Building a successful business and then selling it to a big fish in the industry is The Brass Ring for many startups. Yesterday’s announcement from RJMetrics shows they have a firm grasp on that ring with the sale of the company to eCommerce platform giant Magento. But it’s less of a buyout and more of an evolution for the Philly-based company. In fact, the deal is part of a growing trend with tech companies and startups, enabling them to downsize with a purpose – to focus on new initiatives.
RJMetrics, Magento and Stitch
Founded in 2008, RJMetrics couldn’t have launched at a better time. Coming just as words like “data insights” and “big data” were passing the lips of every CIO, RJMetrics grew into a multi-product offering. Their suite gives businesses the intelligence they need to acquire customers, get them to buy and get them to stay.
With those kinds insights, it’s no wonder that RJMetrics caught the attention of California-based Magento. The acquisition, for an undisclosed sum, was announced yesterday and brings a solid competitive advantage to both Magento and their customers. Marketed as Magento Analytics, the solution will put the power of business intelligence and data insights into the hands of B2B and B2C merchants using the Magento platform. This will bring enterprise level analytics and actionable data to non-technical users of the platform.
The deal also acquires half of the current RJMetrics staff and allows Magento to set up a presence in Philadelphia. But what about the other half? This is where the story goes beyond a mere acquisition.
The other half of the RJMetrics staff, including RJMetrics co-founders Jake Stein and Robert J. Moore, have spun off into a new company, Stitch. As Stein points out in his blog post announcing the new company, data has “created a headache for developers”, and Stitch is looking to be the cure.
Taking the Pain Out of Data
An enterprise’s data can live in a myriad of places in today’s connected world. You’ve got CRM data in Salesforce, email databases in Marketo, web and mobile analytics in Google Analytics, and marketing data in Facebook and AdWords, among others. There are multiple teams wanting to look at this data from every angle, and you’ve got a data warehouse ready for it.
The estimate to get all of that data into your warehouse is staggering. The estimate to maintain it is worse.
It’s an all too common complaint from developers on up – connecting data sources and getting that data to look the same for your apps and warehouse is tedious, grinding, and time consuming work. It’s not the kind of work that makes developers happy. And it takes them away from the critical user-centric application work that companies need to focus on.
But data is king, and without it many business critical applications are meaningless.
This is the problem that Stitch was created to solve by offering a managed ETL solution.
When it was initially launched as RJMetrics Pipeline application, the team did a little digging into how much time creating a proper ETL system takes. What they found was staggering, but unsurprising. Building out a solid system for data transformation and loading takes “between 8,000 and 15,000 development hours to get off the ground and then 1–2 developers to maintain on an ongoing basis”.
RJMetrics effectively removed this pain point for hundreds of developers in beta, and now, as part of Stitch, they have the chance to help even more.
Downsizing to Focus – A Growing Trend
The one-two punch of acquisition and spin-off lets the established portions of RJMetrics live on while providing the team with the chance to go heads down on their ETL solution. The new Chairman of the Board and co-founder of Stitch, Moore described the situation as creating “a future that’s exciting without disrupting the universe you’re in”. And with this move, Stitch follows in the footsteps of other tech companies who have re-focused their efforts on fewer products.
Notable in this group is the 37Signals shift that occurred in early 2014. At that time the creators of Ruby on Rails announced the decision to re-focus the company on their core product offering, Basecamp.
The company not only dropped the 37Signals branding, but also decided to divest themselves of their other products including Highrise, Campfire and more. The reason? In an Inc. article at the time, 37Signals co-founder Jason Fried said the change would “allow us to do more things with fewer people”.
Dropping everything but Basecamp allowed the company to focus on doing more with a single product – better features, more access and a more mature platform. Instead of growing their team, they kept it the same size, allowing them to maintain the family-style culture while doubling-down on a product known both inside and outside the tech industry.
Doing Good and Doing Well
The change at 37Signals was accomplished while still holding everything together, customers and employees alike. And despite a strategic layoff earlier in the year, RJMetrics was able to achieve a similar outcome.
In fact, the acquisition/spin-off of RJMetrics isn’t a case of line-your-pockets-and-run. Instead it brings a number of benefits with it
- It brings fresh funding to the Philly startup scene
- It has the potential to create new jobs by establishing a new Magento office
- It has the potential to create new jobs as Stitch grows
- It creates a dedicated, proven team to work on a new product
- It leaves a dedicated, proven team to support existing clients
This isn’t just another acquisition of a startup. It’s part of a new breed of re-structuring that fosters better products with solid, proven teams.