I must have read a dozen books about the founding of Apple Computer over the years, so when co-founder Steve Wozniak wrote his autobiography iWoz a few years back, I made a mental note of it, but never got around to reading it. Woz and I happened to be speaking at the same conference last week. They say you should never meet your heroes, but meeting Wozniak was a real honor. He is one of the most talented engineers and nicest guys I've met. His onstage interview was a bit scattered (imagine opening a faucet of Woz), but it was great to hear him speak about his experiences in designing the Apple II computer, how Basic and Visicalc helped turn the Apple II into a platform, the importance of privacy in social media, etc.
iWoz is co-written with veteran PC Week reporter Gina Smith though told in Woz's unique style. Smith spent over a thousand hours interviewing Woz and then transcribing and reviewing the interviews and suffering through numerous Woz pranks. Woz's sense of humor and lightness come through in spades.
Although Woz was less a part of Apple than Steve Jobs in later years, those who know the history know that Apple would not have existed without Woz. The Apple II computer effectively created the personal computer revolution. It was first all-in-one design, the first computer that you could plug in and use. The Apple II+ was the first computer I bought and I still have one in my closet. It works perfectly 40 years later.
With the average iPhone app today weighing in at 100mb or more, it's hard to appreciate how much work went into creating software that could run on a 48k machine running at 1Mhz. It was Woz and other early apple employees like Randy Wigginton, Chris Espinosa, Bill Fernandez, Daniel Kottke, who labored to make that Apple II a reality. Woz, gave some of these early employees shares of stock worth tens of millions of dollars out of his own pocket when Jobs refused.
For those interested in the history of Apple, this book is a unique opportunity to hear it from the guy who built it. You get everything from selling blue boxes with Steve Jobs to how he built what became the Integrated Woz Machine (IWM) disk controller for the Apple II and Mac.
Looks like we're in another boom year for Tech IPOs! While everyone is obsessed with the mega IPOs like Uber, Airbnb and the like, I think we're seeing a very healthy number of B2B IPOs happening. Zoom and PagerDuty have gone out successfully and others like Fastly and Slack are on deck. I was an advisor to PagerDuty founder Alex Solomon in the early days, and it's great to see how the company has continued to grow. It's a company that had its share of growing pains in the early days as they built the management team. Ultimately Alex recognized he needed an outsider to scale the company to IPO level. He hired Jennifer Tejada who has done a fantastic job, while he's chosen to focus more on the technology. (Both of them are in the photo above.)
Here's to the many other B2B tech companies that have crossed $100m in revenue and are heading for their IPO.
Congratulations to Duo Security, which announced that it is to be acquired by Cisco Systems for $2.35b. This is a great outcome for all involved, and I'm very proud of what the team has accomplished.
I worked with Duo for about three years, initially as an advisor and ultimately as Chief Operating Officer running Sales, Marketing, Products, Engineering and Services. I helped grow the company from around $7m in Annual Recurring Revenue (ARR) to about $100m. The company has continued to grow to 700 employees, 12,000 customers and revenues that I estimate could exceed $200m ARR by year end, based on prior published numbers.
Duo is the fastest growing company I've been a part of; faster even than Zendesk or MySQL. When a company grows this quickly, it becomes a different organization every year. The early sub-$10m revenue company is quite different from where Duo is today. I would always tell new employees to be prepared for change. What remained constant was an underlying set of midwestern values of hard work, customer care and innovation that made Duo special. (Also we had a really good fun band called "Louder Than Necessary.")
It's a testament to the founders' vision and the management skills of the leaders we recruited that the company scaled so well. I remain especially proud of the many people we hired, promoted and developed to become the future leaders in the company. As news of the acquisition came out, many people have asked me about the deal, so here are my thoughts...
First of all, this should be recognized as an absolute success for the management team. To grow a company to this size and value is very rare. Less than 1% of venture-backed companies get to a valuation of $1 billion. It's also one of the biggest software successes in the midwest and proves that you don't have to be in Silicon Valley to win big. (Duo has in fact expanded into San Mateo, Austin, London and Detroit. Part of Duo's success is due to these multiple locations, but that's a another story.)
Secondly, this deal creates a larger force in the industry. There is no doubt that Duo could have proceeded towards an IPO in 2019; they had in fact hired several new executives to lead these efforts in recent months. But the combination of Cisco and Duo together is more significant than Duo on its own. There has been a large amount of consolidation in the security space in the last few years and I believe Cisco will emerge as a leader. They have the respect and attention of Global 2000 CISOs and CIOs, a strong worldwide sales machine and a large number of related products. In a few years time, it will be clear that Microsoft isn't the only company that is capable of reinvention.
Thirdly, this represents an opportunity for further growth for the team at Duo. Cisco plays on a larger global stage than Duo could on its own. But Duo's executives, managers, engineers, security experts, sales people, support engineers, product team and marketing organization have a lot of mojo to contribute. Duo has become one of the fastest growing SaaS companies on the planet and they know a thing or two about making security easy. The company has a Net Promoter Score (NPS) of 68, one of the highest in the industry!
