18 ms·

Splunk acquires cloud monitoring service SignalFx for $1.05B

213 points by sgloutnikov 7y ago

blawson 7y ago
Seems like a really impressive number, based on the 170% compounded annual growth rate referenced in their last funding round[1]. Huge assumption but if they started at 1,000,000 ARR in 2015 (which seems generous if sales just started then), 170% yearly growth over 4 years is ~$8.5 million ARR today. Over a 100x multiple! 1. https://www.globenewswire.com/news-release/2019/06/12/1867619/0/en/SignalFx-Raises-75-Million-to-Fuel-Demand-for-its-Cloud-Monitoring-Platform.html https://www.globenewswire.com/news-release/2019/06/12/186761...
jedberg 7y ago
Good for them! I've been a huge fan of SignalFX since they launched. It was the closest commercial product I could find to Netflix's internal monitoring system. I mention it often when people ask for a recommendation of a monitoring system.
- cwp 7y ago
  Yeah. SignalFX is great! I'm happy for them. But also, dammit. Splunk will destroy it.
  - occamsrazorwit 7y ago
    Why do you think Splunk will kill it?
    - cwp 7y ago
      Cause that's how acquisitions always work out. It might not be as obvious as "We are shutting down SignalFX." But they'll want to turn it into a feature of another product which is aimed at a different market, or move it to Splunk's infrastructure, which was designed for something else. Or maybe it's about adopting a common UX, which ends up being worse than what SignalFX has now. Think of Microsoft buying Skype. It's still around, but it's not good anymore.
- PanosJee 7y ago
  Take a look at Netdata to see the future of monitoring. Disclaimer: I am an investor in Netdata
brunoTbear 7y ago
I didn't see the terms on that Tiger capital round anywhere online (very cursory search tho, so I'm open to being wrong!), but they raised $75 just 2 months ago. I wonder what the terms on that round were and what this acquisition means for the older shareholders. Seems unlikely to be a bad deal, given that they just raised, so I'm curious why a sale happened so soon after closing a round.
- allana 7y ago
  Perhaps the addressable market on their own was too small (or so the team at SignalFx felt), thus now is a good time to sell. Splunk already has Enterprise and B2B sales down cold, adding a supporting product is an easy in-sell.
chirau 7y ago
I wonder what this means for Datadog's soon to be IPO
- AznHisoka 7y ago
  I also wonder if New Relic is an acquisition target as well.
  - ryanSrich 7y ago
    New Relic’s stock is down 42% on the year so I don’t see them doing very well. An acquisition would make sense.
    - apple4ever 7y ago
      Really... is there a reason for that?
      - liveoneggs 7y ago
        they missed targets and told everyone that a new dashboard with existing features (newrelic one) was a new sale-able product?
        apple4ever 7y ago
        I was wondering how NR1 worked out. Seems not great to me...
deanmoriarty 7y ago
Does anybody know if employees will end up actually making any money from this massive acquisition, or if yet again board and investors found a way through some shenanigans to distribute all the wealth just to themselves? EDIT: I'm being downvoted, but I've been increasingly hearing a shady Silicon Valley practice where, upon successful acquisition, the board will vote to emit a large number of new shares (think 5-10X the total pool), which will be redistributed just among execs and investors. So, if you are an employee who held on to your 0.1% (which, on 1B, might be worth 1M), you might find out that after the acquisition you are going to be diluted maybe to 0.01%. And this is after all the other "healthy" dilutions that have happened to the company over the years, as part of their financing rounds.
- joschmo 7y ago
  You are being downvoted because there's no evidence to corroborate what you are saying. Just edit with a link to articles/proof if your statements can be substantiated.
- echelon 7y ago
  Is there anything an early startup employee can do to safeguard against this? Is the only viable exit for a non-C-suite going public? Can options be traded / liquidated legally outside of the stock market?
  - deanmoriarty 7y ago
    You could try to sell them on a secondary market if your company allows you to (it's clearly written in your stock option agreement). That of course assumes that there is a market in the first place. You can certainly look for major red flags (e.g. weird clawback clauses in the contract, ...) but at the end of the day, even if the contract is completely clean and the acquisition is a success, the value of your equity will mostly depend on whether the board and investors will decide to screw you or not.
