Thursday, October 20, 2016

Global Expansion: 8 Tips to Make Your Next Acqui-Hire Successful

As an investor, I’ve sat on both sides of the table in more than a dozen acqui-hire situations. Companies that successfullyleverage acqui-hires can save years of work and gain a competitive advantage by adding skilled technical and operational talent, deep local market knowledge and an accelerated time-to-market.

However, not all acqui-hires are created equal, but there are numerous pre-deal considerations to ensure post-deal success. Here are eight tips I’ve learned from the trenches.

Acqui-hire Tip 1: One Vision, Same Values
Both the acquiring and acquired teams need to share the same vision and values. The two teams must work closely and effectively together in order to be successful. “What matters most is the personal and professional fit between the two teams. They should ideally share the same goals, business and company cultures.” (Olivier Bremer, founder of PostoInAuto – acquired by Blablacar)

Acqui-hire Tip 2: Crystal-Clear Roles
Define clear roles at the outset to avoid any misunderstanding or redundancy. This starts by deeply understanding the attributes and behaviors of the other company. Micro-managing a highly entrepreneurial and innovative team, for example, can cause animosity and frustration. Be certain that both parties understand how the acquired executives and employees will fill key roles within the larger organization. Acqui-hires work well when the acquired team continues to run the business or business functions with relative autonomy. “Being clear about the future roles of an acqui-hired team is key to post acqui-hire integration.”  (Piotr Jas, founder of a Polish ride sharing company acquired by BlaBlaCar)

Acqui-hire Tip 3: One Big, One Small
Size matters. The larger the size differential between the two companies, the easier the acqui-hire will be. It’s more difficult when companies are of relative equal size, and the main variant is one company’s cash on-hand. The smaller the size difference, the more conflicts emerge around products, leadership, best practices, etc.

Acqui-hire Tip 4: Equity is King
You must agree to an incentive structure that motivates the founders and key executives within the company you acquire. This is paramount to make sure they remain invested in the success of the company at large. An acqui-hire is not a cash-out event. Use equity and options to incentivize and reward these new team members. Determine the amount relative to the value of the businesses – prioritize options over equity as motivation to stay.

Acqui-hire Tip 5: Global Incentives
The right approach is to allocate options and shares of the global company rather than the subsidiary where the acqui-hired team operated. Here’s what it is important to align incentives on the overall success of the company:
  • Growth within a country is linked to the amount invested in the region, which the acqui-hired team does not control and may change over time.
  • Team roles will evolve, including those from the acqui-hire. You will have to renegotiate incentives if and when roles evolve in tandem with the company’s growth.
  • Finally, it is hard to define the relative value of a specific country vs. the overall company. When an exit comes, determining the respective value of each part has a high chance of creating conflict at a time when all the team needs to work closely together to make the exit happen

Acqui-hire Tip 6: Avoid Hidden Liabilities
Understand tax liabilities. There are two common acquisition structures: option-A) asset purchase: the preferable option where the acquiring company buys only the assets; option-B) company purchase: acquiring company buys both the assets and liabilities. Option-A is usually faster and safer, as you will not take on any hidden liability, which may arise in the future. However, it can trigger tax liabilities for the founders/investors of the acquired company. If you must take option-B, conduct thorough legal due diligence to avoid future liability surprises.

Acqui-hire Tip 7: Keep it Simple
Acquiring a company with a complex equity structure (i.e. many angel investors) can lead to a large administrative burden that slows decision-making. Offer angels cash or options, which can be only exercised at expiration (typically 10 years) or an exit. This way they benefit from the full economic value, but are not shareholders. If this is not possible, you can group them into a Special Purchase Vehicle (SPV) with only one signatory.

Acqui-hire Tip 8: One Brand to Rule Them All
A global brand offers significant synergies, so make sure acqui-hires rebrand quickly. BlaBlaCar rebranded all local brands into one unified international brand, including their initial market, France: “A single brand offers clarity and consistency for customers and employees. The parent brand should have a brand on-boarding process to streamline the transition, while creating a strong, unified and identifiable global brand experience.” (Frederic Mazzella, founder of Blablacar)

 Account for these factors, but understand that every company and situation is different. The founders and executives from both parties must be diligent and transparent, and leave nothing to question. I hope these learnings will influence your thinking in your quest to go global, and as always, share your thoughts, feedback and questions with me here or on Twitter (@pbotteri).

