Laundrapp and Zipjet merge to form largest on-demand laundry service in UK, seal new funding

Two of Europe’s biggest on-demand laundry startups are merging today. Laundrapp from London and Zipjet from Berlin are confirming the completion of a previously-rumored merger through which the combined business will become the largest on-demand laundry business in the UK.

Alongside this, the combined business has completed a funding round from existing investors including Toscafund, Hargreave Hale VCT, Henkel, Rocket Internet and further minority shareholders. The amount involved has not been disclosed. News of a planned merger was broken by Sky News back in April this year.

The European on-demand laundry and dry-cleaning market is estimated to be worth around €20bn per annum. Both Laundrapp and Zipjet have benefitted from this demand, with revenues, they say, rising more than 30% yoy. Together, the businesses currently process over 150,000 items of washing each month, with the ‘Wash & Fold’ service representing approximately 25% of volumes. The business says customers tend to start with the classic dry-cleaning offering, but later convert to the laundry and linen offering, driven by its convenience.

London is currently the main market for both Laundrapp and Zipjet, and this transaction gives the combined business-critical operational mass, whilst maintaining two separate brands in the short term.

Oliver Bedford at Hargreave Hale commented: “Bringing together two significant operators within the on-demand laundry industry will help lay the foundations for the next wave of investment into technology and infrastructure. Laundrapp aims to put convenience, choice and value at the centre of its customer proposition and we see this transaction as an important step towards building a sector leading capability.”

Lorenzo Franzi, CEO of Laundrapp, commented on the deal: “Bringing the two businesses together allows us to realise synergies, leveraging our technological advantage and critical mass to better serve customers and partners, and in the process cement our position as the #1 player.”

VMware announces intent to buy Avi Networks, startup that raised $115M

VMware has been trying to reinvent itself from a company that helps you build and manage virtual machines in your data center to one that helps you manage your virtual machines wherever they live, whether that’s on prem or the public cloud. Today, the company announced it was buying Avi Networks, a six-year-old startup that helps companies balance application delivery in the cloud or on prem in an acquisition that sounds like a pretty good match. The companies did not reveal the purchase price.

Avi claims to be the modern alternative to load balancing appliances designed for another age when applications didn’t change much and lived on prem in the company data center. As companies move more workloads to public clouds like AWS, Azure and Google Cloud Platform, Avi is providing a more modern load-balancing tool, that not only balances software resource requirements based on location or need, but also tracks the data behind these requirements.

Diagram: Avi Networks

VMware has been trying to find ways to help companies manage their infrastructure, whether it is in the cloud or on prem, in a consistent way, and Avi is another step in helping them do that on the monitoring and load-balancing side of things, at least.

Tom Gillis, senior vice president and general manager for the networking and security business unit at VMware sees, this acquisition as fitting nicely into that vision. “This acquisition will further advance our Virtual Cloud Network vision, where a software-defined distributed network architecture spans all infrastructure and ties all pieces together with the automation and programmability found in the public cloud. Combining Avi Networks with VMware NSX will further enable organizations to respond to new opportunities and threats, create new business models, and deliver services to all applications and data, wherever they are located,” Gillis explained in a statement.

In a blog post,  Avi’s co-founders expressed a similar sentiment, seeing a company where it would fit well moving forward. “The decision to join forces with VMware represents a perfect alignment of vision, products, technology, go-to-market, and culture. We will continue to deliver on our mission to help our customers modernize application services by accelerating multi-cloud deployments with automation and self-service,” they wrote. Whether that’s the case, time will tell.

Among Avi’s customers, which will now become part of VMware, are Deutsche Bank, Telegraph Media Group, Hulu and Cisco. The company was founded in 2012 and raised $115 million, according to Crunchbase data. Investors included Greylock, Lightspeed Venture Partners and Menlo Ventures, among others.

Security stays hot as Imperva grabs Distil Networks

Last week 4 security companies changed hands. The shopping spree continued this week with CDN company Imperva, announcing it was buying bot mitigation startup Distil Networks. The companies did not share the acquisition price.

Imperva CTO Kunal Anand says his company had a narrow bot capability, but was looking to bring a more complete solution to the platform and Distil fit the bill nicely.

