Why did we sell Brand Embassy? Three reasons

It has been over three months since we decided to sell Brand Embassy, a digital customer service platform startup, to NICE (NASDAQ: NICE) and I have received many questions from my colleagues, business partners and friends since then asking why we decided to sell our highly growing business at this particular time. I’m happy to share our reasons as openly as possible publicly as I believe it may help other entrepreneurs in their journeys towards accomplishing their missions. 

This May, NICE, a global company with over $1.5 bn revenues and over 6,000 employees located in 30 offices worldwide acquired Brand Embassy Ltd, a startup company I founded with my partner Damian eight years ago in Prague, Czech Republic. The transaction amount has not be disclosed and I am bound by confidentiality. However, getting to the stage of receiving an offer from a market leader to acquire our company on favorable terms was a result of very turbulent times that, frankly, had caused me many sleepless nights and some gray hair in the past years.

Our journey to first customers

Let me start first by sharing the genesis leading us to the acquisition. Brand Embassy launched its very first product in May 2012, providing an enterprise-level SaaS application for managing customer service conversations across various social media channels. It took us only a few weeks to get our first paying customer, it took us another few months to get another three large customers (all direct competitors of the first customer, eager to try what the first one positioned as a market differentiator) and then it took us nearly two long years to get the first enterprise level customers abroad. In this period, we nearly ran out of cash several times and despite initial success in our local market, the revenues just couldn’t cover the investments we felt we needed to make in order to scale the business. 

Angels and VCs

We brought our first VC investors on board, followed by nearly 30 individual business angels over the following 6 years totaling over $7M in raised capital. The global market had slowly but surely returned from the post economic crisis mode represented by cost cutting across employees and technologies in the customer service industry and companies had gradually started to invest again in innovation and revenue generation activities. The contact center market globally employing over 15 million human agents and with annual spend exceeding $16bn into technology had turned to new entrants like Brand Embassy to seek innovation that well-established technology companies had failed to deliver. 

Our team preparing for a key meetings in Salt Lake City, UT, the home of NICE inContact, few days before the acquisition

We had fought for every single new customer however, as the market had been largely fragmented and in most of the countries in the world there are some decent local providers, some good regional providers and some really good global providers. Although we had received customer feedback from various Fortune 500 companies that our product was superior, the scalability of our direct sales approach driven by teams in Prague, Dubai and Boston was not meeting our very high expectations of building a globally accomplished business. 

Scaling the business

We decided to change our business model. We approached several large legacy providers in the market and some high growth traditional contact center platform providers (generally helping businesses provide customer care via phone) to integrate with our platform to provide digital care across over 30 digital channels to their customers. It worked. We signed several reseller, referral and OEM partnerships and gradually scaled our sales and pipeline generation and signed our very first $1M deal that we considered as one of many to come.

As our commercial partners witnessed the growing customer demand for our platform, they wanted higher assurance that we remain committed to our partnerships. Some partners offered investments; some sought contractual obligations such as right of first refusal (ROFR) (We never signed this! I learned that if we did, we likely wouldn’t have sold our business and our overall market position would be very weakened!). I had been approached by several Investment bankers, Private Equity funds and some larger competitors every month. They were all fishing around our interest to sell our business. It felt good, but only then I realized this interest as such doesn’t mean anything. Without proper focus on day to day cash management, customer satisfaction and a continuous drive to acquire more revenues, we could easily become the very last company to get contacted in a matter of a few months.

The acquisition offer from NICE came after a year of commercial cooperation. The company knew our product, they received some positive customer feedback, we were awarded for being a good partner to them and we developed some good personal relationships with some of the key managers in the company. 

Damian, my business partner, signing the last few sets of contracts at 6:00 AM in the morning the day of acquisition after three sleepless nights...

Three reasons why did we sell Brand Embassy

There were three reasons leading to me and our board agreeing to the acquisition.

1. The market consolidation had started

I had been saying this for some time to our investors: “our market will consolidate in the next few years.” And then it happened. Shortly before our transaction one of our European competitors was acquired, and another three competitors were bought by legacy players only weeks after our acquisition. We didn’t want to end up being one of the last independent startup players on the market, as that would make our position very challenging. The first acquisition in the market set a good standard, leading to subsequent better deals that happened to be us. 

2. We joined forces with the market leader

There is a big difference between selling a business to another, although larger, incumbent, or to a market leader. NICE happened to be the latter, coming on top of the Magic Quadrant (A company capability benchmark across market developed by Gartner, the analyst firm) across most of the key business areas and generating significant free investable cash every year. The company, from my perspective, lacked only one critical product component, and that was to be filled by integration of Brand Embassy. Up until then, our product had been used by hundreds of customers. NICE, with over 25,000 customers worldwide, has the ability to get our product to thousands of customers quickly, which is very exciting.

3. We had a good culture fit

Becoming a part of a multi-billion dollar company with over 30 years of history and thousands of employees is a bit scary, considering the fact I used to make fun of such companies for their inefficiency and lack of innovation. Moreover, many of our talented software engineers, sales executives and managers came to Brand Embassy from corporate environments trying to escape their bureaucracy and slowness. The acquisition doesn’t end with signing the SPA (shareholders purchasing agreement), but with successful integration of the company including product and people. And that can take years. I happened to know many mergers that went wrong - the root team members started to jump ship shortly after the acquisition followed by their friends and loyal colleagues. That would be a disaster. I have always considered the successful outcome of acquisition as a proof for the entire team. Getting them frustrated shortly after the acquisition is something I would consider as my personal failure. 

Some of many fun memories from the “We Are One” party we organised after the acquisition for all team members, supporters and alumni to say huge thanks for the joint success.

Extra: Proven M&A track record

NICE happened to acquire another company, called inContact, three years before Brand Embassy. Another SaaS cloud-based business, with an open and pragmatic American culture and strong, like-minded leadership led by the energetic Paul Jarman, the CEO. Paul stayed with the company after the acquisition and became one of the key people driving overall change and “digitalization” of the well-established NICE. As we were expected to work closely with the inContact folks, integrate Brand Embassy into modern cloud-based platform built also on micro-services, and become the catalyst of a new company-wide initiative turning the company to become “Digital First”, that made our team and myself convinced. It also helped that the acquirer had made several other successful mergers in the past. 

With NICE inContact, we are building what I call the first truly omnichannel cloud-based customer service platform. Image: ?NICE inContact

Looking back at our decision

It’s been three months since the acquisition. We have spent them mostly by making sure our customers and team understand what happened and making them excited about what comes next. We will spend the next few months launching the integrated product, I call it “the first truly Omnichannel cloud based customer service platform”, and getting to know more of our new colleagues around the world. 

I feel incredibly fortunate to have the opportunity to go through the recent acquisition process. Signing over 500 contract pages on the breezy early morning of Thursday, May 16, 2019 after three sleepless nights and cooperating with the M&A team members on both sides have been incredible learning experience. I am grateful to our customers, as none of them have left since following the announcement, and to our team, as none of our folks have voluntarily left since. I’m excited about the new chapter and anxious about what are we going to launch very soon. Stay tuned. 

Please add your comments about your experience of your company being acquired or merged and feel free to send any tips for me and other readers. Thanks!