acquisition

Shopify Makes First Major Acquisition

By Mark Evans in Social Media No Comments Tags: , ,

Armed with $15-million in venture capital to aggressively expand its e-commerce platform, Shopify has made two big moves – made its first major acquisition – Ottawa-based S3 – and moved into a new 17,000 sq ft headquarters in Ottawa’s ByWard Market.

The purchase of S3 is a key part of Shopify’s efforts to expand its mobile growth strategy, which will see the development of new applications on the major platforms.

A Mobile Company in a Few Years

Shopify CEO and founder Tobi Lutke said the purchase of S3, which was located in Shopify’s old offices, materialized after Shopify realized that an increasingly amount of business was happening using mobile devices.

“There are people on smartphones and tablets, and people sitting on couches makes purchases,” he said in an interview. “We really realized that in a few years from now we will be a mobile company. We did have a mobile application that was good and people liked it but it was tricky because our DNA is building scaleable Web sites, while mobile development requires a very different kind of craftsmanship.”

Shopify has more than 20,000 active online stores in 80 different countries, including more than Shopify’s stores in Canada. Last year, Shopify processed more than four million orders worth $275-million of sales, and more than doubled its workforce to 100 employees.

Tariq Zaid, S3′s co-founder and CEO of S3, will be joining Shopify with his team of over 20 mobile engineers and designers.

 

Getting Acquired and Then Getting Shut Down

By Mark Evans in Startups 2 Comments Tags: , , ,

Hey, the good news is you’re being acquired. The bad news is a key part of the deal is the product you’ve been nurturing, growing and pouring your heart and soul into will be shut down as part of the deal.

Welcome to the exciting world of team-buying in which the acquirer has far more interest in the people who built the product than the product itself. Case in point is Twitter’s purchase of Vancouver-based Summify last week.

Twitter essentially bought co-founders Mircea Pasoi and Christian Strat and the Summify team, while blowing off the service, which used social data to create a personalized news. Summify has stopped accepted new users, and has already removed or disabled some features.

The buy-and-close transaction is interesting because it is almost as if the product served as a public audition for the people who developed it. While the team performed on stage, the potential acquirers observed from the seats to determine whether there was good talent for hire.

In some ways, being bought but having your product shut down must be bitter-sweet for entrepreneurs who were able to execute on the vision for the product they developed. On the other hand, getting handsomely paid AND having an opportunity to work for a fast-moving company that wants you to be part of it is a good way to get over the loss.

Still, it must be a conundrum for entrepreneurs to accept this kind of deal. As much as it is flattering to be wanted, it comes with a price. It does make you wonder whether some entrepreneurs would hold out for a deal that doesn’t throw their baby out with the bath water, even if means turning down a fairly attractive offer.

At the end of the day, Summify has to qualify as an entrepreneurial success. The founders are probably happy, Summify’s investors are pleased, and Twitter got what it wanted.

Would you reject an acquisition offer if it meant your product had to disappear, or would it not matter?

 

Skype’s Set Free (Almost)

By Mark Evans in M&A, Telecom Acquisitions, Financing 2 Comments Tags: , ,

When eBay purchased Skype in 2005, it was a $4.1-billion strategic head-scratcher.

Why eBay, the world’s leading online auction service, needed to buy a disruptive VOIP service provider – even one as popular as Skype – made little sense despite assertions there were many synergies, including how Skype would allow eBay to roll out click-to-call to enhance its core online business.

The deal was a mistake that distracted eBay and, arguably, retarded Skype’s progress.

The bottom line, however, is it wasn’t a complete disaster for eBay as they were able to get $2.75-billion for a 65% stake in Skype from a group of investors led by Index Ventures and Silver Lake Partners.

It’s a good deal for eBay because it gets the business refocused strategically, while providing eBay with some more financial stability and flexibility. eBay also gets to keep 35% as a way to ensure it shares in the wealthy if Skype becomes more successful and valuable.

More important is how it will, hopefully, provide Skype with more strategic flexibility and freedom to pursue ideas, new markets and new services that it couldn’t do while part of the eBay empire.

What’s impressive is that Skype has thrived financially while owned by eBay, so it will be interesting to see if Skype’s growth as a standalone entity will be even more impressive.

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