“When we looked at all of these different variables, and when we looked at the capabilities and the presence that they have in the market, the leadership with analysts, it felt like a no-brainer for us. And once we got to know the team, Rami, and all the folks at Distil, we thought it would be a great pairing to combine these companies,” he explained.

Distil Networks CEO and co-founder Rami Essaid says the paperwork to seal the deal was signed just yesterday and is expected to close in a month. He says he was finding it difficult to hold his own as a point solution in a market that increasingly valued a platform of services from a single vendor, so he went looking for a partner like Imperva.

“We were finding it harder and harder to compete as a point solution, outside of being a platform, so we started looking for a platform partner, that we could be a part of to continue our journey, and to continue to do what we do best without having to build an entire platform ourselves,” Essaid told TechCrunch.

The plan is to bring most of Distil’s employees on-board, while the long-term plan is to incorporate the Distil toolset into Imperva’s platform, Essaid says that all of his current customers will have the opportunity to become Imperva customers.

Distil was founded in 2011 and has raised almost $60 million. Imperva was sold last year to private equity firm, Thoma Bravo for $2.1 billion.

Why four security companies just sold for $1.5B

If you’re thinking about starting a technology company, you may want to consider focusing on cybersecurity.

Last week was an incredible M&A whirlwind with four security companies getting acquired over just a three-day period:

  • On Tuesday, FireEye bought Verodin, a five-year-old startup that helps measure the effectiveness of your cybersecurity defenses for $250 million.
  • On Wednesday, Palo Alto Networks entered the fray, buying not one, but two Israeli security startups. The big prize was container security company Twistlock for $410 million. It also snagged serveless security company PureSec. Reports in Israeli media pegged that deal at between $60 and $70 million.
  • If that wasn’t enough for you, private equity firm Insight Partners bought 10-year old threat intelligence company, Recorded Future for $780 million.

That’s more than $1.5 billion changing hands for those of you keeping score at home. If you take a look at the four firms, the one common denominator was that each one was covering a different aspect of cybersecurity. Two were looking at more operational tasks, while the two companies that Palo Alto Networks grabbed were aimed squarely at modern developers using containers and serverless technologies.

FireEye snags security effectiveness testing startup Verodin for $250M

When FireEye reported its earnings last month, the outlook was a little light, so the security vendor decided to be proactive and make a big purchase. Today, the company announced it has acquired Verodin for $250 million. The deal closed today.

The startup had raised over $33 million since it opened its doors 5 years ago, according to Crunchbase data, and would appear to have given investors a decent return. With Verodin, FireEye gets a security validation vendor, that is, a company that can run a review against the existing security setup and find gaps in coverage.

That would seem to be a handy kind of tool to have in your security arsenal, and could possibly explain the price tag. Perhaps, it could also help set FireEye apart from the broader market, or fill in a gap in its own platform.

FireEye CEO Kevin Mandia certainly sees the potential of his latest purchase. “Verodin gives us the ability to automate security effectiveness testing using the sophisticated attacks we spend hundreds of thousands of hours responding to, and provides a systematic, quantifiable, and continuous approach to security program validation,” he said in a statement.

Chris Key, Verodin co-founder and chief executive officer, sees the purchase through the standard acquisition lens. “By joining FireEye, Verodin extends its ability to help customers take a proactive approach to understanding and mitigating the unique risks, inefficiencies and vulnerabilities in their environments,” he said in a statement. In other words, as part of a bigger company, we’ll do more faster.

While FireEye plans to incorporate Verodin into its on-prem and managed services, it will continue to sell the solution as a stand-alone product, as well.

HPE is buying Cray for $1.3 billion

HPE announced it was buying Cray for $1.3 billion, giving it access to the company’s high performance computing portfolio, and perhaps a foothold into quantum computing in the future.

The purchase price was $35 a share, a $5.19 premium over yesterday’s close of $29.81 a share. Cray was founded in the 1970s and for a time represented the cutting edge of super computing in the United States, but times have changed, and as the market has shifted, a deal like this makes sense.