Tuesday, September 20, 2016

SaaS Wars: Europe Awakens

Accel Euroscape: The 100 most promising Software-as-a- Service companies in Europe and Israel

-This article was co-authored with my colleague Pia d'Iribarne and published initially on Findings were presented at SaaStock 2016 and you can see the slides here-

Software is eating the world, and Software-as-a-Service (SaaS) is eating software. Global SaaS revenues are expected to grow by $19 billion in 2016, an increase of 22% from 2015, while traditional software revenues are shrinking by $10B. Two dollars in SaaS revenues are created for every $1 of software revenues eaten – an impressive stat, but where does Europe stand on the global SaaS map?

Rising tide

When I was in Silicon Valley, I spent most of my time investing in SaaS companies. When I moved back to Europe in 2011, I had to reduce my activity significantly in this area, as there was not enough going on. Five years later, the picture has changed drastically: five of Accel’s 10 most recent investments in Europe have been SaaS companies. SaaS in Europe is exploding in terms of both quantity and quality. Our analysis estimates that the number of SaaS companies created has grown 4x between 2007-09 and 2013-15, and the amount raised by European SaaS companies has more than doubled. 

As it takes around 10 years for a SaaS company to reach maturity, the explosion we are seeing at the early stage has not yet translated into a significant number of exits. To date, there have been only four major European SaaS exits (all IPOs), including QlikTech in 2010, Wix in 2013, Zendesk in 2014 and Mimecast in 2015. The combined market cap of these companies today is around $9B. By comparison, the US has seen around 60 SaaS IPOs with a combined market cap of close to $140B ($50B of this is Salesforce).

The Accel EuroScape

To better understand the new generation of SaaS companies, we took a systematic look at more than 1,000 SaaS startups across 12 countries to create the “Accel EuroScape” – a list of the top 100 most promising SaaS companies in Europe and Israel:
Note: to create the list, we ranked each company by a set of criteria including market attractiveness, level of technology differentiation, strength of the team and initial traction (monthly recurring revenues and growth in number of employees). Nothing is perfect, and we might have missed some great companies, so please send us any additional companies to

These 100 companies have raised a combined $2.5B and 85% of the $900M that went into European SaaS companies in 2015 alone. Twenty-eight of them have raised more than $30 million in total, while Trustpilot, Intercom, NewVoiceMedia and Zerto have raised above $100M. This concentration of capital in a limited number of champions will hopefully pave the way for a good number of IPOs in the coming years.

From a geographic standpoint, the top three regions for SaaS companies are the UK, France and Israel, with around 20 logos each in our top 100. Perhaps surprisingly, despite all the hype, Germany only has eight companies on the list. Across the rest of Europe, SaaS is still very fragmented, but every single country, big or small, has the potential to generate a champion. Take Denmark, where the passion of Peter Holten Mühlmann has made Trustpilot the online standard for customer experiences.

When these 100 companies are compared to a similar list of 300 US SaaS companies, a few trends emerge:
  • Marketing is the leading SaaS industry in Europe – 22% of the companies vs. 13% in the US. It’s interesting to see Europe overweight in this area, and the reason may be that several marketing start-ups in various European countries are going after the same problem – A/B testing is a good example. This creates small country leaders rather than global businesses and leads to a very fragmented market.
  • Europe is underrepresented in vertical SaaS solutions – 17% of the companies vs. 23% in the US. Vertical solutions are typically a sign of a more mature ecosystem. In Europe, a range of vertical SaaS companies is beginning to emerge, and it's likely to catch-up in the future.
  • From a funding standpoint, European SaaS companies have raised on average 30-40% less capital than their US counterpart at a comparable stage. Even with the difference in cost base (engineers in Europe are cheaper than in the Valley), the funding gap has not been closed yet, and European companies have less firepower than their US counterparts on average. That said, with 28% having raised more than $30M and a handful more than $100M, the funding they have received is enough to help them reach significant scale.

Building European Champions

Taking a step back from the categories on this map, two main types of European and Israeli SaaS champions emerge. 

