Salesforce announced on Tuesday that it would be acquiring Mulesoft, an integration platform for enterprise cloud networks, for $5.90 billion. Valued at $6.5 billion using a 21x multiple (including debt), Mulesoft will be acquired in a combination cash and stock deal after only a year of having been listed on the NYSE. The SaaS company grew 58% in 2017 and generated $297 million in revenue with a 73% gross margin, making it the second fastest-growing software company at the time of acquisition. The two SaaS businesses have a history of partnership, as Salesforce Ventures had previously invested $128 million in Mulesoft in 2015. Steve Koenig, an analyst at Wedbush Securities, observes that “It is really a natural fit for Salesforce to own Mule,” since the two services work in tandem to facilitate customers’ operations of their CRM with as few interruptions as possible. Bank of America Merrill Lynch advised Salesforce on the deal, while Goldman Sachs served as Mulesoft’s financial advisor.
In global news this week, world economic officials gathered at the G20 summit in Buenos Aires to discuss cryptocurrency regulations, where it was decided that cryptocurrencies “lack the key attributes of sovereign currencies” and so should instead be considered “crypto-assets”. Acknowledging the technological innovation that cryptocurrencies represent, the summit led to the decision to implement FATF (Financial Action Task Force) standards as applicable to crypto-assets, rather than devise discrete regulations, calling on each governing body to continue closely monitoring crypto-activity in their respective countries.
Elsewhere in the world of financial regulations, President Trump announced on Thursday that a new tariff would be applied to imports from China of up to $60 billion in value, following a White House investigation into Chinese trading policies. The tariff was enacted to reduce Chinese investment in the US, and led China to say that they would take “necessary measures” in a trade war with the US. Investor response to the tariff was immediate, as the DOW closed 724.42 points (2.93%) down at the end of the trading day on Thursday.
Small business news this week saw Jigsaw, the Alphabet-owned, human rights-focused tech incubator announce the release of Outline, a VPN software targeted at small businesses. With Outline, teams can easily set up a VPN on their own server (or one they control in the cloud) in order to take ownership of who is monitoring their data. The aim of the software is to make setup and hosting VPNs easy enough for small organizations to control who is viewing their website traffic for increased security. Outline will serve as an alternative to secure browsers like Tor which slow down browsing significantly, as well as more expensive, third-party commercial VPNs that put users’ private information and internet traffic data at risk.
New in SaaS business listings this week is a $1.2M B2B digital sales and marketing business, with rapid MRR growth and revenues reaching a CAGR of c.52% for the 2014 to 2017 period, a notable customer base of c.4,900 paying users and earnings diversified across several mission-critical apps aimed at Shopify store owners.
New in e-commerce business listings this week we have a $375K business in the B2B and B2C consumer electronics niche, with diversified sales across B2B and B2C channels including multiple notable B2B clients. Strong OEM manufacturer relationships allow the business to offer high-quality SKUs at a low cost while building out a well-known brand with early entrance in a lucrative and growing niche. If you are interested in either of these businesses, follow the respective link to request a prospectus.
Event activity in 2018 remains busy as ever, with founder Thomas heading off to Recurring Revenue in Marina Del Rey, CA on April 12. Shoot us an email if you will be in the area and would like to schedule a meeting.
Continue reading below for more on Salesforce’s acquisition of Mulesoft, the outcome of the G20 cryptocurrency summit and Alphabet’s release of Outline.
Deal Highlights
New:
SaaS – B2B Digital Sales & Marketing – $35K MRR
- Rapid MRR growth with revenues reaching a CAGR of c.52% for the period 2014 to 2017
- Earnings diversified across several mission-critical Apps aimed at Shopify store owners
- Notable customer base of c.4,900 paying users
- Clear market fit with a history of success and hundreds of five-star product reviews
- Low owner involvement
Yearly net profit: $308,000
Asking price: $1,197,000
E-Commerce – B2B & B2C Consumer Electronics – $74K gross/mo
- Well-known brand with an early entrance in a lucrative and growing niche
- Diversified sales across B2B and B2C channels reducing concentration risk with multiple notable B2B clients
- Strong OEM manufacturer relationships offering high-quality SKUs at a low cost
- Full team capable of running the day-to-day staying on post-sale
Yearly net profit: $162,000
Asking price: $375,000
Sold:
Direct Advertising – Photography – $11K gross/moAffiliate – Lifestyle – $5.5K gross/moSaaS – Digital Marketing & Design – $900 MRR
In the News…
Salesforce Acquires Mulesoft
Salesforce announced this week that they will acquire Mulesoft, an integration platform for connecting business’ various software subscriptions on the cloud.
Having previously invested $128 million in a 2015 round of funding for the data management software provider, Salesforce has signed an agreement to acquire Mulesoft for $6.5 billion (including debt). Mulesoft and Salesforce are a “natural fit” according to analyst Steve Koenig at Wedbush Securities, who went on to say that “Salesforce usually helps customers move to the cloud and digitally transform their business that often starts with CRM, so having Mule helps eliminate friction as customers transform their business and to provide a more complete solution.” Mulesoft, which generated $297 million in 2017 at a 73% gross margin, grew by 58% in 2017. Mulesoft is being acquired at a 21x multiple on the enterprise value of the business, and shareholders will get $36 in cash and 0.7011 of a Salesforce share, or $44.89 per share for a premium of 36% to Mulesoft’s Monday close of this week. Mulesoft has only been listed on the NYSE for less than a year.
The acquisition is seen as part of Salesforce’s growing focus on AI, as it would improve data management for the CRM giant to approach machine learning most effectively.
Alphabet Releases VPN for Small Businesses
Alphabet-owned Jigsaw, a tech incubator with a focus on human rights, has released a VPN software for small teams to install on their own servers called Outline.
VPNs run by third parties mean that a business has little control over who sees their traffic and proprietary data. The trouble that most companies have, if they are too small, is that a commercial VPN is quite expensive in addition to putting users’ private information and internet history at risk. Other options, like using anonymity browser Tor, slow down browsing by bouncing connection through various encrypted jumps around the world. Outline offers businesses a third option of software that can be easily set up on teams’ own servers (or one they set up and control in the cloud). Jigsaw boasts that the software can be set up in minutes, making it easy for companies to avoid any potential spying by the VPN they are using.
Santiago Andrigo, Jigsaw Product Manager who led Outline’s development, has stated that when using a third-party VPN, “your privacy is in someone else’s hands.”
G20 CryptoCurrency Summit Gathers in Argentina
The G20 Summit in Buenos Aires saw a gathering of the world’s economic leaders to propose cryptocurrency regulations for July 2018.
The document drafted at the summit follows the wording of Argentina’s Central Bank Chief Frederico Sturzenegger, who has pushed for the examination of cryptocurrencies. According to CCN who have reportedly seen the document, there is not much of a coming crackdown on cryptocurrencies. Officials have instead decided to refer to them as crypto-assets due to a lack of “key attributes of sovereign currencies.” The summit acknowledged the technological innovation that cryptocurrencies represent, though are invested in regulating it due to the posed threat to consumers and investors, tax evasion, market integrity money laundering and terrorism financing. Certain leaders, like Brazil’s Central Bank president Ilan Goldfajn have shared that cryptocurrencies won’t be regulated in their countries.
The summit seemed to lead to the conclusion that cryptocurrencies “do not post risks to global financial stability at this time.”