Ray Wang, founder and principal analyst at Constellation Research says this is about consolidation at the high end of the market. “This is a smart acquisition for HPE. Cray has been losing money for some time but had a great portfolio of IP and patents that is key for the quantum era,” he told TechCrunch.

While HPE’s president and CEO Antonio Neri didn’t see it in those terms, he did see an opportunity in combining the two organizations. “By combining our world-class teams and technology, we will have the opportunity to drive the next generation of high performance computing and play an important part in advancing the way people live and work,” he said in a statement.

Cray CEO and president Peter Ungaro agreed. “We believe that the combination of Cray and HPE creates an industry leader in the fast-growing High-Performance Computing and AI markets and creates a number of opportunities that neither company would likely be able to capture on their own,” he wrote in a blog post announcing the deal.

While it’s not clear how this will work over time, this type of consolidation usually involves some job loss on the operations side of the house as the two companies become one. It is also unclear how this will affect Cray’s customers as it moves to become part of HPE but HPE has plans to create a high performance computing product family using its new assets.

HPE was formed when HP split into two companies in 2014. HP Inc. was the printer division, while HPE was the enterprise side.

The deal is subject to the typical regulatory oversight, but if all goes well, it is expected to close in HPE’s fiscal Q1 2020.

VMware acquires Bitnami to deliver packaged applications anywhere

VMware announced today that it’s acquiring Bitnami, the package application company that was a member of the Y Combinator Winter 2013 class. The companies didn’t share the purchase price.

With Bitnami, the company can now deliver more than 130 popular software packages in a variety of formats such as Docker containers or virtual machine, an approach that should be attractive for VMware as it makes its transformation to be more of a cloud services company.

“Upon close, Bitnami will enable our customers to easily deploy application packages on any cloud — public or hybrid — and in the most optimal format — virtual machine (VM), containers and Kubernetes helm charts. Further, Bitnami will be able to augment our existing efforts to deliver a curated marketplace to VMware customers that offers a rich set of applications and development environments in addition to infrastructure software,” the company wrote in a blog post announcing the deal.

Per usual, Bitnami’s founders see the exit through the prism of being able to build out the platform faster with the help of a much larger company. “Joining forces with VMware means that we will be able to both double-down on the breadth and depth of our current offering and bring Bitnami to even more clouds as well as accelerating our push into the enterprise,” the founders wrote in a blog post on the company website.

The company has raised a modest $1.1 million since its founding in 2011 and says that it has been profitable since early days when it took the funding. In the blog post, the company states that nothing will change for customers from their perspective.

“In a way, nothing is changing. We will continue to develop and maintain our application catalog across all the platforms we support and even expand to additional ones. Additionally, if you are a company using Bitnami in production, a lot of new opportunities just opened up.”

Time will tell whether that is the case, but it is likely that Bitnami will be able to expand its offerings as part of a larger organization like VMware.

VMware is a member of the Dell federation of products and came over as part of the massive $67 billion EMC deal in 2016. The company operates independently, is sold as a separate company on the stock market and makes its own acquisitions.

Bubble-driven boom in M&As hides steep costs long-term

Driven by ultra-easy central bank policy, global merger and acquisition activity is exploding. The value of transactions in the first eight months of 2018 reached $3.3 trillion worldwide, a 39% increase from 2017, and the market can expect another record-setting year in 2019. What does this mean? The data suggests that optimism about the efficacy of M&As has never been higher. Businesses are increasingly looking to M&As as the way to grow.

Growth is good, but growth can also be cancerous. Financial and strategic calculus may suggest a perfect fit between two companies, but that calculus is mostly irrelevant to the long-term success of an M&A transaction. What looks on paper to be a perfect fit ends up in protracted conflict arising from a mismatch of cultures, values and ideologies. Those intangible factors are often only obvious in hindsight, and it is tempting for decision makers to ignore them because of their very intangibility; after all, if it is not part of the model, it cannot possibly exist, right?

Most acquisitions fail. That is the sobering reality. 