And that is the key to why this deal makes sense to me. The combination gives Duo scale. But it also injects speed and innovation into an industry that needs it. The old approach to security, locking down your network with a VPN and using old-fogey security tokens doesn't work when your applications are in the cloud, employees are mobile and hackers are targeting everyone and every thing. I believe Duo is well positioned to lead with a modern new approach to security.
There's also a fourth point, which in the long term could become even more significant. Duo's success injects a large amount of capital in the Ann Arbor / Detroit area. The company has also developed tremendous expertise in building a SaaS company at scale. That combination of capital and talent will result in the creation of additional startups in coming years. Duo's investors (Benchmark, GV, Index, Redpoint,Rennaissance, True Ventures...) did very well and are likely to be open to investing in new startups in the region alongside other firms focused on the midwest such as Drive Capital, eLab Ventures, Steve Case's Revolution, RPM Ventures and others. This acquisition shines a spotlight on Michigan's growing tech scene and that will have all kinds of positive impact on investment, innovation and job creation.
To all my friends at Duo, this is a vote of confidence in all that you have created. I wish you congratulations on achieving this milestone. Now there's an even bigger opportunity to take this product line, security expertise and company culture to a bigger audience than we ever thought possible.
It looks like 2018 will be the strongest year in tech IPOs in recent history. Although some of the largest companies (Airbnb, Uber) are still waiting on the sidelines, so far we've seen a large number of very successful IPOs including DropBox, Zuora, ZScaler, Spotify and others. This week there were three strong IPOs including Ceridian, Docusign and Smartsheet which popped 30-42% in their debut. These companies all have much stronger fundamentals than some of the troubled IPOs of 2017 (Blue Apron, SnapChat) which gave investors pause.
Pivotal is the only IPO that had a very modest rise on it's debut, a day when the markets were down overall. But in the following week, Pivotal has risen about 20%. DocuSign is a good example of a cloud company that has pursued a massive market opportunity. DocuSign has a $2 billion dollar run rate ($518m revenue in Q1, doubling over the last two years) with a quarterly loss of $52m, compared to $115m a year ago. While the company certainly could have gone public earlier, at a $6 billion market cap, the wait seems to have been worth it.
One of the factors fueling demand for new IPOs are the strong Q1 results among public tech companies including Amazon, Facebook, Microsoft and even Twitter. Microsoft's stock has recently hit a historic high, based on the growth of its cloud business. Considering that Microsoft was a laggard in this space, it speaks to not only the disciplined management that CEO Satya Nadella has put in place, but also the huge upside that still exists for tech companies with recurring revenue SaaS offerings.
And that's precisely why we should expect to see even more IPOs in the second half of 2018. It looks like Acquia, Anaplan, Avast, CarbonBlack, Domo are likely to go out in the next few months. I would expect to see quite a few IPOs between now and mid-August when bankers head out on vacation and then more in the fall.
While there has been a lot of volatility in the market earlier this year, it has still been a nine-year bull market and at least in the tech sector, it seems that there is still a lot of headroom for growth.
What companies do you think will IPO in the rest of 2018? Will the bull market keep running? Let me know your thoughts by posting a comment below.
Much has been made of the slowdown in tech IPOs in recent years, but that trend appears to be changing in 2017. Of course, there are a few mega-companies that continue to sit on the sidelines (AirBnB, Uber, DropBox, I'm looking at you!) but I think we will continue to see improvements in 2017 and 2018. Perhaps not as strong as the record number of IPOs of 2014, but likely enough to reverse the declining trend from 2015 and 2016.
Early this year we saw IPOs from the likes of Snap, Mulesoft, Aleryx, Okta, Cloudera among others. Other than Snap, which was rather over-hyped, most of the others had very good returns for their investors and are continuing to trade above their IPO price. And overall multiples for tech companies on NASDAQ and NYSE are holding steady. I'm especially encouraged by the performance of B2B software companies Mulesoft, Okta and Cloudera. Mulesoft now has a market cap over $3b and Cloudera and Okta look likely to cross that threshold later this year based on their steady growth and increasing efficiency. It looks like B2B stocks are once again in fashion.
My expectation is we'll see a bit of an IPO slowdown during the summer and then a significant uptick in the fall. For B2B SaaS companies getting to $100m or beyond in annual recurring revenue (ARR), this will be an interesting time.
I'm very proud to see how much Duo Security has continue to grow. In 2016 we more than doubled Annual Recurring Revenue (ARR) year over year, finishing at $73m and becoming cash-flow positive for the year. I've been a part of several high growth companies including MySQL and Zendesk, but Duo is the fastest growing and most efficient.
We've also announced our new Duo Beyond offering, which adds even more capabilities to go beyond traditional two-factor authentication. Hopefully 2017 continues to be an excellent year for SaaS security companies.