    - joes223 7y ago
      But realistically, can an employee get 2-3% of preferreds to secure his share? Assuming he's valuable enough to negotiate this much.
rattray 7y ago
Curious to see what comes of this from a product perspective... any speculation as to what they might be able to pull off in practice as a joint entity?
codesushi42 7y ago
Proof that the cyber security industry is an overlooked dark horse, full of opportunities. Too bad it gets overshadowed by AI, cryptocurrency, VR/AR. I guess it's unsexy and not necessarily new. But there's a lot of money in it.
- munchbunny 7y ago
  From the inside of the cyber security industry, it certainly doesn't feel that dark horse-like. It feels quite crowded actually. There are two big things going for it though: 1. There's an adversarial relationship that drives up demand for products. 2. It's stupidly complex, so there's a lot of potential value add in anything that can simplify the problem. The main thing going against the cyber security industry is that while it's sexy to subject matter experts, it's not really sexy to boardrooms, Silicon Valley tech startups included, many who see it as a cost center and something that slows down product development and thus do the minimum necessary to look secure. Speaking from anecdotal evidence. In the context of big companies, Krebs on Security had a great article in the wake of the Equifax breach which pointed out that there are very few CISO's (or equivalent) who report to the CTO or CEO. For the most part they report to the CFO, to the head of IT, or to the head of legal.
  - staticassertion 7y ago
    I just reviewed roughly 20 vendors. Doesn't feel crowded at all when they all basically do the same thing. There's a ton of room in this space for real innovation. Instead, as mentioned, we get substitutes for innovation, like "AI". If infosec weren't a dark horse, we wouldn't be miserably to protect against breaches. Clearly there is a need not being addressed.
  - cik 7y ago
    Concur, also from inside the industry. The reality is that almost every C-Suite executive I talk to sees security as a cost center, and rolls it (and IT even) into the CFO, or the COO. We focus on helping an organization make security an enabler. Yet even those customers who get it - really only care when there's a breach, or if someone's bacon has seriously been saved. Suffice it to say, I find the industry troubling, to say the least.
Trias11 7y ago
Oops, Just found 2yr old email from SignalFx asking if I interested in a Director position :)
paulyacoubian 7y ago
Tiger Global led the Series E round in June at a $500m post-money valuation. That means they get a 2x in a few months. This looks like it will be a fantastic exit for employees too!
majestik 7y ago
So the days of “Splunk for logs and X for monitoring” will change to “Splunk for logs and monitoring”
bpicolo 7y ago
Congrats to the team. I used Signalfx at Yelp years back. It was a fantastic product - I miss it to this day. (Same with Splunk). Both products set a ridiculously high UX bar, but they definitely charge accordingly for it.
jujube888 7y ago
Splunk's existing cloud service is a disaster they are desperate to make it work but due to lack of experience in the cloud field they think they can buy credibility by acquiring a SaaS company to make it work and it will only get worse. Splunk is forcing customers to sign on to it's cloud service by ending all perpetual licensing by November 2019 and forcing subscription cloud and term licensing to make it affordable to customers. It will take them an extra 5 or more years to break even as their cloud service has been in existence for 6 years. There is no guarantee of success as they haven't been known for their execution with poor leadership everywhere in the company. The SignalFX exec management team will make money but no one else will. They will only be there for one year as they realize they've been put into subservient roles reporting to incompetent SVP and VP Splunk managers. The regular employees will soon find out that Splunk is a chaotic and terrible environment and that no one is held accountable for their mistakes or lack of competence. Their stocks will be reset to what splunk will dole out for new employees and they have to vest for 4 years all over again. There is no joy to this it's a brutal reality and Splunk will eventually be purchased by a legacy tech company like Cisco or a private equity like Thoma Bravo.