Issues of high executive turnover, labored transition periods and lowered production standards arise when businesses either jump into a deal too quickly or leave internal disagreements unchecked for too long. It is not a secret that M&As have drawbacks, and a lot of ink has been spilled outlining the potential pitfalls of mergers and acquisitions. For a lot of companies, staying private and addressing issues internally is the best path to steady growth. It may not make for a bold headline or improve a company’s financial valuation, but there are real benefits to avoiding M&As altogether.

Facebook’s WhatsApp and Instagram acquisitions will rank among the most successful in all of tech. Yet, even with that success, issues of culture and values have come to the fore longer term.

Late-stage executive churn

In 2003, the Harvard Business Review looked at executive churn within targeted companies. It reported, “On average, about a quarter of the executives in acquired top management teams leave within the first year, a departure rate about three times higher than in comparable companies that haven’t been acquired. An additional 15% depart in the second year, roughly double the normal turnover rate.”

Upon further research, the Harvard Business Review survey found that “executives continued to depart at twice the normal rate for a minimum of nine years after the acquisition.” If we look at a company like Facebook, the Harvard study’s churn timeline doesn’t seem so far-fetched.

Back in 2012, Mark Zuckerberg was unjustly mocked for what was then an unthinkable $1 billion bid to buy Instagram. Five years later, Instagram was seen as perhaps Facebook’s most successful acquisition. Then, from disagreements with Facebook and the urge to start something new, Kevin Systrom and Mike Krieger, the co-founders of Instagram, exited the company at the end of last year. Nicole Jackson Colaco, Instagram’s director of Public Policy, left the company in early 2018. Around the same time, Keith Peiris, Instagram’s AR/Camera product lead, moved on as well. According to TechCrunch, “Instagram’s COO Marne Levine who was known as a strong unifying force, went back to lead partnerships at Facebook. Without an immediate replacement named, Instagram started to look more like just a product division within Facebook.”

Growth is good, but growth can also be cancerous.

Loss of autonomy — and even the perceived loss of autonomy — can be a prime driver of executive churn at targeted companies. In 2018, Facebook also lost Jan Koum, a board member and the co-founder of WhatsApp, the company Zuckerberg acquired in 2014 for $19 billion. Many speculated that Koum’s departure came after concerns about data privacy and Facebook’s advertising model. In either case, Koum’s departure was born out of concern for his company’s ability to function autonomously within Facebook — a concern, we’re learning, that was justified.

What we see here is the exodus of key decision-makers at two targeted companies. With Instagram and WhatsApp, Facebook is now left to move these properties forward without the help of critical executives who know the products they created more intimately than their acquirer ever could. It’s yet to be seen how much and in what ways these personnel changes will hurt Facebook’s bottom line. Facebook is still reporting substantial revenue growth year-over-year, but these recent departures make for a cloudier outlook. Keep in mind that WhatsApp and Instagram would count as major successes.

Righting the ship

Fortune ran an article in 2014 outlining some of the problems with acquisitions. One of the companies they reported on was Aptean, a roughly 1,500-person business software company formed in 2012 from a merger of CDC Software and Consona. Both CDC Software and Consona were the product of several previous acquisitions. The company had become a daisy chain of acquired businesses strung together under one name.

According to Aptean’s own chief architect, “The result was 30 companies that were really never integrated with each other. We had 30 vertically organized separate companies doing their own things, with their own tools. Everything from HR to software delivery and launch was in the hands of the product teams. There were attempts to try and solve that but there was really no interest.”

Aptean, like so many other companies, was not prepared for the herculean task of retraining and acclimating hundreds of workers. It can take years to onboard new teams, requiring long adjustment periods for employees who need to learn new systems and management styles. According to Forbes,”Worker experiences can vary dramatically even if values are aligned. You can speed up assimilation with focus, resources, support, communication and transparency, but it still takes time.”

Early M&A struggles can be managed, but it takes recognition at the point of conflict.

Acquisitions are often initiated to solve a problem then and there, so long acclimation periods require time most businesses don’t have or are unwilling to give. Aptean was willing to put in the work to shore up foreseeable issues that come from a business model built on mergers and acquisitions. If there’s one thing to learn from Aptean it’s that early M&A struggles can be managed, but it takes recognition at the point of conflict to enact a plan to remedy the situation.

