On May 19, Google acquired a startup for $US120 million in cash and stock, making it one of the largest New York exits of 2014.
One-third of the company’s 70 employees became millionaires. Everyone kept their jobs. And the founders are leading Google’s Android enterprise group.
Divide is a mobile productivity app that allows employees to carry one device instead of two to work. Once downloaded, the app splits a phone into two modes: work, which can be controlled and monitored by a corporate IT department, and personal, which IT departments don’t have access to, for regular enjoyment.
How does a $US120 million acquisition slip through the cracks?
Google is characteristically secretive, enforcing strict NDAs during acquisitions. It also isn’t required to report acquisition prices under a few hundred million dollars, because they aren’t meaningful to the $US55 billion company’s bottom line.
Enterprise startups are also largely ignored by the press, which favours buzzy consumer apps like Uber.
So wildly successful exits like Divide’s sometimes fly under the radar. New York startup TXVia, for example, was sold to Google for more than $US100 million in 2012, but that amount has never been reported either.
Google declined to let Business Insider speak with Toy about Divide or the acquisition. Instead, we spoke with other Divide insiders, as well as friends and family members of Toy.
They helped us piece together the story of how first-time founders built a massive enterprise startup that became one of the largest, and quietest, New York City tech exits of the year.
A Standout CEO
Andrew Toy was born in Hong Kong, but he has an accent that’s hard to place. It’s British, with a slight Australian twang. His father moved from Australia to China before Toy was born, to become an architect, and the Toys joined a largely British expatriate community there.
It felt odd to Toy and his siblings, who looked Chinese like their father, that they were a minority in their Hong Kong school.
“We were always aware we stood out and were different, and that stuck with us,” Andrew’s younger brother, Chris, tells Business Insider.
When Andrew Toy was seven, his father gave him a book on the programming language C++. Toy taught himself to code, and soon he was creating video games for him and his brother to play.
“We didn’t have the latest game systems, so Andrew created games for us,” Chris recalls. “We were taught to solve problems.”
Most of Toy’s classmates wanted to return to England when they graduated from high school. Toy’s parents hoped he’d go on to study finance or become a doctor. Instead, Toy pursued his love of technology and went to Stanford to get a degree in computer science. Chris later followed Andrew to the US.
Toy graduated from Stanford in 2000 and joined a mobile workflow startup in Silicon Valley, Jarna. He impressed managers even though he was young.
“I have met some bright people in my life, and Andrew belongs at the very, very top of these,” his manager said of Toy on LinkedIn. “He knows how to communicate his ideas in a very clear and concise way even when it gets very technical.”
Toy moved to New York City a few years later, to join Morgan Stanley’s mobile research-and-development team. The mobile revolution was still ramping up, but Toy could see it would become the next major platform. At Morgan Stanley, he worked alongside his future Divide cofounders, Alexander Trewby and David Zhu, in the remote-computing division.
After Morgan Stanley, Toy went to Viacom to learn more about business development and sales as the company’s VP of mobile technology. He reported directly to the CTO.
When Chris, who is three years younger than Andrew, graduated from Northwestern, the two became roommates in Manhattan. They lived together for the next eight years and regularly swapped business ideas during their morning commutes.
“There were probably 1,000 ideas, at least,” Chris recalls. Some were ridiculous, but when Andrew Toy stumbled upon the idea for Divide, the chats turned serious.
In the late 2000s, BlackBerry was the device of choice for corporations and their employees. Unlike the iOS or Android platforms, the phones came with security that software IT departments could control. But BlackBerry’s software wasn’t open source like Android’s, and it couldn’t be manipulated by developers to fit a corporation’s needs.
iPhone and Android devices were rapidly gaining popularity with consumers. Employees started bringing two devices to the office: work-assigned BlackBerrys and smartphones for personal use. Taking note of this Bring Your Own Device, or BYOD, trend, Toy and his former Morgan Stanley colleagues envisioned an alternative software product that would fix the two-phone problem.
The ‘Utterly Disheartening’ Call From Google
Toy, Trewby, and Zhu left their jobs to cofound Divide’s predecessor. They launched the company, called Enterproid, which stood for “enterprise” and “Android,” in January 2010. The founders raised a $US500,000 debt round, primarily from their former bosses and managing directors at Morgan Stanley.
