I’m delighted to say that Host Analytics has signed a definitive agreement to be acquired by Vector Capital, a San Francisco private equity (PE) firm with over $4B in capital under management. Before diving into some brief analysis of the deal, I want to thank Host Analytics customers, employees, partners, investors, and board of directors for everything they’ve done to help make this happen.
Going forward, I expect the company’s top three priorities to be growth, growth, and growth. Why? Given a large market opportunity and a company that’s executing well, it’s the right time to add fuel to the tanks.
Large Market Opportunity
- The total available market (TAM) for Host’s enterprise performance management (EPM) products is $12B.
- The market, somewhat amazingly, remains less than 10% penetrated by cloud solutions, which means there is an enormous on-premises replacement opportunity.
- The market, equally amazingly, still over-relies on Microsoft Excel for planning, budgeting, reporting – even sometimes stunningly consolidation – which represents an enormous greenfield opportunity.
- Recent consolidation in the market (e.g., Workday’s acquisition and, in my opinion, up-market hijacking of Adaptive Insights) creates new space in various market segments
Host is wrapping up an excellent 2018 with strong sales growth (e.g., new subscriptions up 50%+ this quarter), record ending annual recurring revenue (ARR), historically high customer satisfaction (i.e., net promoter score), above-benchmark employee satisfaction — and we’ve been doing all that while transitioning to positive cashflow. On the product front, we’ve been pumping out innovations (e.g., Host MyPlan, Host Dashboards) and have an exciting product roadmap.
Simply put, the company is executing on eight cylinders. Strong execution plus large opportunity usually calls for one thing: more fuel.
Host was well ahead of the market with its vision of cloud-based EPM and raised its first venture capital in 2008. As some of our early investors are thinking about how to wrap up those funds, it’s the right time for a shareholder rotation where our last-phase investors are able to get liquidity and the company can get new investors who are focused on the next phase, i.e., the next five years of growth and scale.
That’s why I think “shareholder rotation” is the right way to think about this transaction — the old shareholders rotate out and Vector rotates in. And I should note that our largest shareholder, StarVest Partners, is not rotating entirely out — they will remain a significant shareholder in the company going forward.
In many respects, things won’t change. Host will remain focused on:
- Delivering a complete EPM suite
- Providing solutions for the Office of Finance
- World-class professional services and support, and our desire to create Customers for Life
- Partnership, working with other leaders to provide our customers with complete solutions
- Product innovation, finding novel ways to help finance better partner with the business
- Core values: trust, customer success, and teamwork
Other things will change. We’ll see some new faces as we evolve and grow the company. We’ll get the benefit of Vector’s internal management consultancy (i.e., the value creation team) to help drive best practices. You should expect to see us accelerate growth through both organic means (e.g., scaling up sales, launching in new geographies) and inorganic means (e.g., follow-on acquisitions).
Thanks to our founder, serial entrepreneur Jim Eberlin, for creating the company. Thanks to everyone who helped us get here. Thanks to our board for its foresight and support. Thanks to Vector for taking us forward. And thanks to StarVest for coming along for the ride. Onward, full speed ahead!
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