One fairly recent M&A that has received a lot of attention is Amazon’s purchase of Whole Foods. If we look at Whole Foods one year after the acquisition, a familiar narrative to Facebook and Aptean arises, only now Amazon and Whole Foods have the added challenge of competing in the retail space while maintaining customer satisfaction.

Growing pains

Similar to Instagram and Whatsapp, Whole Foods was a big fish in a big pond that has been swallowed by a blue whale. To what end? As The Wall Street Journal points out, “More than a dozen executives and senior managers have left since Amazon acquired Whole Foods last year, according to former employees and recruiters steering them to new jobs.”

There appears to be little harmony between Amazon and Whole Foods right now, and the bruises are already showing. Whole Foods may be reporting a 19% rise in sales year-over-year, but customers are complaining about the quality of their produce. Businesses are weary of steep price hikes for prime shelving space, and perhaps most concerning of all, Amazon — the blue whale — isn’t getting the return on its investment.

Late last year, Forbes ran an article about the Amazon-Whole Foods deal, writing, “Amazon, even after acquiring Whole Foods for $13.7 billion in 2017 and offering two-hour grocery delivery service, is finding little success in the grocery business.” It may be that Amazon’s plans for Whole Foods are far-reaching and require several years to fall into place, but just like Facebook, the company is encountering problems now that if gone unaddressed could jeopardize the viability of the acquisition. Bloomberg reported that, “The number of Amazon Prime members who shop for groceries at least once a month declined in 2018 compared with 2017… The drop was surprising given the company’s Whole Foods investment and expansion of two-hour delivery service Prime Now.”

In the short-term, we see that shoppers at Whole Foods are unhappy, vendors are feeling pinched and Amazon is losing money to Walmart and Kroger and Target (businesses with more physical stores to service online orders). Looking ahead, Amazon’s plans for Whole Foods are ambitious, and with proper management of these early issues, this acquisition could prove beneficial to both companies, but only time will tell.

The perks of going it alone

An overwhelming majority of companies that engage in M&As are public. The reason for this is because public companies are accountable to their shareholders, who demand revenue growth year-over-year. The fastest way for a business to demonstrate growth and reinvest capital is to acquire another company. When financial valuations, shareholders and exit strategies are top of mind for a business, little attention is paid to company culture.

Good company culture is becoming harder to find as businesses increasingly turn to M&As to solve their problems.

Now consider a private company that avoids M&As. Over time, that company can benefit immensely from its autonomy. Money that would have otherwise been used to buy a competing business can be reinvested into R&D and far-reaching growth projects that may not suit the revenue timeline of a shareholder. Executive turnover is lower, which leads to lower churn, company-wide. These benefits contribute to company culture. Demonstrating good company culture means that employees stay longer and are given the opportunity to work on projects that excite them. Good company culture is becoming harder to find as businesses increasingly turn to M&As to solve their problems.

Look before you leap

Ultimately, expectations and creative control have always loomed large over the fate of any merger or acquisition. It is natural for a business to want to absorb the brain trust of a competing company. Buying out a business to integrate its products into your suite can be a sound financial practice as well. But when things go south — whether that be through executive churn at the targeted company or problems with integration — people rarely point to the baked-in complications associated with M&As as a responsible party.

With each acquisition, a business may be forfeiting a part of its core DNA. There are issues of long-term employee retention and ideological compatibility that weigh heavy on any M&A. What’s more, acquisitions can require 10-year implementation plans (or longer), but with such a high turnover rate, it becomes incredibly difficult to make the transition work.

In the abstract, warning against these issues can come off as patronizing. But with this year expected to bring more M&A activity than 2018, the best way for businesses to assess the merits of a merger or acquisition tomorrow is to study the troubles befallen many high-profile companies today.

Microsoft delves deeper into IoT with Express Logic acquisition

Microsoft has never been shy about being acquisitive, and today it announced it’s buying Express Logic, a San Diego company that has developed a real-time operating system (RTOS) aimed at controlling the growing number of IoT devices in the world.

The companies did not share the purchase price.