By then, the three lived on different continents. Trewby had moved to England with his family, Zhu had moved to Hong Kong, and Toy remained in New York. But they were used to remote collaboration from their Morgan Stanley days. Plus, being spread all over the world made their startup a true 24/7 operation. Each found different ways to cope with the time difference.
“David and I had babies, which was conducive to staying up all hours of the night,” Trewby says. Toy, his brother says, often worked US and Hong Kong hours combined.
“Every entrepreneur works hard, and I had seen Andrew work hard plenty of times, but Enterproid was a whole different [level],” says Chris, who doesn’t recall his roommate and brother sleeping.
Enterproid’s global offices also had culture-inducing quirks. In London, for example, the teams worked out of bunk beds that resembled Trewby’s work setup in his old Manhattan apartment. A desk took the space of the bottom bunk, while the top bunk was generally used to get a modicum of privacy when someone needed to take a phone call in the crowded office. (Trewby’s Enterproid bunk bed is now featured in Google’s London office.)
Trewby’s team also had regular 4 o’clock tea. In New York, Toy installed a different food perk: a cotton-candy machine.
Over the next few months, Enterproid created an enterprise-friendly operating system to compete directly with Android and iOS. The goal was to get device makers, such as HTC and LG, to build it into their devices and sell the phones with the pre-uploaded Enterproid software in stores. But the team soon learned that securing deals with hardware makers would take a lot of time and money, so they began fundraising again.
Toy, friends say, takes a mathematical approach to everything from dating to fundraising.
“He saw the exact right amount of [venture capital] firms and used a massive spreadsheet with logs of how to handle each situation,” a friend says. This person estimates Toy met with 40 different VCs. Many weren’t familiar with the mobile enterprise space and passed; others said they planned to speak to an enterprise expert, Android founder Rich Miner, before making a decision. Miner was a partner at Google Ventures.
The first VC to take a chance on Enterproid was Owen Davis at NYC Seed. Davis introduced the team to Genecast Ventures, which led the $US1.3 million seed round in fall 2010. BOLDStart Ventures and High Peaks Venture Partners participated.
Toy’s team moved into a small office at 32nd Street and Sixth Avenue in Manhattan.
Although Miner and Google Ventures passed on Enterproid’s seed round, Miner asked to set up a call with Toy, Trewby, and Zhu. The founders were ecstatic.
“We thought, ‘Great! We’re about to get acquired! That was sort of easy,'” Trewby tells Business Insider. Toy and Trewby flew to Hong Kong, where an official office had just been set up, and together they called Miner. Parts of the freshly unpackaged phone were still in plastic wrap.
The call didn’t go well.
“Rich told us, ‘This is going to fail, abysmally,'” Trewby recalls. “It’s going to take way too long [to onboard hardware companies]. You’re going to run out of money trying, and Google is going to crush you.”
Rich Miner told us, ‘This is going to fail, abysmally … Google is going to crush you.’
Miner advised the team to create an app instead of partnering with hardware companies. That way the software could be downloaded to any device, allowing clients to get up and running within minutes, and it’d keep the product experience consistent across Android and iOS devices.
“We were utterly disheartened,” Trewby recalls.
But they listened to Miner, and Trewby now calls the harsh feedback a “saving grace.” The company spent the next few months building an app.
Starting From Scratch
With the new app, Divide began closing deals with corporations and mobile carriers. AT&T, Verizon, and Vodafone all agreed to start selling Enterproid to business clients as an app in a suite of enterprise tools.
Dell also teamed up with Divide. Chris Toy, who occasionally worked from the Enterproid office, remembers the team high-fiving in celebration when that deal closed. But signing big companies can be stressful for a startup, since it tends to lead to thousands of employees downloading an app all at once.
A friend once asked Toy how he dealt with the onboarding issue, and the flood of bug reports that inevitably followed.
“Just call the product ‘beta,'” Toy replied.
More validation for Enterproid came in late 2011, when Toy’s startup won Qualcomm’s second ventures competition. Qualcomm participated in an $US11 million Series A round of financing soon after. And this time, Miner chose to invest. “He said, ‘You guys listened,'” Trewby recalls.