The first is the B2B global platform play, such as Algolia, the search-as-a-service API Nicolas Dessaigne and Julien Lemoine have built out of Paris. Like other technology infrastructure businesses, search is a truly global opportunity, and these companies need to bring their fight to the US early, as its size makes it the most strategic market. For example, half of Algolia’s initial customers where from the US. While breaking into the US can be a challenge, Europe has the engineering talent to build world-class companies. Take Intercom as an example; the combined design and technology skills of Des Traynor and Ciaran Lee have allowed it to shine in the very competitive field of customer communication. 

The second type of company is the local SaaS champion with a solution connecting businesses to consumers. The consumer marketplace creates a winner-takes-all dynamic, which opens the door to grabbing massive market share. For example, two software companies are emerging in Europe for doctor booking management, Doctolib and DocPlanner. 

Crystal balling

Looking back at the growth of SaaS ecosystem in Europe over the past five years, I am very excited about what will happen in the next five. A number of companies in our EuroScape have the breakout potential to be tomorrow’s global leaders and put Europe firmly on the Global SaaS map.

But, the story does not stop there. If SaaS is eating software, Artificial Intelligence is starting to eat SaaS. It’s early days, but legacy SaaS applications will be disrupted by a new generation integrating Artificial Intelligence and machine learning technologies. A good example is Shift Technology, which is applying AI to fraud detection in insurance. Founder Jeremy Jawish gave me a striking example of the power of its AI engine: would you think that someone filing a claim for a car accident the day after subscribing to a policy is a fraudster? In most cases this would be true, but not if the driver just got their license. No insurance claim investigator could figure this out, but Shift’s AI engine did.

Monday, August 15, 2016

Tuesday, July 05, 2016

The Magic of Acqui-Hire in Europe: Learnings from Blablacar

Most startups fail at getting a new country off the ground. This is why Unicorns are such a rare breed. Fortunately, a happy few have succeeded at finding this magic formula, like the team at Blablacar and turned it into a competitive weapon. One of their secret: acqui- hiring. 

This is my second post on international expansion. If you wonder how to pick your next launch country first, see my earlier post here.


One of the most important decisions any company of any size will make is how it will successfully launch operations in a new country (the following applies to launching in new cities or states within an existing country). For early stage companies, the stakes are even higher, and finding a great country manager is the single most important element of a successful launch.

The most common solution is not necessarily the easiest, where companies hire a manager with expertise or a network in the chosen country, and enable him or her to hire a team of two or three people as support to get started. However, an experienced leader is extremely difficult to find and the risk of failure is high. Alternatively, companies will “spin-off” an existing core team member to lead the launch. While this is a good option, it can be difficult to implement because this person must meet important criteria like language fluency, geographic familiarity and more.

Fortunately, there is another, proven strategy, which I will expand on here – the acqui-hire.

Lessons from Acqui-Hire Success Stories

The best example of launching and expanding in new countries via acqui-hire can be found in Paris-based BlaBlaCar, Europe's top ride-sharing company with 16 offices worldwide. As, I was about to lead Accel’s first investment in the company, I began building a list of all the start-ups operating in a similar or adjacent space. Among them was a small company of two people in Italy called PostoInAuto (at the time, BlaBlaCar had only launched in France and Spain). PostoInAuto’s founder, Olivier Bremer, was terribly talented, but his business was not at a point where he could raise a significant investment.

As our investment in Bablacar was ready to close, I again reached out to Olivier to gauge his interest in joining the BlaBlaCar team – strong leadership, significant funding and the opportunity to retain total freedom to build the service in Italy. He was intrigued, so I connected him to BlaBlaCar’s founders who convinced him to join the adventure shortly after. Within four months, Olivier re-launched his service under the BlaBlaCar brand in Italy, and today BlaBlaCar is the dominant service in the country. Olivier went on to lead the company’s launch in Germany given his dual German/Italian background, and currently leads the business in both countries.

"There were many reasons why I decided to join forces with BlaBlaCar: we shared the same long term goals; I could feel a very good fit with the founding team; my company was early stage and by joining BlaBlaCar” said Olivier Bremer, BlaBlaCar GM Germany and Italy. “I was empowered to continue doing what I had been doing, but with a much larger budget and support from a team that shared my same passion.“

Learning from the success of this initiative, I introduced the BlaBlaCar team to companies in Poland and Russia, which have also been very successful acqui-hires.

