How to sell a startup for a $1B, Automattic, WeWork craziness, Kobalt, Netflix, Blackstone, and ClimateTech

Editor’s Note

Apologies for not getting this roundup newsletter out on Saturday — I was on vacation this weekend. So this newsletter covers the back half of last week and the first half of this week, and some of the articles are summarized more aggressively to keep this email at least somewhat reasonable in length.

How founder and CTO Dries Buytaert sold Acquia for $1B

Earlier this week, Acquia (the company behind content management system Drupal) announced that it had been acquired by Vista Equity for $1 billion. It’s a big exit for co-founder Dries Buytaert, who built out the original version of Drupal almost twenty years ago as an open-source approach to CMSes.

Our enterprise reporter Ron Miller talked with Buytaert about why he sold, what it feels like to exit a startup after building it for so long, and what’s next for Acquia and Drupal.

“We were born out of open source. All of our customers use open source. We give back to open source. It’s part of our DNA. It’s what we do. And so making sure that any new investor understood that and was aligned with was critically important, and Vista is very excited about the open source community around Drupal and Mautic (two open source projects Acquia is the steward of), and has even agreed to invest more in them,” he said.

It was more than aligned values around open source though. He says that Acquia is competing with some big companies like Adobe and it needs more capital, especially for larger M&A projects, and Vista provides that financial backbone that they have been lacking. While they have been able to make a couple of smaller acquisitions, being part of Vista should open the door for far more substantial ones.

How Automattic wants to build the operating system of the web

Speaking of content management systems, Automattic, which owns WordPress.com and recently bought the remnants of Tumblr from TechCrunch parent company Verizon Media, has a major vision for the future of content (and of course, how it fits into that world).

Our Paris-based correspondent Romain Dillet sat down with Automattic founder and CEO Matt Mullenweg to discuss his strategy, why he raised $300 million, and what’s next for the company:

Dillet: With so much funding on your hands now, do you have some moonshot projects that you’ve been putting on the back-burner and that you can now tackle?

Mullenweg: We’re trying to show that we invest for the long term wherever possible. We can make our funding go a really long way. Even though we’re 15 years old, this is only our fourth round. Things like Calypso, Gutenberg, Tumblr, WooCommerce… are big bets. And with each one of those, we have a long way to go.

The problem we’re trying to solve is likely multigenerational. It can take the rest of our lives and we need to pass it on to the generation that comes after to continue to work on it. Hopefully for the rest of humanity because I can’t imagine a time when humanity cannot benefit from an open, free, connected web.

CEO ouster, looming layoffs and devaluation turn WeWork into cautionary tale

On the flip side of startup trajectories, WeWork has gone from rocket ship to recycle bin in the blink of an eye. There are really so many pieces moving here that it is hard to get holistic context on what we really should be learning about the situation, but our Silicon Valley editor Connie Loizos gives us her view of the unfolding drama while also reporting some news about potential layoffs at the company:

It’s rather breathtaking, the speed with which the couple was just elbowed aside. Still, some others involved in the company look poised to get a far worse deal. The Japanese conglomerate SoftBank currently stands to lose billions of dollars on its investment in the company — if it doesn’t wind up writing down nearly the entire investment. Even an aggressive ratchet clause won’t do much to protect SoftBank if WeWork’s shares eventually sink on the public market.

It would seem an extreme correction to a culture that had become, well, anything but restrained. It’s also far from clear that it would have the intended effect of attracting public shareholders to the company, whose wheels began to come off when SoftBank first plugged $4.4 billion into WeWork roughly two years ago, according to our sources. (Roughly $6 billion more would follow.) As says one of these individuals, who has known Neumann for many years, “Adam already had a healthy ego. What the f_ck do you think is going to happen when he’s given billions of dollars?”

How Kobalt is betting on music’s middle class and DIY stars

We are finishing up our EC-1 series on Kobalt this week (part 4 is probably coming out right as this email comes out). Here though is part 3 from Extra Crunch media columnist Eric Peckham.

In this segment, Eric looks at how Kobalt is empowering a “middle class” of artists and songwriters, who aren’t eking out a living busking in subways nor are they international superstars. Kobalt and its various services offer these folks a new path to make a living by simplifying the management of their professional lives, and also giving them richer data to improve their own performance.

And in case you missed them, part 1 and part 2 of the Kobalt EC-1 are also available.

As another sign that consumers’ listening is becoming less concentrated on the top hits and more inclusive of small artists, self-released recording artists (those with no record label at all) reached 3% market share of recordings in 2018 — that’s a small portion but at $643 million it is 35% year-over-year growth for the segment.

Statistically, music is becoming slightly less of a hits-driven business.

Kobalt’s internal prediction is that there were over 15,000 artists in the worldwide English-language market who earned tens of thousands of dollars from their recorded music catalogs in 2018 and they expect that to soar to over 60,000 in 5 to 10 years. Kobalt estimates over 5,000 artists earned hundreds of thousands of dollars in 2018 and expect that segment to double to over 10,000 in the same 5 to 10 year timeframe.