Having strategic investors like Qualcomm, rather than a traditional venture capital firm on board, was helpful for recruiting clients. “The Ciscos and Dells might not know what Sequoia Capital is, but they’re certainly aware of Qualcomm and Google,” Trewby says.
In 2012, Enterproid launched an iOS app and continued to pick up steam. A slew of well-funded competitors, like VMWare, entered the BYOD space. In 2013, Enterproid secured more money from Qualcomm and Google and raised another $US12 million.
Enterproid also changed its name to “Divide.” Friends had complained that “Enterproid” was hard to pronounce and reminded them of “hemorrhoid.”
By 2014, Divide was on pace to generate somewhere between $US10 and $US20 million in annual revenue. The company grew just to shy of 70 people.
Many of the partnerships that Divide had secured, whether with Google or Qualcomm, sparked merger conversations.
“Our merger and acquisition options were with software houses, like Dell, Cisco, IBM, HP and Juniper,” Trewby explains. “Those are also companies we wanted to sell our product to and integrate our technology with. So when we’d meet with them, we never quite knew which hat we were wearing. You didn’t know if you were flirting with them because you wanted them to buy your company or resell your product.”
Eventually, the acquisition talks with Google turned serious. Miner didn’t participate in the discussions; another Google Ventures startup, Nest, had just been purchased for more than $US1 billion, and the spotlight was on his firm.
Still, the deal came together relatively quickly with the help of an internal evangelist in Google’s Android department. Divide had two requests if it was going to get bought: All employees had to keep their jobs and the Divide product needed to continue operating. Google agreed to both concessions, and within a few weeks the paperwork was signed.
A Celebratory Stouffer’s Lasagna
Trewby remembers the day of the acquisition and how nervous he felt to break the news to employees. He, Toy, and Zhu had a plan to tell all 70 employees in all three offices at once.
Each founder led their team to Google’s headquarters in their respective cities. It didn’t seem odd, since Google was already one of Divide’s partners. There, the teams jumped on a Google hangout where everyone could see one another.
“It was a tense moment,” Trewby says. “We didn’t know if we were about to get beaten up by employees in a corner, or they’d throw beanbags at us. We thought maybe they’d think, ‘What?! You sold too early!’ Or ‘Oh no, not Google! We hoped someone else would buy us.'”
It was a tense moment. We didn’t know if we were about to get beaten up by employees in a corner, or they’d throw beanbags at us.
Instead, employees in all three offices erupted in applause.
No champagne was popped as the employees celebrated the acquisition. None of Divide’s cofounders drink. But Trewby says there was a better alternative.
“The real champagne corks were the individual conversations we got to have with everyone, letting them know their futures at Google, the roles they’d have there, and various attributes of their employment contracts,” Trewby says. “That was more pleasurable than pouring champagne.”
Selling a startup to Google in London is relatively rare. The following week, Trewby met the Queen.
In New York, Toy’s celebration was modest. His mother was in town from Hong Kong, and Chris brought over a cheap bottle of champagne for dinner, coercing his big brother into to choking down a sip.
Toy, a new millionaire, did what he always does to celebrate a big achievement: He heated up a Stouffer’s microwave lasagna and had a feast.
* * *
Andrew Toy now lives in Mountain View, and is managing a stealth Android enterprise product for Google as its project management director. Alexander Trewby still lives in London, where many of the Hong Kong Divide employees will be relocating. He is Google’s partner development manager. David Zhu is an engineering manager for Google in Hong Kong.
While Divide had its struggles, an investor says the company “never stared death in the face.”
Or as one friend put it: “Andrew had the pain of really good success.”
Running and selling Divide may have looked easy to outsiders because of Toy’s cool confidence. Friends describe the CEO as a “terrier” and a “destroyer” who cuts through the choppy waves of entrepreneurship better than most founders.
“When you’re running a startup, your boat is moving up or down,” Toy’s friend, who’s also a tech CEO, explains. “But you can’t tell that with Andrew, because he’s just driving through it.”
Toy was also raised to believe that smart people who work hard are often rewarded.
“Andrew believed in himself absolutely,” Chris Toy says. “He believes in me absolutely. And he believes in his friends absolutely. He believes, if you look at something and you deserve it, go get it. If you put in hard work, plan, and be analytical and smart, good things will come.”
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