's still plenty of opportunity for new innovation and new entrance and the innovator's dilemma of companies coming up with new ideas and new concepts and software that's lighter and more flexible and more mobile -friendly and more consumer -like.

[650] There's no shortage of room, I think, you know, for innovation and for new companies to find their groove.

[651] and that you don't need your CIO to approve to buy it.

[652] You don't, you don't.

[653] That's exactly right.

[654] That's exactly right.

[655] Which, honestly, you know, you're talking about ideation and getting ideas for new companies and getting your first customer, obviously something near and dear to my heart at Pioneer Square Labs.

[656] And as someone that is often going out and transitioning from the customer development to getting your first customer and taking the people that you were talking to about what are your needs and saying, cool, we built this.

[657] Will you pay for it?

[658] It's become extremely easy to do that when you have an advocate.

[659] in the organization who for, you know, like you're going to charge less than $1 ,000 for your product.

[660] So they just can use their credit card and you don't have to go through the CIO.

[661] So it's opened this whole new wave for us of the ability to land your first customer in a much faster time frame.

[662] Absolutely.

[663] No, that's exactly right.

[664] And then all these great cloud platforms where you can really quickly, right, build technology, build MVPs, get it to market and really see if you've got product market fit and you've got something that can be viable.

[665] And that's what's so fun, I think, Ben, about what we're both doing in coming up with new ideas and launching new companies is you can go from idea to MVP and proof of concept really, really quickly.

[666] Yeah, yeah.

[667] All right, we're going to move on to what was formally the last part of our show.

[668] I think we have a couple of cool sections after, but grading the acquisition.

[669] And, Scott, you can choose to participate in this or not.

[670] I feel like you might be a little bit biased.

[671] But this is obviously an incredibly successful.

[672] acquisition.

[673] I mean, you hear Mark preach it to the world time and time again and some of the biggest stages he's ever on, obviously a success.

[674] We've given A's to things that have like ridiculous multiples.

[675] I mean, you look at what Instagram did at Facebook or you look at Pixar sort of reverse integration or reverse acquisition of Disney pictures, Disney animation.

[676] Those are A's.

[677] So I guess what I'm going to land on this is an A -minus for exact target.

[678] I think I'm similar.

[679] You know, we've talked about all the reasons why this is a great outcome.

[680] You know, one thing that we actually didn't quote, it's funny, we're not super quantitative on this show, even though we're about, you know, acquisitions.

[681] So, you know, we went through this whole episode.

[682] We didn't talk once about your revenue.

[683] But some numbers I want to throw out when the exact target in 2012, which was the final year, a full year of being a standalone company, I believe you had about 294 million in revenue.

[684] And in Salesforce's fiscal 2016, which ended January 31st, 2016.

[685] So essentially, the calendar year 2015, the Marketing Cloud Division did $654 million in revenue.

[686] So over twice as much in less than three years.

[687] So that's a pretty great outcome, I think, and speaks to the power of this.

[688] You know, there are many product things that I'm sure that Salesforce has done with the acquisition and bolted on many things, but also just the power of these enterprise relationships that they have.

[689] So I think this was a great deal.

[690] I'm also going to, you know, when I think about Instagram, like, you know, it went from a billion dollar acquisition price to $3 billion in.

[691] revenue in like three years and that's all right i'm also a minus but i'm on the fence here scott any any any comments you guys are tough graders you're really you guys are really really really you'd be like that professor that's really difficult incredibly stingy incredibly stingy about giving away an a so my if it's it's not fair so i know i know i know i mean instagram is the is is the bar um that's a that's a high bar yeah i there's no question i'm biased but i I think I'd give you a really fair grade.

[692] And I definitely, I definitely, I'd definitely give a folay.

[693] No, no minus.

[694] I'd go with the full A. And I'll tell you the reason is that this was an extraordinary outcome, you know, for exact target.

[695] You think about, you know, three first time software entrepreneurs, you know, starting a software company in Indianapolis, you know, with very, you know, humble expectations.

[696] Nobody thought this was going to happen.

[697] Inconceivable.

[698] You guys were the definition of undergone.