Netflix cofounder Marc Randolph on the company’s earliest days, the streaming wars, and moving on

Netflix co-founder Marc Randolph has a new book out about his experience conceiving and building the DVD mail service turned streaming giant. Our Silicon Valley editor Connie Loizos sat down with Randolph to talk about his experiences, and what challenges Netflix faces as the fight for consumer streaming attention heats up among the big tech companies:

Connie: This is a memoir, but you do manage to convey many learnings, including to distrust epiphanies. Why? It seems that after cycling through various business ideas, you knew you were onto something when you sent Reed a CD of Patsy Cline’s greatest hits and it arrived undamaged.

Marc: Epiphanies are short-hand for the emotional truth behind an idea, but the reality isn’t so simple. On the one hand, there was this guy (me) who’d learned all about subscription marketing and personalization over his career and shipped a million things using the U.S. Postal Service. Then you had this other guy who was really good at algorithms and who really understood software (Reed). Then there are the other people who worked at video stores. And it was by mixing all these pieces together that the idea began to evolve. And even then, people said, “That will never work,” and they were right.

Connie: Were they?

Marc: They were right that my first idea, mailing out VHS cassettes for people to rent and return, would never work. But even when we [focused on] DVD rentals and we first launched the site, no one came or, if they rented, they never rented again because we had due dates and late fees. The only innovation at that point was that we were an online store, so we had many more DVDs available to rent [than a single Blockbuster store] and in 17 or 18 locations versus one. The innovation stopped there. If you didn’t send your DVD back to us in time, we dinged you for it. It took one-and-a-half years for [us to offer] no due dates, no late fees, subscriptions to a list of movies in a queue so when you returned one, another came.

Finding sustainable success with Blackstone CEO Stephen Schwarzman

On a different book tour, Stephen Schwarzman, who founded one of the largest wealth management companies with Blackstone, has a new book out about his executive lessons running his company and building it into the financial force it is today. He chatted with Extra Crunch fintech columnist Gregg Schoenberg, who talks about what the book means for entrepreneurs:

The book ends on a more instructive note with Schwarzman’s 25 Rules for Work and Life. Some of the ideas on his list will cover topics that may seem familiar to those who have read their fair share of how-to-be-successful-by-successful-people guides (e.g., hire 10s whenever you can, the best executives are made, not born, time wounds all deals). But I was particularly interested in probing him about #19, “Don’t lose money!!!”, which looks to be his first among equals principle given that it is the only rule followed by three exclamation points.

ClimateTech is the new hot space for investors in a warming planet

Climate change is heavily in the news this week, what with the UN General Assembly and worldwide climate protests underway. But what can tech companies hope to do to change the plight of the planet?

Far from being remote from the issue, entrepreneurs are finding all sorts of ways to engage with healing the planet, while building new business models to boot. Our European editor-at-large Mike Butcher takes a look at what ClimateTech is and the funders who are underwriting the creation of a whole new industry for a whole new world:

The climate is now firmly on the global agenda, but is there really such as thing as “climate tech”?

After all we already have biotech, HealthTech, FinTech. InsurTech, AdTech and AgTech, so why not ClimateTech and what are its investment prospects? What would distinguish it from, say, CleanTech?

Well, whereas CleanTech has traditionally been known in the field of energy generation, such as solar, battery and hydro, ClimateTech could perhaps be defined as data-driven products aimed at addressing the risk and exposure to the effects of climate change.

Even more stories:

• Target Global is firming up its bet on Barcelona’s entrepreneurs — our Euro reporter Natasha Lomas conducts a deep interview with general partner Shmuel Chafets on the state of Southern Europe startups and why new regulations emerging from the continent might actually create more startups.
• The Mate 30 is a moment of truth for Huawei — TechCrunch hardware editor Brian Heater discusses the implications for Huawei of leaving the Google app ecosystem as the US/China trade war heats up.
• How to profit from valuable peer referrals hiding in Slack — Extra Crunch guest writer Colin Bendell of Cloudinary offers growth tips around using messaging effectively to drive lead generation and ultimately revenue.
• Out of the box influencer strategies to accelerate awareness for your startup — Extra Crunch guest writer Kamiu Lee of Activate discusses how to use influencers effectively with fresh tips.
• “Am I as brave as I think I am?” MIT Media Lab student Arwa Mboya on the aftermath of a scandal — Extra Crunch resident ethicist Greg Epstein interviews Arwa Mboya, the researcher at the MIT Media Lab who pushed for the ouster of Joi Ito, about how people in the tech industry need to engage with challenging social and political issues.
• Publicis Sapient’s John Maeda explains how big companies can think like startups — finally, our New York-based reporter Anthony Ha interviewed prominent designer John Maeda about his new role running the consulting wing of PR/marketing giant Publicis and how he’s transitioned to the big corporate life from the startup world.

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.