Estonian technology company Pipedrive began acquiring companies, starting with a Latvian startup Mailigen.
After ten years of operation, Pipedrive, a sales customer relationship management CRM software developer, has reached business acquisition, writes Äripäev. Their first acquisition was a Latvian e-marketing startup Mailigen. Riga will now become one of Pipedrive’s development hubs for a new version of the CRM software that combines sales and marketing functionality.
Timo Rein, co-founder and CEO of Pipedrive, that possible acquisitions have been discussed for past two years. "It always comes up when we look at our strategy and think where it is wise to build the product ourselves and where it is wise to find a team somewhere, based on their market, technology or industry knowledge and experience, with whom we both win." With Mailigen we acquire a company with 22 employees that has been developing the product for ten years.
According to Rein, this acquisition fits in well with their strategy because adding Mailigen's marketing automation technology will help their customers to establish effective customer contacts." Estonia too is reaching outwards today and the potential customer bases are so large that the automation tools are starting to have an impact," said Rein.
Janis Rozenblats, co-founder and CEO of Mailigen, noted that the marketing technology landscape is highly competitive. Businesses in this area have been merging for the last ten years and there is reason to consolidate. "As technology matures, there is less room for innovation. It is almost impossible for smaller companies to compete with established brands without a giant capital injection and a supporting brand," said Rozenblats.
Rozenblats added that by joining Pipedrive as one of the world's leading B2B software as a service company, they can continue their mission of helping companies grow their businesses, like Pipedrive, but under a single brand. "Our basic mission is the same and although we are very different in size, we have a similar mindset and culture. We fit very well," he said.
Erkki Markus, head e-marketing company Smaily in Estonia, said Mailigen is a strong competitor. "They do not have a large user base in Estonia, but it is challenging for us to compete with them in Latvia. However, both are internationally oriented and with combined forces the reach is larger," said Markus.
According to Mark, the tighter connection between Pipedrive and Mailigen is a good fit in the B2B market, which is a fairly specific segment and does not have much influence on Smaily. "Our customer today is rather in the B2C segment. With the acquisition, Pipedrive will gain good expertise in the rather technical field of e-mail delivery, plus help with automating marketing activities."
Bigger plans with acquisition
Sergei Anikin, Chief Technology Officer at Pipedrive, said that as they set out their acquisition strategy, they started getting offers from various fields. Offers came through their co-founder Ragnar Sass, who is active in the startup scene, and through other investors. Mailigen was found through Sass.
To mitigate risks, they initially looked for a company based in Europe to make it easier to put two companies to work together. To facilitate this, Pipedrive has created a distributed office structure: their development teams have so far been placed in four offices where each team is responsible for its own field, which is developed independently of the others. "It allows us to integrate Mailigen’s team without a big headache. Mailigen will be provided with resources, but they don't have to do a lot of restructuring. We have been preparing from the start to expand business through acquisitions. "
The size of the deal is not disclosed, but one of the conditions when looking for a suitable acquisition was that the company should not be large. "We wanted mature technology, but usually the faster the company grows, the higher its cost price. We were looking for a company with advanced technology but where they have not been able to commercialize it very well. Which means we could buy better technology at a lower price, ”said Anikin.
Anikin stated that already two years ago there were discussions in Pipedrive about being large enough to create a separate business development function within the company that would focus on acquiring small businesses. "We weren't yet large enough to have a whole department for it," he said. Anikin took responsibility for figuring out how to make the acquisitions. "It turned out that the most important thing was to develop a strategy and agree on the criteria for selecting the companies. There are many options and it would be very difficult to make decisions without defining a strategy first.” The main goal of acquisitions is to bring new products to the existing portfolio to increase the sales.
According to Timo Rein, ohter Estonian startups and technology companies could also grow through acquisitions. "In the early years of a startup you focus on building the company," said Rein. "I think many startups are reaching the stage where it seems like a good idea. Of course, this is not a guarantee," he said. Rein added that they try not to take up very large acquisitions and choose such companies that they are able to manage.
Also Sergei Anikin thinks that larger startups in Estonia could definitely start acquiring companies. "For example, TransferWise has been a couple of years ahead of Pipedrive, and we're a little surprised that they haven't done it yet, if I'm not mistaken. Bolt and Veriff have probably been busy with managing high growth, it takes a lot of energy. When things are already working well inside the company then you can start looking outside."
TransferWise did not wish to comment on potential acquisitions at this time. Bolt confirmed they have no acquisition plans at this moment.
Pipedrive was founded by Timo Rein, Martin Henk, Urmas Purde, Martin Tajur, Ragnar Sass. The company has raised around $ 90 million in total. Their last investment round was in June 2018, when they raised $ 50 million from Insight Venture Partners, Bessemer Venture Partners, Rembrandt Venture Partners and Atomico. The company is not planning to raise another round in the near future. Pipedrive is expected to be one of the next technology companies in Estonia to reach unicorn status.
Insight Venture Partners invests in high growth software companies disrupting traditional businesses. Bessemer Venture Partners is one of the oldest venture capital firms in the world, investing in consumer, enterprise and healthcare startups. Its portfolio includes Pinterest, Skype, Twilio and LinkedIn.