Making an acqui-hire successful

If successfully executed, combining resources from an acqui-hire will save years of work while broadening the technical and talent bench. But, this is a highly emotional process for the acqui-hired team. Therefore, it is very important to set the right rationale and motivation to ease the process.

“Like any successful partnership, the acqui-hiring and -hired companies must fully align in terms of strategic goals, operational processes and culture. Both sides must trust the other and commit to a shared vision,” said Piotr Jas, BlaBlaCar GM CEE. “Both companies need to actively learn from one another throughout the diligence process, and maintain an open and honest line of communication in the early days of the expansion.”

Like any relationship, the responsibility for success is shared. The acquiring company must find a team with the skills and passion to accelerate growth exponentially.

“Being acqui-hired can be seen as a ‘fundraising++’ because the local team receives money to expand faster (like any fundraising) and a robust and proven product and tech platform. It also receives access to ultra-relevant experience in their field, fast-growth methods, tailored customer support – provided by HQ in our case –, a strong international brand with related communication methods and positioning,” said Frederic Mazzella, BlaBlaCar co-founder. “Thus it is not only about the money.”

Since its acqui-hire of PostoInAuto, BlaBlaCar developed a team that scouts potential acqui-hire opportunities across the globe. While it’s not possible to find strong acquisitions opportunities in every country (the launches in India and Turkey have been organic), it remains a key element of its fast global rollout.

The interesting element of the acqui-hire strategy is that it does not require a lot of upfront cash to implement relative to the resulting growth (assuming proper diligence ahead of time).

“We acquired three companies in short amount of time and each time I re-used the same term sheet template. Most of the consideration for these deals was equity and options, so cash is not a requirement. To be successful, you need to have the right skills and having someone in the core team with M&A or venture background helps a lot,” said Nicolas Brusson, BlaBlaCar co-founder.


Today, more than 50% of BlaBlaCar new members are coming from acqui-hires – an impressive ratio proving the effectiveness of the approach.

While this is one example of many across our portfolio and beyond, the acqui-hire strategy remains consistent and taps into a set of best practices, regardless of country: find great talent, maintain great culture and clearly communicate strong values across each local teams.

Friday, May 20, 2016

Brexit: What Start-ups Need to Know

In 30 days, on June 23rd, UK voters will be asked a simple question: 

“Should the United Kingdom remain a member of the European Union or leave the European Union?”

I hope the answer will be "Stay" - currently the betting odds are 1:5 for "Stay" and 10:3 for "Out", so the odds are clearly in the "Stay" camp. But who knows? The interesting part about this vote is that voters will not have a clear picture of what a Brexit actually means, since the post-Brexit UK/EU relationship will have to be negotiated after the referendum.  If the "Out" vote succeeds, it will trigger a 2-year notice period during which the negotiations will take place.  

I worked with my colleague James Cameron to look at the potential outcomes and in particular how it would impact start-ups in the UK and Europe and we put together this short post.

Three key areas will be on the negotiation table:  

  1. Trade terms and the extent to which the UK can still access the EU single market
  2. UK control over EU immigration
  3. How EU regulations will continue to impact the UK
All are interrelated and there will be trade-offs between all three. 

The likely options
Neither the major parties nor the "Out" campaign have released proposals for the UK’s future after a Brexit –so we can only speculate based on other models that currently exist: 

Option 1:
The Norwegian model
Option 2:
The Swiss model
Option 3:
The Turkish model
Option 4:
WTO rules
Out of EU, but still in EEA (e.g. like Norway, Iceland). Preserves access to the EU single market for most trading sectors, but most EU-derived laws remain in place.  Free movement still applies.
Out of EEA, but the UK would negotiate access to the single market, sector by sector.  Example - Switzerland has 129 different bilateral trade accords with the EU, but must accept free movement of people and still pays fees to the EU.
Outside EEA, but with a negotiated customs union.  In Turkey’s case, it doesn’t pay fees to the EU and there is no freedom of movement.