[699] Inconceivable that we would ultimately sell the business for $2 .5 billion And what I'm so grateful for is that every employee who was a part of an exact target had equity in the company.

[700] And this was really a meaningful outcome for our employees, not only just the kind of experience of a lifetime and being a part of this powerful culture we called Orange, but there was a financial outcome that was meaningful.

[701] And the neat thing is that, you know, at 3375 a share, every person who ever invested in an exact target from friends and family to venture rounds to public.

[702] investors made money.

[703] So I smile from ear to year just thinking about what an incredible outcome this was for everyone at exact target.

[704] And then the neat thing, David, I'm glad you referenced the numbers, is that integration is remarkably difficult.

[705] It is so difficult to acquire companies, integrate them effectively.

[706] And when you look at Salesforce, this was the largest acquisition they had done.

[707] First time they'd have required a public company and to see the kind of results that have been produced, and I just know how delighted Mark and the team have been about the performance of the business.

[708] I give it an A in both sides, the Salesforce side and the exact target side.

[709] As an entrepreneur, you have to love your company, right?

[710] Like, if you don't, you know, who else will know?

[711] Oh, absolutely.

[712] Absolutely.

[713] That's right.

[714] Well, let's move on to a little, some fun we have at the end of the episode.

[715] It's a section called the carve -out.

[716] And this is where we talk about something that's in pop culture or media that we read or watched or stumbled upon or a product that we love, really anything that really tickled our fancy in the last couple weeks.

[717] And I'll start with mine.

[718] I'm a big fan of The Talk Show.

[719] It is a podcast done by John Gruber of Daring Fireball that mostly covers Apple.

[720] And John does a live show every year at WWDC, the biggest Apple conference.

[721] And this year, his guests, you know, his guests are normally friends of his or other people sort of in the Apple journalism space.

[722] And Outwalks, you know, Craig Federici and Phil Schiller, the senior VP of marketing and the senior VP of software or just engineering all up.

[723] Anyway, just like an unbelievable, candid interview with two guys that have great personalities on stage.

[724] And you normally only see these people in, you know, the extremely rehearsed.

[725] very, very perfectly timed and executed Apple keynotes and getting them off the cuff.

[726] It's just so fun if you're a fan of Apple or just like a fan of technology and how these businesses run in general to get that sort of candid look at these guys.

[727] Mine is a great book that I'm almost done reading, but I've been enjoying immensely.

[728] I saw this as a recommendation.

[729] I went to Wycombinator Startup School.

[730] in 2013, I believe, either 2012 or 2013, and Jack Dorsey spoke there, and he recommended it as a book.

[731] And it's been on my list, you know, ever since, and I just finally got around reading it.

[732] It's a book called The Score Takes Care of Itself, and it's by Bill Walsh, who was the legendary, unfortunately late coach of the 49ers during their amazing dynasty in the 90s, which I remember, you know, growing up and watching, you know, Joe Montana and Jerry Rice and Steve Young and but the book is just it's about his you know kind of philosophy and lessons on leadership and he's such a he's such an amazing guy like he's not the you know you think of like a football coach in that era and it's like you know super you know hard and yelling and screaming like that's not his style at all it's just like it's just this commitment to excellence and like you know that's all that matters and all the other stuff is just show and um but anyway there's lots of good gems in the book um we'll link to it in the show notes i'll have to check it out that's very fun.

[733] I love the carve -out feature here, guys.

[734] This is kind of fun.

[735] Thanks.

[736] And David, I should clarify Jack Dorsey is no relation.

[737] I mean, although I've got lots of family connections here on the show, Jack and I are not related to one another, although that'd be kind of fun.

[738] So my carve -out was a month ago I was flipping channels trying to find, I think probably an NBA playoff game, flipped over to ESPN and caught the end of the National Spelling Bee, the script's national spelling bee.

[739] And it was phenomenal.

[740] The two finalists were were an 11 -year -old and a 13 -year -old who were just extraordinary at their ability, obviously, to spell very difficult words and handle a tremendous amount of pressure.

[741] And they ultimately tied in the end.

[742] The 13 -year -old had had an older sibling that had won previously, and the 11 -year -old was a fifth -grader, who was the youngest kind of finalist and champion ever.

