On Wednesday, IBM announced that it had acquired DataPower. Bill Burnham (who originally did the investment for us when he was at Mobius) has a nice set of posts on his view of VC lessons from the deal and his view of the implications for software in general.
After Bill left Mobius, Gary Rieschel and Robin Bordoli took over responsibility for the company in our shop. I got actively involved earlier this year (and eventually joined the board) when IBM made its initial overture to the company. In 2004, IBM acquired Cyanea, another deal that Bill sourced that I took over after he left Mobius. I spent a silly (large) amount of time last summer working on that deal and, while we were very happy with the outcome (as was IBM), the process and negotiation was brutal. As a result, when the first overture came this time around it was logical for me to get involved.
The dance – as with many deals – took a while to get to the point where both sides were serious. IBM and DataPower had a good business relationship that was developing nicely and – while IBM was very interested in the company – DataPower was well capitalized and growing like crazy. At some point, IBM made an attractive enough offer and the real dance began.
This time around, it was much easier. The IBM lead negotiator was the same person as on the Cyanea deal – as a result we were jointly able to establish a very effective approach to the negotiation early in the process. We had great M&A support on the DataPower side from both Steve Tonsfeldt at Heller Ehrman who has now done six deals with IBM in the past few years and Steve Cheheyl – previously EVP Operations at Bay Networks and CFO for three companies that went public (Applicon, Alliant, and Wellfleet) – who is now a consultant that helps on things like this (e.g. he was the principle negotiator and ringleader on our side of the deal.) Dave Gammell and his team from Brown Rudnick also carried a huge amount of water on the deal.
Of course, the company wouldn’t exist without the incredible entrepreneurial, technical talent, and energy of Eugene Kuznetsov (the founder, chairman, and CTO), the steady hand and leadership of Jim Ricotta (the CEO), and the balance of their great team. Congrats to all.
It’s last week’s news (literally) but if you are interested in hearing directly from Brent Simmons (NetNewsWire) and Greg Reinacker (NewsGator) on NewsGator’s acquisition of NetNewsWire, Niall Kennedy has a good interview online.
Look for more M&A news this week – everyone knows that Moreover has been acquired – the current rumor is that it’s Verisign again (who acquired Dave Winer’s Weblogs.com last week).
NewsGator announced today that it has acquired NetNewsWire, the most popular Mac-based RSS reader. Many of the folks involved, including Brent Simmons (NetNewsWire), Greg Reinacker (NewsGator CTO / founder), Nick Bradbury (FeedDemon creator – now part of NewsGator), Sandy Hamilton (NewsGator EVP Sales/Marketing), and JB Holston (NewsGator CEO). Rather than repeat what they’ve said, I’ll try to cover different ground.
When I originally invested in NewsGator in June 2004, the company consisted of Greg Reinacker and one other part time person. I wrote a post describing why I invested in NewsGator. In September 2004, I wrote a post about NewsGator’s new CEO and how Greg and I worked through the notion that I thought it was critically important to bring on a partner early in the business as CEO so Greg could focus on what he did best.
Greg then went to town. It’s hard to believe that it’s been only a year since JB joined the company and 15 months since I made my initial investment. In February 2005, Greg posted NewsGator’s product roadmap and put a firm stake in the ground about what he wanted to build. In May 2005, NewsGator acquired FeedDemon (and added the incredibly talented Nick Bradbury to the team), filling a clear hole in the product roadmap. The NetNewsWire acquisition is similar – NewsGator now has a Mac client to add to its family along with another hugely capable guy on the team – Brent Simmons.) Oh – and NewsGator shipped their Enterprise Server product on Friday.
So – why are we doing this? One word – “platform.” Rich Tong and John Zagula (both ex-Microsoft – now partners at Ignition Partners) have written an excellent book called The Marketing Playbook on a series of different strategies a software company can take. The platform play is one of them and the one we are executing at NewsGator (and at FeedBurner).
As a result of my blog and all the stats I collect, I have insight into the way people are using (or not using) RSS to consume content. While I have access to other data as well, my FeedBurner subscriber stats are incredibly useful as I don’t have any “inappropriately biasing” data (e.g. none of the newsreader default feeds list my blog – automatically including them in my user counts). In addition, I have the law of large numbers on my side (with n > 4000 subscribers and all of the top 10 readers having n > 75, I’ve got a decent shot at qualifying for statistical significance.)