213 points by sgloutnikov 7y ago

Seems like a really impressive number, based on the 170% compounded annual growth rate referenced in their last funding round[1]. Huge assumption but if they started at 1,000,000 ARR in 2015 (which seems generous if sales just started then), 170% yearly growth over 4 years is ~$8.5 million ARR today. Over a 100x multiple! 1. https://www.globenewswire.com/news-release/2019/06/12/1867619/0/en/SignalFx-Raises-75-Million-to-Fuel-Demand-for-its-Cloud-Monitoring-Platform.html https://www.globenewswire.com/news-release/2019/06/12/186761...

jedberg 7y ago

Good for them! I've been a huge fan of SignalFX since they launched. It was the closest commercial product I could find to Netflix's internal monitoring system. I mention it often when people ask for a recommendation of a monitoring system.

cwp 7y ago
Yeah. SignalFX is great! I'm happy for them. But also, dammit. Splunk will destroy it.
- occamsrazorwit 7y ago
  Why do you think Splunk will kill it?
  - cwp 7y ago
    Cause that's how acquisitions always work out. It might not be as obvious as "We are shutting down SignalFX." But they'll want to turn it into a feature of another product which is aimed at a different market, or move it to Splunk's infrastructure, which was designed for something else. Or maybe it's about adopting a common UX, which ends up being worse than what SignalFX has now. Think of Microsoft buying Skype. It's still around, but it's not good anymore.
PanosJee 7y ago
Take a look at Netdata to see the future of monitoring. Disclaimer: I am an investor in Netdata

brunoTbear 7y ago

I didn't see the terms on that Tiger capital round anywhere online (very cursory search tho, so I'm open to being wrong!), but they raised $75 just 2 months ago. I wonder what the terms on that round were and what this acquisition means for the older shareholders. Seems unlikely to be a bad deal, given that they just raised, so I'm curious why a sale happened so soon after closing a round.

allana 7y ago
Perhaps the addressable market on their own was too small (or so the team at SignalFx felt), thus now is a good time to sell. Splunk already has Enterprise and B2B sales down cold, adding a supporting product is an easy in-sell.

chirau 7y ago

I wonder what this means for Datadog's soon to be IPO

AznHisoka 7y ago
I also wonder if New Relic is an acquisition target as well.
- ryanSrich 7y ago
  New Relic’s stock is down 42% on the year so I don’t see them doing very well. An acquisition would make sense.
  - apple4ever 7y ago
    Really... is there a reason for that?
    - liveoneggs 7y ago
      they missed targets and told everyone that a new dashboard with existing features (newrelic one) was a new sale-able product?
      - apple4ever 7y ago
        I was wondering how NR1 worked out. Seems not great to me...

deanmoriarty 7y ago

Does anybody know if employees will end up actually making any money from this massive acquisition, or if yet again board and investors found a way through some shenanigans to distribute all the wealth just to themselves? EDIT: I'm being downvoted, but I've been increasingly hearing a shady Silicon Valley practice where, upon successful acquisition, the board will vote to emit a large number of new shares (think 5-10X the total pool), which will be redistributed just among execs and investors. So, if you are an employee who held on to your 0.1% (which, on 1B, might be worth 1M), you might find out that after the acquisition you are going to be diluted maybe to 0.01%. And this is after all the other "healthy" dilutions that have happened to the company over the years, as part of their financing rounds.

joschmo 7y ago
You are being downvoted because there's no evidence to corroborate what you are saying. Just edit with a link to articles/proof if your statements can be substantiated.
echelon 7y ago
Is there anything an early startup employee can do to safeguard against this? Is the only viable exit for a non-C-suite going public? Can options be traded / liquidated legally outside of the stock market?
- deanmoriarty 7y ago
  You could try to sell them on a secondary market if your company allows you to (it's clearly written in your stock option agreement). That of course assumes that there is a market in the first place. You can certainly look for major red flags (e.g. weird clawback clauses in the contract, ...) but at the end of the day, even if the contract is completely clean and the acquisition is a success, the value of your equity will mostly depend on whether the board and investors will decide to screw you or not.
  - joes223 7y ago
    But realistically, can an employee get 2-3% of preferreds to secure his share? Assuming he's valuable enough to negotiate this much.