Simply rely on WTO rules for access to the EU market.
The situation would be very similar to what we have now, but the UK would have reduced power to influence the rules that would apply domestically.  This solution may appease ‘Out’ voters’ desire for more sovereignty - but is arguably an unattractive result for both sides.
This model could give UK more latitude to negotiate preferred deals in certain areas. However, the EU think the current situation with Switzerland is unsustainable, and many commentators think it’s unlikely they will accept a similar deal for the UK.
The Turkish customs union covers only goods, not services or finance, so a similar deal for the UK would deny the UK access to a big part of the single market.
This is a fallback option would give the UK more sovereignty at the price of less trade and a potentially big fall in income.

A Fifth option?
  • A fifth option that is advocated by ‘Out’ proponents is to negotiate a special deal for Britain alone that retains full access to the single market without observing all the EU’s rules (including freedom of movement) or contributing heavily to its budget (i.e. a form of ‘EEA lite’). 
  • Whether the UK will be able to negotiate such a deal comes down to the relative bargaining power of the two parties.  The Leave camp believes that UK will be in strong position since it is the 5th biggest economy in the world.  However, the Remain camp notes that it is the relative size of the market that matters most - the EU is half of Britain’s export market, whereas Britain would be only 10% of the EU’s. 
  • Ultimately, in a post-Brexit with a potentially hostile EU, we can expect that it will be extremely hard to secure as favourable a trading relationship as the UK enjoys at present, especially if it insists on curbing free movement of people. 
Possible impacts on the UK tech ecosystem
  • Skilled labour migration:  This is probably the biggest single concern for the UK tech scene. Restricting free movement will need to be negotiated if the UK wants to keep favourable trading terms post Brexit, but given immigration control is central to the Out campaign, we should expect the UK to push for at least some restrictions on free movement.  Many in the Out campaign want to design a system that will favour immigration from skilled migrants regardless of origin (the ‘Australian model’).  This may be workable in the longer term, but at least in the short-to-medium term we should expect a Brexit to trigger a sharp drop in the number of available skilled immigrants from the EU, which would be highly detrimental to the UK tech ecosystem. 
  • Existing immigrants: Any EU nationals that are already in the UK pursuant to the existing arrangements should be unaffected.  Under the Vienna Convention on the Law of Treaties they cannot be removed from the UK unless the countries agree otherwise – which is unlikely.
  • Financial services: Unless UK remains in the EEA (i.e. the Norwegian option), the European passporting rules for financial services will no longer apply to UK firms after Brexit.  This will impact any UK companies operating regulated financial services in Europe or vice-versa.  
  • EU R&D funding: UK is the second largest recipient of EU research and innovation funding (expecting £2bn in the next 2 years – roughly 20% of the total science budget allocated by the UK gov).  Most has gone to university R&D programmes, but at least 15% typically goes to startups/SMEs. This funding will likely no longer be available after a Brexit.   
  • Data privacy: On a Brexit, the EC must decide whether to designate the UK as a 'safe third country' for data. If it didn’t, personal data transfers to the UK could be restricted – similar to the US. 
  • No Digital Single Market:  A Brexit will most likely mean that the UK firms are excluded from the proposed digital single market – a basket of regulations that expect to be implemented between now and 2018 to streamline EU copyright applications, streamline VAT payments for digital goods, harmonise ecommerce rules and abolish EU roaming charges, amongst other things.
  • Currency impact:  The pound will almost certainly continue to suffer a sharp sell off in the wake of a Brexit vote – which will benefit any UK based startups that sell globally, at least in the short term.
Possible impact on the broader economy

Base case
Upside case
Downside case
Similar to Norway or Switzerland - the UK maintains deep and wide trade relations with the EU after leaving the bloc, but continues with many of the laws and regulations that are currently part of EU law (inc. free movement).
UK negotiates more favourable trade terms with the EU and is able to quickly put in place favourable terms with other key countries.  At the same time, the UK gets more control over immigration and finds an immigration solution that does not restrict flow of skilled labour. 
Drawn out negotiations, with UK eventually trading controls over immigration for much weaker access to the single market.  At the same time, UK finds it difficult to sign beneficial trade deals with other countries.
The impact on the broader economy over the long term may be neutral, but we will likely still see a period of volatility and low investment with the risk of a run on the pound.  Sovereignty will be re-established, but in practice UK will be subject to regulation without representation.
Most commentators discount the likelihood of this scenario heavily – it will be very difficult to secure as beneficial trading relationship outside the EU as it enjoys at present, especially if it insists on curbing free movement of people.
Britain receives less inward foreign direct investment, fewer skilled immigrants, and does not improve the regulation of the economy.  The tech ecosystem is disproportionately impacted by the reduction in skilled immigration.

