A tale of 2 tools: Loom vs Vidyard

Since Atlassian announced Loom's acquisition, I have been grappling with 2 questions

1. Why did Atlassian buy Loom
2. How/Why for the acquisition price

A little history

Nov 2022: Atlassian stock price plunged 22% in a single day. The day they announced their Q12023 results! Two reasons:

1. Earnings fell 22%
2. Q2 revenue guidance of $844M (vs expectations of $879M)

Cash on balance sheet: $2.1Bn. A year back this was $1.4Bn

When you have money in the bank and the market doesn't like slow growth, what do you do? In-organic growth is the answer.

So you are out shopping, you first decide what categories are of interest - a bit like deciding to buy shoes versus a dress.

In last year's shareholder letter, Atlassian had mentioned Loom and 40+ apps that they integrate with to enable better collaboration.

Atlassian's thinking on the synergies is best summarized here

Engineers will be able to visually log issues in Jira; leaders can use videos to connect with employees at scale; sales teams can send tailored video updates to clients and HR teams can onboard new employees with personalized welcome videos. With AI, customers will be able to seamlessly transition between video, video transcripts, summaries, documents, and the workflows developed from them, providing multiple ways for teams to connect and collaborate.

Ok great, so there is a category out of many others that is interesting. Atlassian is making a bet on the future of work being hybrid. And through the integration it received a lot of data on the relative overlap with user-bases, customer feedback etc.

Picking the winner

Here are the download stats from the Atlassian marketplace

• Loom: Confluence(166), Jira (153), General (694)
• Vidyard (closest competitor on the marketplace): Confluence(5), Jira (11)

Ok great, so Loom is doing better than Vidyard - but really this is a minuscule number given the user base of both these companies. Loom has 25M users.

Let's look at relative valuation/size of the 2 competitors

• Loom: ARR ($41M), Total Funding ($204M), Last valuation ($1.5Bn)
• Vidyard: ARR ($57M), Total Funding ($76M), Last valuation ($300M) - last equity funding was in 2016, so this number isn't as meaningful

Well, based on the above, if I had to pick one - I would think that Vidyard would be a better (VFM) buy. We can only speculate whether they were in the fray and if so, why they missed out.

My biggest concern with this acquisition has been - what's the real overlap in current user-base and therefore how much value should be attributed to Loom;s revenue versus just the product and how it fits with Atlassian's plans.

It's hard to really answer this question without data on user / use-case profiles. So the closest proxy i have for this is G2 reviews and their own list of use-cases. Going in, my assumption was that both the tools are largely used for sales prospecting but I wasn't sure if this was just exposure bias.

Website screenshots

G2 stats

Loom: 5.4% of the reviews mention sales or prospecting

Vidyard: 42% of the reviews mention sales or prospecting

Conclusion

The choice of Loom over Vidyard is best summarized by 2 words "customer love"

Founder takeaways (or not)

Often the biggest question is vertical versus horizontal. Do I build a Loom vs Vidyard, Otter vs Clari Copilot , Aircall vs Orum etc.

Looking at this turn of events, should you build a more horizontal product and support multiple use-cases from day 1?

My quick take: if you are building a PLG product, with a strong freemium option (only 1% of Loom's users are paying customers) you better make sure your market is large, like VERY LARGE. And maybe, that becomes the reason to go horizontal early on.

PPS: None of this is to say that Vidyard is a bad company. This is just my thesis on why they picked Loom and chose to pay a huge premium for it. Assuming the $40M ARR is accurate, 24X multiple in this environment is definitely top dollar!

PS: Building companies for M&A, can be injurious to health

This post is part of ????Behind The News - a collaboration with Mohit Sadaani on decoding startup news.