When Niel Robertson – the founder and CTO of Newmerix – started talking about his idea for a set of “next-generation software quality assurance” products aimed at packaged application vendors, he regularly listed several packaged application vendors, including PeopleSoft, Siebel, Oracle, and SAP as candidate packaged applications to target.
Newmerix focused their development initially on PeopleSoft products and has released three products – Automate!Test (automated software testing), Automate!Change (change management), and Automate!Program Manager (product management and regulatory compliance) – all for the PeopleSoft platform.
When Oracle acquired PeopleSoft, a number of VCs that I know said something like “Brad – your screwed – there’s no reason for these products after Oracle owns the entire ERP footprint.” “Au contraire” I responded (using one of the few French phrases that I’ve actually managed to learn), the trend and complete migration zoo that Oracle will generate insures the need for these types of products (if you want a hysterical and detailed overview about why this is happening, take a look at Niel’s brilliant post titled “I Pity The Fool” – I bet you never thought that Mr. T and the elusive Dirk Benedict could be woven into a serious discussion of Oracle’s migration path for the various products they’ve acquired.)
Of course, only time (and performance) will tell the end of the story, but so far it’s getting more and more exciting every quarter. However, every time I talked to Niel, he’d look at me and say something like “SAP.” Sometimes it was more, but often that was it. Today, he backed up his word(s) by announcing that Newmerix now supports SAP’s products. We are starting via the acquisition of the Object Manager product line from a company named Skywire – these products immediately become Newmerix Automate!Change for SAP and Automate!Program Manager for SAP.
These acquisitions use a long time “early acquisition” strategy that I’ve used successfully in many of my portfolio companies (Fred Wilson kindly referred to me as the “master of the venture rollup” – fortunately I can count some real masters like Jerry Poch and Len Fassler as mentors.) If you’ve followed NewsGator’s trajectory, you know that they have acquired three companies to date – FeedDemon/BradSoft, NetNewswire/Ranchero Software, and Smartfeed.org/Windows Mobile Reader.
As an early stage VC, I’ve found that when you’ve got a clear long term strategy developed, a super strong leadership team that is open to integrating new technologies, people and products into their company (vs. a classical “not invested here approach”), and a willingness to get close to great small companies that can help you quickly extend your product footprint, a buy (vs. build) approach is often really compelling. There are lots of risks and not every acquisition or company is successful, but if you do it right, you can end up with some very nice companies like Return Path.
Congrats Niel and the Newmerix team on your nice strategic move – I look forward to the next one.