Broadly neutral (between -0.8% and +0.6% of GDP by 2030 according to OpenEurope)
Moderately positive (+1.6% of GDP by 2030 according to OpenEurope)
Strongly negative (-2.2% of GDP by 2030
according to OpenEurope)

Expert views on the outcome
  • In one of the most comprehensive polls of experts done so far (an FT poll of >100 economists in Jan 2016), >75% thought Brexit would adversely affect the UK’s medium-term economic prospects, only 8% thought Britain’s economy would benefit.
  • “There are few issues that unite UK economists but Brexit is one of them: they overwhelmingly believe leaving the is bad for the country’s economic prospects.”  Financial Times

30 more days before we know...let's hope the "Stay" will prevail!

Tuesday, February 23, 2016

Killer SaaS Pitch: the Video

25mn presentation of the "Killer SaaS Pitch" at the Accel "We Love SaaS" event in Paris in front of 200 entrepreneurs. Thanks to The Family for hosting us!

Tuesday, January 19, 2016

Why do I invest in SaaS?

I was recently interviewed by the team of eFounders, the new Parisian SaaS start-up incubator founded by Thibaud Elzière (Fotolia) and Quentin Nickmans. They are running a series of interviews of European VCs investing in SaaS and I was lucky to be the first one.

Accel SaaS portfolio
  • Europe: Algolia, Doctolib, PeopleDoc, Qubit, CartoDB, Prezi, KDS
  • US: Slack, Dropbox, Docusign, Squarespace, Cloudera, Qualtrics, SumoLogic, RelateIQ,, Responsys, Coremetrics, HasOffers, Airwatch, Xero, Invoice2Go
  • Asia: Freshdesk, Atlassian
SaaS trends I like 
  • “SMB Operating System”
  • API-driven products
  • Vertical SaaS
  • Enterprise mobile-driven services (like Docusign)

What I look for in SaaS companies
  • Passionate founders
  • Differentiated product addressing a very large market opportunity
  • SaaS metrics, → the “5C” of SaaS finance (CMRR, CAC, Churn, Cashburn and CLTV) completed by an additional “3Cs”: Cohorts, Clients concentration, and Country breakdown
Why do I invest in SaaS?
I began my career at McKinsey and when the Internet bubble burst in 2001, I made a shift towards online software (ASP at the time). From then on, I remained convinced that SaaS was a much more efficient model, for both ISVs and customers — although many people remained skeptical on the viability of the model for a long time. Even in 2006, when I joined Bessemer Venture Partners, there was still a lot of skepticism in the Silicon Valley around SaaS (one of my first blog post in 2006 was titled: “Why I disagree with Tony Zingale — CEO of Mercury Interactive — on the future of SaaS"). My SaaS focus at Accel Partners is the natural continuity of this path. Today is a very interesting time for the SaaS industry: Europe has shown it was capable of creating successful SaaS businesses, and it’s only the beginning.

What makes a good VC for a SaaS startup?
SaaS startups need to have a VC that understands the SaaS model, including market development strategies, upsell dynamics, sales incentive plan, etc. They also need VCs capable of financing their entire life cycle — on average, SaaS startups raise between $80 and $100 million before an IPO. Lastly, SaaS startups can only thrive if they become leaders in the US. As a consequence, they need a VC that has a strong international network and can help them develop their go to market successfully in the US.

What investment trends do I foresee for 2020 in the SaaS industry?
  • More and more champions will be built out of Europe.
  • The SaaS infrastructure will become increasingly more driven by APIs: developers will use more API driven services like Algolia or Segment to reduce time to market and focus their dev resources on the part of their product which differentiate them.
  • Mobile will drive new use cases.

Do you consider yourself as competing with US VCs for SaaS startups?
We are a global VC, therefore we’re competing — and at the same time partnering! — with VCs everywhere in the world.

What’s the n°1 startup that you wish you had in your portfolio?
Zendesk — the 1st SaaS EU company to be listed on the Nasdaq