[743] And watching those two operate was incredible.

[744] And to me, I'll tell you two little stories.

[745] One, it's just quite exceptional, I think, how young people.

[746] people are developing so quickly.

[747] And when we look across our businesses at interns or contributions new college graduates can make, they are able to contribute to businesses in a way today that never existed in the past.

[748] And watching these two kind of young students compete was really incredible.

[749] And then one of my favorite parts is that each of the finalists had to share their favorite word, which I would definitely have a difficult time spelling any of them, probably even pronouncing one of them.

[750] But one of them that stuck with me was indefatigable.

[751] And for Great word, which really means tireless persistence to be indefatigable.

[752] And as I'm working with all these early stage startups, to me, that's like the number one characteristic for a CEO or a founding team is that they have this tireless persistence.

[753] And they just, they have such a burning fire inside them to succeed and to solve a big problem and make a difference in the world that you just know they're going to be successful.

[754] That's great.

[755] Totally agree.

[756] David, do you want a table follow -ups until next time?

[757] We're running a little long here.

[758] Yeah, well, maybe I'll just do one real quick, because we've mentioned.

[759] mentioned a few times on this show.

[760] Instagram reported latest user numbers this week, or Facebook reported Instagram's latest user numbers this week.

[761] Pretty incredible.

[762] They passed 500 million registered users, 300 million daily active users.

[763] Think about that ratio.

[764] Three out of five registered users on Instagram use it every single day.

[765] Wow, that's impressive.

[766] That's engagement.

[767] You know, Instagram was one of our very first shows, and like I said, it's our canonical L .A. But especially with Snapchat and everything going on, there's all these existential questions and that business just continues to perform at an amazing level.

[768] Indeed.

[769] Thank you, Scott.

[770] Our sponsor for this episode is a brand new one for us.

[771] Statsig.

[772] So many of you reached out to them after hearing their CEO, VJ, on ACQ2, that we are partnering with them as a sponsor of Acquired.

[773] Yeah.

[774] For those of you who haven't listened, VJ's story is amazing.

[775] Before founding Statsig, VJ spent 10 years at Facebook where he led the development of their mobile app ad product, which, as you all know, went on to become a huge part of their business.

[776] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

[777] Yep.

[778] So now Statsig is the modern version of that promise and available to all companies built.

[779] in great products.

[780] StatsSig is a feature management and experimentation platform that helps product teams ship faster, automate A -B testing, and see the impact every feature is having on the core business metrics.

[781] The tool gives visualizations backed by a powerful stats engine unlocking real -time product observability.

[782] So what does that actually mean?

[783] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

[784] It's super cool.

[785] Statsig lets you make actual data -driven decisions about product changes, test them with different user groups around the world, and get statistically accurate reporting on the impact.

[786] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

[787] There are like so many more that we could name.

[788] I mean, I'm looking at the list, Plex and Versel, friends of the show at Rec Room, Vanta.

[789] They like literally have hundreds of customers.

[790] now.

[791] Also, Statssig is a great platform for rolling out and testing AI product features.

[792] So for anyone who's used Notion's awesome generative AI features and watched how fast that product has evolved, all of that was managed with Statsig.

[793] Yep.

[794] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's Statsig is awesome for that.

[795] They can now ingest data from data warehouses.

[796] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today.

[797] You don't even have to migrate from any current solution you might have.

[798] We're pumped to be working with them.

[799] You can click the link in the show notes or go on over to stat sig .com to get started.

[800] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[801] Yeah, hey, just to kind of close down the show, anyone listening out there?

[802] Thanks so much.

[803] Tell your friends, review us on iTunes.

[804] Share it on Twitter, Facebook.

[805] Whatever you like to do, snap about us, if that's your thing.

[806] And Scott, how can our audience find you?

[807] At Scott Dorsey on Twitter.

[808] And then high alpha .com.

[809] You can learn more about the new venture that we're building here in Indianapolis.

[810] Awesome.

[811] Well, thank you so much.

[812] Yeah, thanks so much, guys.

[813] Really enjoyed it.

[814] Thanks, Ben.

[815] Thanks, David.