Quip CEO Bret Taylor had a nice pay day earlier this month when he sold his three-year old startup for $750 million to Salesforce.
But more than anything, it sounds like Taylor’s more excited about all the salespeople he’ll be able to tap in to by being part of Salesforce’s $50 billion software empire.
“We do think we have a new way of working that’s better, and to have the platform of one of the largest direct sales forces in the world, to be able to spread that to more companies is worth the trade off of losing some of that independence,” Taylor said in a podcast with Recode on Monday.
“Creating the next Google is awesome, but you also have to weigh reality into it and this is the way our product can thrive and grow faster — and we were more excited about that than the cost,” he added.
Taylor’s comments show the sales and marketing cost involved in selling business apps is a real challenge for even the most highly valued startups. Quip, which raised $45 million in total funding, had just hired its first sales chief in June, after mostly relying on word-of-mouth to sell its work collaboration app.
In fact, according to tech columnist Ben Thompson, who runs the popular tech blog Stratechery, Quip’s sellout reflects exactly that: the difficulty of selling business apps.
“What Salesforce brings is a pre-existing channel through which Quip can be sold. I’d go further than that: I think there will be more and more deals like this, wherein startups build great products that are sold to incumbent tech companies who have pre-existing sales channels.
Building those channels is just too expensive and risky for the startups (see Box’s near-death experience), while incumbent companies have neither the talent nor the organizational culture to build user-centric software.”
Given Salesforce still spends nearly half of its revenue on sales and marketing, and most cloud software companies follow the same playbook, it’s no surprise that Taylor wants to take advantage of Salesforce’s deep sales and distribution channels.
But it’s also a stark reminder that most of the cloud software companies that thrived on freemium and word-of-mouth will eventually have to find a way to spend more on sales and marketing, or as Thompson points out, get acquired by a larger incumbent with enough flexibility and cash. For Quip’s Taylor, Salesforce seems to be the perfect destination.
“We are going to be independent in our own office…they do want Quip to exist, which is great. The interesting thing is I don’t want Quip to be completely independent because then we’re just in the same position we were the day before the acquisition,” Taylor said.