rattray 7y ago

Curious to see what comes of this from a product perspective... any speculation as to what they might be able to pull off in practice as a joint entity?

codesushi42 7y ago

Proof that the cyber security industry is an overlooked dark horse, full of opportunities. Too bad it gets overshadowed by AI, cryptocurrency, VR/AR. I guess it's unsexy and not necessarily new. But there's a lot of money in it.

munchbunny 7y ago
From the inside of the cyber security industry, it certainly doesn't feel that dark horse-like. It feels quite crowded actually. There are two big things going for it though: 1. There's an adversarial relationship that drives up demand for products. 2. It's stupidly complex, so there's a lot of potential value add in anything that can simplify the problem. The main thing going against the cyber security industry is that while it's sexy to subject matter experts, it's not really sexy to boardrooms, Silicon Valley tech startups included, many who see it as a cost center and something that slows down product development and thus do the minimum necessary to look secure. Speaking from anecdotal evidence. In the context of big companies, Krebs on Security had a great article in the wake of the Equifax breach which pointed out that there are very few CISO's (or equivalent) who report to the CTO or CEO. For the most part they report to the CFO, to the head of IT, or to the head of legal.
- staticassertion 7y ago
  I just reviewed roughly 20 vendors. Doesn't feel crowded at all when they all basically do the same thing. There's a ton of room in this space for real innovation. Instead, as mentioned, we get substitutes for innovation, like "AI". If infosec weren't a dark horse, we wouldn't be miserably to protect against breaches. Clearly there is a need not being addressed.
- cik 7y ago
  Concur, also from inside the industry. The reality is that almost every C-Suite executive I talk to sees security as a cost center, and rolls it (and IT even) into the CFO, or the COO. We focus on helping an organization make security an enabler. Yet even those customers who get it - really only care when there's a breach, or if someone's bacon has seriously been saved. Suffice it to say, I find the industry troubling, to say the least.

Trias11 7y ago

Oops, Just found 2yr old email from SignalFx asking if I interested in a Director position :)

paulyacoubian 7y ago

Tiger Global led the Series E round in June at a $500m post-money valuation. That means they get a 2x in a few months. This looks like it will be a fantastic exit for employees too!

majestik 7y ago

So the days of “Splunk for logs and X for monitoring” will change to “Splunk for logs and monitoring”

bpicolo 7y ago

Congrats to the team. I used Signalfx at Yelp years back. It was a fantastic product - I miss it to this day. (Same with Splunk). Both products set a ridiculously high UX bar, but they definitely charge accordingly for it.

jujube888 7y ago

Splunk's existing cloud service is a disaster they are desperate to make it work but due to lack of experience in the cloud field they think they can buy credibility by acquiring a SaaS company to make it work and it will only get worse. Splunk is forcing customers to sign on to it's cloud service by ending all perpetual licensing by November 2019 and forcing subscription cloud and term licensing to make it affordable to customers. It will take them an extra 5 or more years to break even as their cloud service has been in existence for 6 years. There is no guarantee of success as they haven't been known for their execution with poor leadership everywhere in the company. The SignalFX exec management team will make money but no one else will. They will only be there for one year as they realize they've been put into subservient roles reporting to incompetent SVP and VP Splunk managers. The regular employees will soon find out that Splunk is a chaotic and terrible environment and that no one is held accountable for their mistakes or lack of competence. Their stocks will be reset to what splunk will dole out for new employees and they have to vest for 4 years all over again. There is no joy to this it's a brutal reality and Splunk will eventually be purchased by a legacy tech company like Cisco or a private equity like Thoma Bravo.