The top 10, in order, are:
I won’t bore you with rate of change data, but I have that as well and – while Bloglines is still the largest – their rate of change has slowed materially over the past few months while the various NewsGator products have accelerated. Amazingly, there are another 45 different readers with at least 2 reported subscribers, and many more with only 1 (of which a number of them are clearly not reporting their subscriber counts to FeedBurner – something that will improve over time.)
As a huge consumer of RSS-based content (my current blogroll has around 350 feeds that I monitor daily), I bounce around between NewsGator’s various products. Historically I’ve used NewsGator Outlook. Recently, I’ve been exercising FeedDemon (and loving it) – especially combined with NewsGator Online. Occasionally, I’ll use NewsGator Mobile on my T-Mobile Sidekick. My Mac at home has NetNewsWire on it and once sync with NewsGator Online is completed, I’ll use it when I’m home. Now that NewsGator Enterprise is in production, I’ll de-install NewsGator Outlook on my machines and simply roll with NewsGator Enterprise to feed my inbox. NewsGator’s sync platform underlies all of this capability as I have a completely seamless transition between products.
Now that most of the key pieces to the platform, including the API, are in place, NewsGator Enterprise edition is out, and Nick is almost able to code like a maniac again, look for rapid innovation on all fronts, especially NewsGator Online.
On August 4th, Greg Reinacker – NewsGator founder and CTO – announced NewsGator Enterprise Server and stated that it would ship in Q3. On Friday night, September 30, at 7:28pm (Mountain Time) Greg sent out an email stating “FYI – build 3202 was declared “gold” at 7:13pm tonight.”
In my first company, we had an enormous amount of scrutiny on releases as we shipped them all the time. Since we wrote custom software, we often updated our customers’ systems and – as a result – were releasing software for clients as frequently as daily (although typically we tried to stay on an approximately once a month cycle.) Since we usually had more than 20 active clients at a time, we could have a half a dozen releases in any given week.
For a while, we’d say things like “we’ll release it on Tuesday.” We eventually figured out that this meant (at least to the person working on the software) “I can work on this up until 11:59:59pm on Tuesday, at which point the client will be asleep anyway, so I can let it slip until Wednesday morning and finish it up then early before the client gets to work.” You can imagine what this devolved into.
We eventually started specifying date / time pairs for releases – it was ok to release something on 9/30 @ 11:59pm (or 9/30 @ 12:01pm). 9/31 @ 12:01am didn’t work, although I’m sure someone tried.
So – 9/30 @ 7:28pm counts for Q3. Congrats NewsGator.
China in the summer (via Bokee), now Japan in the fall (via GMO Affiliate). FeedBurner continues on its quest to deliver the world’s content everywhere it’s needed
FeedBurner has a new statistics post up demonstrating the continued rapid adoption of RSS. I know the post all the people that care about aggregators are interested in is the market share one – expect that soon.
Nice graph guys.
If you like homemade blues music, RSS, or just want to start your day off with something musically different, check out Leland Rucker’s (an eclectic part of the NewsGator gang) new song “The RSS Blues.” Among other things, Leland is NewsGator’s online content manager and maintains the NewsGator Editor’s Choice feed.
Don Dodge – one of the guys at Microsoft on the Emerging Business Development Team – has a nice post up on why he loves NewsGator and how it fits into the Microsoft ecosystem.
ePartners – one of my larger portfolio companies – announced today that they have closed a $25 million financing led by Needham Capital Partners. As part of this financing, Howard Diamond became the CEO. I was a (very happy) investor with Needham in Howard’s prior company – Corporate Software (now Software Spectrum) – which was acquired by Level 3 in 2002.
ePartners is one of the largest Microsoft Business Solution (MBS) partners and my investment was the result of a merger between EYT and ePartners in mid-2004. With this financing – which Howard has been working on for several months – ePartners is well capitalized and positioned for another major round of growth. We like to think that our timing is good as many of the investments that Microsoft has made in MBS over the past few years is starting to pay off – and our strong second quarter results reflected this.
Since I had an homage to Btrieve in an early post, I’d be remiss if I didn’t reminisce about the old Great Plains logo (ah – the relaxing wheat fields blowing in the wind on a white background, trips to Fargo North Dakota in December, and a calmer (well – maybe not) world.) And – of course I’d also be remiss if I didn’t tell you to drop me an email if you have any ERP / accounting, CRM, or Sharepoint needs, especially if you are tired of huge total cost of ownership associated with being an Oracle, PeopleSoft, or SAP customer (yes – plenty of folks are replacing their expensive ERP systems with Microsoft MBS products.)