$5.6B cloud company Fivetran acquired its way to survival
forbes.com
forbes.com
These guys apparently had spent $160 million and according to the article, had “no product here.” It’s perplexing to me that they were then able to so easily raise hundreds of millions of dollars to buy competitors that did have a successful product.
And this was barely a year ago. Why do investors believe two failed founders will be able to grow and scale this business when they couldn’t grow and scale their own business?
I’ll personally make sure to avoid this company as I don’t at all respect their method for creating a viable “business.”
Anyway the company “forecasts $189 million in revenue this fiscal year” how on earth that translates to a 5.6 billion valuation is anyones guess.
Now, the actual multiplier values used for that... we can debate them for ages :-)
Valuations based on revenue are essentially arbitrary because they are always based on models of potential rater than actual performance.
However my point was these calculations are at their core core based on profit.
Summarized a different way they took $725 million and turned it into a business with $189 million in annual revenue over a period of a decade.
If they had just invested all the VC money they would have $1.8 billion. I’d consider that a more successful outcome to be perfectly honest. Is anyone really going to pay $5b for Fivetran at 26x revenue? Doubt.
Building things is definitely hard work! It sure is a lot easier to just know the right people, but you also should have the right skills and insight to identify the opportunities.
Pulling off acquisitions at this scale takes a way more than you are giving it credit for.
I don't think anyone is denying that skill is involved, but skill is often orthogonal to utility. Skill can be abused. Con men, burglars, and pickpockets all have skill. Malware authors have skill. Torturers have skill. I'm not saying sales is equivalent to any of those (OK maybe con men) but the point should still be crystal clear. What people are saying is that Fivetran hasn't succeeded in creating any value, and might even have destroyed value. When a big company "succeeds" by acquiring competitors they quite rightly get antitrust scrutiny because that's bad for competition and innovation. The principle doesn't really change for smaller predators.
Rich guys going to elite colleges to study CS in shambles.
I used to think this way and then I realized "whats the difference between a company that raises $100M to put it all in sales & marketing, and one that raises $100M to acquire a business with paying customers"
The answer is the latter one is much easier to do.
On the other hand we have two founders who within a calendar week decided to raise money, did raise money, and made a successful bid for a company.
One of these things is not like the other. One of these things is actually hard. Sing it with me!
I don't really care which is easier. Neither are easy, but the latter provides value to more than the con artist, while the first does not.
You're being tricked into thinking there is "one way to build a business". There isn't.
Please do tell. What exactly do you mean "from scratch"?
The comment “there was no product here” is referring to a specific (very lucrative) market segment.
The rest of the product was and still is selling just fine.
Fivetran has been a home run for us.
Actually it sounds as if they had a good board who were making them look forward to find bigger markets. This seems very positive to me.
They've been very good to us, definitely recommend. Reach out to gabriel.giely@ - he's very helpful.
does this match the size-based pricing you are thinking about?
We dumped them once our first credit purchase ran empty.
Some weird limitations around postgres and datatypes (BC dates will clog it), but if you actually validate your data you won't have any problems.
Which connector was that?
You can turn off tables you’re not interested in, but perhaps this was a bug.
This is a bubble.
Even the praised dbt is just a hack to make declarative incremental because the SQL capabilities of these databases is also bad and you need to template out your way in.
There will once be a SQL database that will make these things not suck and collapse this entire hot space of startups for data loading and missing features in Snowflake.
Snowflake will go away too if they keep ignoring so many "missing features" startups and not improving their loading or language capabilities. Unless they intend to spin up an ecosystem of "hacks" to complement Snowflake to make it usable, which is another reason for some saner system to displace them.
What language and loading capabilities would you like to see us add?
I personally doubt we'll ever aim for postgres levels of extensibility, but Java has been in for a while and Python just went public preview - with great reviews from everyone I've spoken to.
Plenty of activity on the loading side too, although we don't really aim for visual ETL - you're pretty much correct that we're happy to let 1000 flowers bloom in that space.
Databricks is more of a platform than "just" a tool. So yes we offer first-party "end to end" solutions, and we're happy to show their value to you and convince you to pay for them, but we play nice with others, and we have a ton of great partners who can connect into our platform and help you ingest, transform, analyze, and consume your data. So you can use our native ingestion tools, or partners like Fivetran; our native ETL/ELT tools, or dbt; our native SQL/BI/warehousing capabilities, or Snowflake.
The metaphor Andy Kofoid our VP of Ops uses is XBox or Steam. They're a platform others can build things on, but they also sell their own games and offer value-added services on top of the things others are selling.
And like those platforms, we have the same ultimate twin goals of attracting customers and partners.
It's actually useful to remember if you're a start-up chasing a contract with an enterprise. You might bend over backward accommodating BigCo to get their name on your books thinking you'll make it huge once "they" start using your technology only to find it never actually gets further than 2 people in Sub-Department-Offshoot, and while you might get to use that fancy logo on your marketing material, you'll wonder if the concessions and vastly undercharged overwork was really worth it because the payday of actually having BigCo use your tech throughout their stack never materialised (because it never really does, but it'll be endlessly dangled in front of you to get you to agree to put in a bunch of features for free).
My advice is have an honest and frank conversation with BigCo. Let them know it is in no one's interests for your start up to go out of business, and when they are doing at things at scale you (startup owner) can discuss passing on those economies of scale in terms of dedicated work, discounts, etc.
The BigCo can actually pay you big if you can improve the career and boost the ego of those who will make the decisions. To do this, you need to give people something that they can present to their own managers in a very positive light so they can present it to their own managers. That's how you can build a momentum of people who can push for purchase of your product.
From what I'se seen, making the life easier of some technical employees is not good. Think putting something trendy in it that the managers would love to boost about it. Could be a trendy tech(big data, AI etc.), could be social proof(Apple and Nvidia are also buying from this company). Just try to structure your marketing(which roughly means finding your customers, not to be confused with advertising) in a way that matches the incentives of people who don't spend their own money but try to work their way up in structured relationship. Of course, your product should also accomplish something so you can have a long term business. So it's not a fraud, it just needs right kind of engagement.
> Some of our customers still think we’re one of those big enterprise software companies where you call them up, negotiate with a salesperson for three months, and, on the last day of the fiscal quarter, force the salesperson to promise a long list of new features in exchange for a half-million dollar contract.
> That’s nice, but we don’t have salespeople and we’re not one of those vendors. Our customers are happy that our price point is low but not all of them quite understand the implications. They ask us to fly out to their headquarters to give a demo of the software to their development team. They send us long spreadsheets with lists of features and ask us to check off the features we support. They even send us RFPs (shudder). RFP stands for “Request for Proposal.” It’s a request by a large company for a custom proposal from a small company. The small company works on the 200 page laser-printed proposal like mad for three weeks and Fedexes it in great expense and at the last minute, where it gets put in the trash because the large company has their favorite vendor who takes them on a helicopter to Atlantic City on junkets involving blackjack and strippers, and who is going to get the contract no matter what, but someone in purchasing for some unexplained reason, maybe he’s bucking for a promotion is insisting that the proposal be opened up to “competitive bidding” and the small company has been chosen as a victim to write up a proposal that has no chance of being accepted just to make the process look a little bit less corrupt, and if you’re a small company, I would recommend that you don’t fall for it and don’t spend any time responding to RFPs unless it’s already understood that you’re going to get the contract.
Joel, if you're accidentally around, your archive is borked :-( The front page reading lists are broken and navigation is super hard to try to find some of the awesome old articles.
Basically read as: we started a failing company then used family connections to raise a fuckton of money to buy a successful company, and now we're successful.