When I walked into a conference room last Tuesday at the Cloud Identity Summit in New Orleans to interview Ping Identity CEO Andre Durand, it was my first chat with him since the company had been sold the week before for $600 million (as reported by The Information), a tidy exit for the 14 year old company.
I had questions, lots of questions. After all, in conversations with Durand and CFO Michael Sullivan over the last 12-18 months, the two painted a rosy financial picture of the Identity as a Service company. There was even talk of an IPO down the road. They weren’t looking for a buyer, they were looking to keep growing — at least that’s what they told me.
It was a company that made a successful transition from a traditional licensing model to a subscription model. It was reporting that customer growth from “new products” had grown from 5 percent the previous year to almost a third of new business in October, 2015 when Alex Wilhelm and I talked to them about their financial picture.
What’s more, Ping was a mature startup averaging 40 percent annual growth and was on its way to $100 million in subscriptions. It was fully funded and wasn’t looking for capital. The future seemed so bright, it had to wear shades.
Then came the surprising news that it had been sold to a private equity firm, Vista Equity Partners. It didn’t add up and I was anxious to ask Durand why he sold the company.
Durand looked a little weary when I spoke to him — and with good reason. The acquisition came together right as he was in the middle of gearing up for his company’s annual Cloud Identity Summit conference. Trying to balance the final preparation for the company’s showcase customer event, while steering his company through acquisition talks was no doubt a tall order.
Durand said things began to change over the last several months. He had offers before of course, but there are fishing expeditions, and there are serious offers, and quite suddenly the offers felt more serious, he explained.
Durand also had to balance the needs of several different constituencies including investors who came in as early as 2003, and a second set who came along more recently. He also had 1500 customers and 400 employees to think about.
I had to align the interests. I had short interests and long interests. Ping Identity CEO, Andre Durand
While the early investors said they were in it for the long haul, he hinted they had put at least some pressure on him that they couldn’t wait forever. Given the current state of the public markets, and the chances of IPOing anytime soon, the payout horizon was getting longer on a process that had already proven to be quite long to start.
“I had to align the interests. I had short interests and long interests,” he said.
Then he suddenly had some serious attention, and it was serious enough that he had some leverage — a couple of interested buyers.
There was a strategic buyer he wouldn’t identify, but guessing on the likely suspects looking to add identity as a service, it could have been IBM, Cisco, Akamai, Oracle, SAP or Salesforce. Any would have made sense actually, but going down that road was taking a big chance with the company he had built. A big company could take the tech and perhaps the engineering talent and deprecate the brand. He was reluctant to do that.
In the end, it came down to pragmatism, execution and big pile of money. Vista gave him an offer he simply couldn’t refuse — a big fat offer — one that would satisfy his various constituencies. It would pay back early investors who stuck with the company and later ones who came on board more recently.
It would take care of his loyal employees and perhaps most important of all, it would allow the brand to live on. Vista also presented well. “They came on like nothing we’ve ever seen,” he said. They showed up, and within a week they had an offer and a few weeks later the deal was done. It didn’t hurt that they were a private equity company with an enterprise software pedigree, and they wanted Ping. They really, really wanted it.
Change is gonna come
Durand couldn’t say what this all means just yet — the deal won’t close until the third quarter. Like all of us, he has to wait and see what happens, but he sees a buyer with deep pockets that will accelerate the growth of the company much faster than he could have done alone, and perhaps even provide an avenue for acquisitions that would have been much more difficult before.
There will be change. It’s the nature of acquisition. Undoubtedly there are stock options to pay and some folks will move on, but one employee said nobody is talking about leaving. After the big pay day, that is subject to change of course.
At one point, I asked Durand how many employees he thinks he will have next year at this time, and he really couldn’t say. He doesn’t know how fast this will accelerate, but he’s pretty clear, given the way Vista operates, that’s it’s going to put the pedal to the metal.
I talked to one customer, who said exactly that. He was hoping the influx of money means that the company can move more quickly than it has previously. Hard to know if he was echoing the party line or if he really saw it that way, but it appears to be the reality moving forward.
The company will get bigger, and that will in all likelihood change its identity to some degree, moving from a small community of people to a larger organization and all that entails. Durand, assuming he stays around (and all indications are that he will), will have to guide his company through that growth phase into whatever it’s going to become next.
Ping’s sale could also signal the beginning of more consolidation in this space. There are other modern identity service options out there like Okta and OneLogIn and buyers who missed the boat here, could come looking.
“There are a bunch of big vendors and a scarcity of vendors to acquire. That makes it worse for strategics and makes for interesting opportunities [for vendors],” OneLogin CEO Thomas Pedersen told TechCrunch.
As for Ping, in some ways Durand sees this process through a moral lens that he took care of business and operated the right way.
“I have returned well for everyone who has ever come in contact with Ping, I’ve done right by them,” he said. And that’s all any startup CEO can hope for.