Salesforce.com Acquires Startup RelateIQ(recode.net)
recode.net
Salesforce.com Acquires Startup RelateIQ
http://recode.net/2014/07/11/salesforce-com-acquires-startup-relateiq/
20 comments
i would look at this from a different angle. If i can grow a company till its IPO, why would i sell. for me the most realistic scenario is that RelateIQ had a very high customer acquisition cost (CAC) and they were not sure they can get out of this high CAC before the money runs out.
According to crunchbase http://www.crunchbase.com/organization/relateiq they took 3 rounds on top of seed funding. So in the best case scenario, each round diluted by 20%, leaving the founder team and employees with ~50% ownership (= 80% * 80% * 80%). Again, best case scenario, there is no participating preferred, then 2% options will end up somewhere around .8% (depending on the option pool), which is between 2.5M and 3M.
Worse case scenario, all rounds come with 3x participating preferred and much bigger percentage than 20%, and the options pool got inflated to accommodate more recent employees. So in this liquidity event, the VCs take 3 * 70 = 210M out first, leaving 150M on the table. 2% options might end up being .1% equity, resulting in 150K for the first employee (before tax).
The real number is somewhere between the two. From my experience, it's more likely closer to the lower end than the higher end.
Worse case scenario, all rounds come with 3x participating preferred and much bigger percentage than 20%, and the options pool got inflated to accommodate more recent employees. So in this liquidity event, the VCs take 3 * 70 = 210M out first, leaving 150M on the table. 2% options might end up being .1% equity, resulting in 150K for the first employee (before tax).
The real number is somewhere between the two. From my experience, it's more likely closer to the lower end than the higher end.
This seems to extreme. Starting with 2%, likehood is he was diluted 50 - 55% across the 3 rounds. He end's up with 1.1%.
Given the $390M exit, he get's $4.2M. This doesn't take into account liquidation preferences, but also doesn't take into account incentive plans either.
Let's say due to liquidation preferences he only takes half of that ($2.2M). Given that he just made $2.2M and Salesforce is keeping RelateIQ as a whole subsidiary, they'll want to make sure they retain the talent. So they will probably sweeten the deal with an incentive package of 60%-80% of that(1.3M). All in all, given he stays 3-4 more years, he'll likely come out with 3.5M to 6M.
Let's say due to liquidation preferences he only takes half of that ($2.2M). Given that he just made $2.2M and Salesforce is keeping RelateIQ as a whole subsidiary, they'll want to make sure they retain the talent. So they will probably sweeten the deal with an incentive package of 60%-80% of that(1.3M). All in all, given he stays 3-4 more years, he'll likely come out with 3.5M to 6M.
This sounds much more reasonable... thanks Daniel
The logic makes sense, but that is a pretty pessimistic view.
I have no inside info, but I hope the first few people will come out ahead of that.
I have no inside info, but I hope the first few people will come out ahead of that.
Thanks for the explanation. Does the same math apply for founders (just with a higher % to start), or is it calculated differently?
In theory, founders get commons too, so same math applies (with higher %). In practice, sometime founders get themselves better deals, e.g.:
http://allthingsd.com/20111001/vcs-unite-chamath-palihapitiy...
There is also some tax workaround that leaves founders much better off: usually their payout are only taxed as long term financial gains, which is a much lower bracket.
http://allthingsd.com/20111001/vcs-unite-chamath-palihapitiy...
There is also some tax workaround that leaves founders much better off: usually their payout are only taxed as long term financial gains, which is a much lower bracket.
I agree. It's most likely this or close to it.
Salesforce has been getting hammered on their lack of true analytics since the last Dreamforce. They have positioned their new SF1 dashboards as analytics, but anybody who knows better, knows that these are not analytics tools but visualization tools.
I'm guessing RelateIQ was a way for them to calm the industry influencers down, and give them a head start in plugging a significant hole they have had when being compared to the legacy stack vendors.
I'm guessing RelateIQ was a way for them to calm the industry influencers down, and give them a head start in plugging a significant hole they have had when being compared to the legacy stack vendors.
i'm genuinely curious what people liked about relateiq... when i looked into it, it seemed like a much less functional salesforce with the addition of automatically showing you the last contact you had with a customer (or potential customer).
what made it interesting/differentiated as a product?
what made it interesting/differentiated as a product?
Seems like salesforce game up on organic growth strategy long time ago. Just a lot of acquisitions. Once you become their scale, I guess it becomes impossible to innovate. Whatever works for them I guess.
What does one have to do with the other? If you can afford it and it's something you need then you buy it. It's only innovation if there is some significant improvement.
I think RelateIQ has a really good product and I honestly thought they will become a multi billion dollar company. Its a little sad to see that enterprise startups with great products are having a much lower valuation than consumer startups.
Umm.. outside of the Instagrams and WhatsApps of the world, name me 5 other consumer startups aquired for more than $200 million within a year of launching publicly?
Salesforce must have been getting scared
Congrats to Steve and the magnificent team at RIQ!
Well that was fast.
The recent early-stage-company acquisitions are an interesting change in the business world. The other, in my opinion, is the move to hold off on IPO until later stages. It seems the opportunity to invest in growth is getting squeezed from both ends.
The recent early-stage-company acquisitions are an interesting change in the business world. The other, in my opinion, is the move to hold off on IPO until later stages. It seems the opportunity to invest in growth is getting squeezed from both ends.
Regarding the exit, I would appreciate if somebody more experienced can give example how much is this for 1st employee. The sold company for $360. First employee probably got ~2% of stock options. They received $69 of investment and there was some dilution.