Process Embracing Social: SuccessFactors buys CubeTree
The terms of the deal from the press release are as follows:
SAN MATEO, Calif. and REDWOOD CITY, Calif. – May 3, 2010 – Today SuccessFactors, Inc. (Nasdaq: SFSF) announced a definitive agreement to acquire CubeTree, Inc. a visionary leader in the rapidly growing social business software category. SuccessFactors is acquiring the company for $20 million in SuccessFactors stock at closing plus a contingent cash payment three years from closing to bring the value of the total consideration to $50 million. There is no contingent cash payment if the value of the stock issued exceeds $50 million at any point during the three year period and to the extent the holders have disposed or hedged their holdings. The guarantee is considered contingent consideration and will be recorded at fair value and marked-to-market each quarter through the statement of operations.
Couple of thoughts:
- $50 million doesn’t seem like a whole lot when compared to your average enterprise software deal but there’s more to it. Whilst CubeTree counts SAP, Cisco, LG, and Adobe as customers, I’ve confirmed that at least 2 of these companies do not use CubeTree across all employees. So the pricing seems warranted.
- On the $50 million thing, another point to consider. Many founders/CEOs of E2.0 companies have been open about that fact that social software is not hard to build (form an IP stand point). So effectively the exit for most will end up being an execution play or a technology transfer. In that context, $50 million on the table looks pretty good.
- Based on my interaction/work with the space as a whole, HR or employee productivity focused offerings are very serious about adding social and collaborative features to process. It’s the most natural fit in the enterprise. SuccessFactors is ensuring that they have a forward looking solution. And the timing is perfect.
- Cash is king of course, but the $30 million payout may well be a good bet for the CubeTree team. And it also goes easy on SuccessFactors’ wallet. Following little or no innovation in the last decade with respect to Enterprise Software, we’re at the beginning of a new cycle of overhaul when it comes to enterprise systems of record. In some cases its due to the need for SaaS, in others, its the need for better engagement. And as we see here, you get both. The likely hood of upside for CubeTree and its investors is better now that its been for a while.
- For the Enterprise 2.0 segment, my sense is that this is actually very good news from a valuation stand point. There are a few players such as Jive Software, Socialcast and Socialtext that have been attracting somewhere between reasonably sized to very large customers for a long time. And the emerging Enterprise 2.0 services ecosystem (disclaimer: My firm is one of those) will only raise awareness for the applicability of these technologies to address business challenges. If CubeTree could secure $50 million after it’s relatively short life, the prospects look good for other prominent players in the space that have a marquee customer base and as important, highly engaged platforms.
About a year ago I sensed that standalone Enterprise 2.0 faced serious commoditization and the lack of process and context was going to be a big problem. I still consider these to be significant impediments to getting to IPO for most vendors. That said, Chatter and now CubeTree serve as excellent reference architectures for other traditional enterprise software companies to see how process injected with engagement can lead to accelerated business performance for end customers. And subsequently look to make a purchase or build their own.
Congrats to both companies. I’ve heard nothing but good things about CubeTree when its come up in conversations and it’s great to see that they have found a good home.
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- SuccessFactors Buys CubeTree in $50 Million Stock Deal (readwriteweb.com)
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- SuccessFactors Acquires Social Enterprise Software Startup CubeTree For $50 Million (techcrunch.com)
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SVP, Enterprise Social and Collaborative Software, SAP