Rally Software is a Buyer

Two weeks ago, one of the companies I’m on the board of – Rally Software – announced that they have acquired a company called 6th Sense Analytics.

I’ve been involved in Rally since the very beginning and it has been incredibly rewarding to see them grow from an idea that the founder/CTO Ryan Martens had to the market leader in Agile application lifecycle management.  Rally updates quarterly their “by the numbers page” which gives a nice overview of the scale of Rally.

In Q4 of 2008 we started getting some inbound calls from other software companies that were in related markets to Rally.  These calls were from companies that had developed significant software assets, but hadn’t really had much market success.  In several cases they were companies that had worked with Rally; in other cases they were from folks that thought they might be complimentary to Rally.

In response, Rally’s leadership team identified a number of areas on their roadmap that they could accelerate (or bring forward) by acquiring a small company.  They’ve used this to quickly decide whether or not it is worth spending time with the inbound inquiries they were receiving.

One of them – 6th Sense – fit great.  Rally has a significant amount activity on their product roadmap in 2009 around development metrics and analytics.  Rally and 6th Sense engaged in a serious discussion and within 45 days had closed an acquisition.  Internally, Rally went through a detailed build vs. buy analysis; adding the 6th Sense folks to the overall team and incorporating their software into the mix was a no-brainer decision for us.

I’m seeing this pattern with a number of the established companies I’m an investor in.  Having gone through this cycle several times and had success and failure with acquisition driven strategies, I’ve got a clear view on when and how it can work successfully.  I’m not interested in garbage truck mergers (two crappy companies that get jammed together to hope something good comes out of it) – all of my energy is focused on having a market leader pick up a complementary technology or market “asset” that helps accelerate the product or market roadmap.

Look for a lot more of this in 2009.

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  • Hats off to Todd Olson and the team at 6th Sense for building much more than technology, this deal happened so fast because it was such a strong deal and had great leverage. You will be happy to know they are done with Iteration 1, integrated into Rally with a local(North Carolina) Rally coach and existing Rally (Boulder) scrum team, and finally their first product council meeting came to unanimous consensus on the direction and scope of release one. This was a glove fit with great talent, technology and heart. I hope to do more of these in 2009, too.

    • Congratulations! 45 days to close a deal like this is quite unheard of…goes to show that you truly are an agile company that is nimble and fast. Best wishes…

  • Todd Olson

    I just wanted to echo the sentiments regarding the fit here. Our entire team recognized the strong fit both technically and culturally from the earliest of conversations. We're pleased to be Rally's first acquisition and part of the Rally team. As Ryan noted there is great consensus around our direction, and we're anxious to contribute to the company's growth. Also, I hope we can be a model for future transactions like this in 2009 and beyond.

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