Express Logic is not some wide-eyed, pie-in-the-sky startup. It has been around for 23 years building (in its own words), “industrial-grade RTOS and middleware software solutions for embedded and IoT developers.” The company boasts some 6.2 billion (yes, billion) devices running its systems. That number did not escape Sam George, director of Azure IoT at Microsoft, but as he wrote in a blog post announcing the deal, there is a reason for this popularity.

“This widespread popularity is driven by demand for technology to support resource constrained environments, especially those that require safety and security,” George wrote.

Holger Mueller, an analyst with Constellation Research, says that market share also gives Microsoft instant platform credibility. “This is a key acquisition for Microsoft: on the strategy side Microsoft is showing it is serious with investing heavily into IoT, and on the product side it’s a key step to get into the operating system code of the popular RTOS,” Mueller told TechCrunch.

The beauty of Express Logic’s approach is that it can work in low-power and low resource environments and offers a proven solution for a range or products. “Manufacturers building products across a range of categories — from low capacity sensors like lightbulbs and temperature gauges to air conditioners, medical devices and network appliances  –leverage the size, safety and security benefits of Express Logic solutions to achieve faster time to market,” George wrote.

Writing in a blog post to his customers announcing the deal, Express Logic CEO William E. Lamie, expressed optimism that the company can grow even further as part of the Microsoft family. “Effective immediately, our ThreadX RTOS and supporting software technology, as well as our talented engineering staff join Microsoft. This complements Microsoft’s existing premier security offering in the microcontroller space,” he wrote.

Microsoft is getting an established company with a proven product that can help it scale its Azure IoT business. The acquisition is part of a $5 billion investment in IoT the company announced last April that includes a number of Azure pieces such as Azure Sphere, Azure Digital Twins, Azure IoT Edge, Azure Maps and Azure IoT Central.

“With this acquisition, we will unlock access to billions of new connected endpoints, grow the number of devices that can seamlessly connect to Azure and enable new intelligent capabilities. Express Logic’s ThreadX RTOS joins Microsoft’s growing support for IoT devices and is complementary with Azure Sphere, our premier security offering in the microcontroller space,” George wrote.

Salesforce is buying MapAnything, a startup that raised over $84 million

Salesforce announced today it’s buying another company built on its platform. This time it’s MapAnything, which as the name implies, helps companies build location-based workflows, something that could come in handy for sales or service calls.

The companies did not reveal the selling price, and Salesforce didn’t have anything to add beyond a brief press release announcing the deal.

“The addition of MapAnything to Salesforce will help the world’s leading brands accurately plan: how many people they need, where to put them, how to make them as productive as possible, how to track what’s being done in real time and what they can learn to improve going forward,” Salesforce wrote in the statement announcing the deal.

It was a logical acquisition on many levels. In addition to being built on the Salesforce platform, the product was sold through the Salesforce AppExchange, and over the years MapAnything has been a Salesforce SI Partner, an ISV Premier Partner, according the company.

“Salesforce’s pending acquisition of MapAnything comes at a critical time for brands. Customer Experience is rapidly overtaking price as the leading reason companies win in the market. Leading companies like MillerCoors, Michelin, Unilever, Synchrony Financial and Mohawk Industries have all seen how location-enabled field sales and service professionals can focus on the right activities against the right customers, improving their productivity, and allowing them to provide value in every interaction,” company co-founder and CEO John Stewart wrote in a blog post announcing the deal.

MapAnything boasts 1900 customers in total, and that is likely to grow substantially once it officially becomes part of the Salesforce family later this year.

MapAnything was founded in 2009, so it’s been around long enough to raise over $84 million, according to Crunchbase. Last year, we covered the company’s $33.1 million Series B round, which was led by Columbus Nova.

At the time of the funding CEO John Stewart told me that his company’s products present location data more logically on a map instead of in a table. ‘“Our Core product helps users (most often field-based sales or service workers) visualize their data on a map, interact with it to drive productivity, and then use geolocation services like our mobile app or complex routing to determine the right cadence to meet them,” Stewart told me last year.

It raised an additional $42.5 million last November. Investors included General Motors Ventures and (unsurprisingly) Salesforce Ventures.