It would be easy to assume that Verizon’s purchase last week of video-conferencing tool BlueJeans was an opportunistic move to capitalize on the sudden shift to remote work, but the ball began rolling last June and has implications far beyond current work-from-home requirements.
The video-chat darling of the moment is Zoom, but BlueJeans is considered by many to be the enterprise tool of choice. The problem, it seems, is that it had grown as far as it could on its own and went looking for a larger partner to help it reach the next level.
BlueJeans started working with Verizon (which owns this publication) as an authorized reseller before the talks turned toward a deeper relationship that culminated in the acquisition. Assuming the deal passes regulatory scrutiny, Verizon will use its emerging 5G technology to produce much more advanced video-conferencing scenarios.
We spoke to the principals involved in this deal and several industry experts to get a sense of where this could lead. As with any large company buying a startup, outcomes are uncertain; sometimes the acquired company gets lost in the larger corporate bureaucracy, and sometimes additional resources will help grow the company much faster than it could have on its own.
What is BlueJeans?
BlueJeans is a video-conferencing tool used by enterprise customers like Facebook, Disney, Red Hat and Nordstrom. It doesn’t have the consumer-level brand recognition of Zoom or WebEx, but it has grown to 15,000 customers since it launched in 2009.
The company has raised a total of $175 million, with the last deal coming in 2015 when it raised $76.5 million. That round was led by NEA Associates, but past investors included Accel, Norwest Venture Partners and former New York Yankees shortstop Derek Jeter, among others.
According to PitchBook data, the company’s post-money valuation for that round was over $727 million, and while there wasn’t an exact figure for last week’s deal, it was pegged at less than $500 million by a Verizon spokesperson.
Alan Pelz-Sharpe, founder and principal analyst at Deep Analysis, which watches the enterprise collaboration space, says the telecom company got a good buy. “Verizon is getting one of the only true enterprise-grade online conferencing systems in the market at a pretty low price,” he told TechCrunch. “On one level, all these systems do pretty much the same thing, but BlueJeans has always prided itself on superior sound and audio quality. It is also a system that scales well and can handle large numbers of participants as well, if not better, than its nearest competitors.”
To the enterprise and beyond
While the time seems ripe for an acquisition like this, it’s more complex than Verizon simply grabbing a video conference service in the midst of a crisis that disrupted how we work.
More importantly, says Constellation Research analyst Dion Hinchcliffe, it was a good choice for the enterprise users Verizon tends to target. “BlueJeans has offered one of the better experiences, almost in the same category of the rapidly ubiquitous Zoom service, but has long struggled to gain broad adoption,” he said.
Tami Erwin, CEO of Verizon Business, says this acquisition augments the telecom company’s product suite because “…customers have said that they really need Verizon to give them a portfolio of connectivity, and then platform capabilities that enable them to have applications and solutions to meet their unique business requirements. This [deal] fits right into that strategy.” The company is particularly excited about the possibilities of pushing BlueJean’s capabilities into areas like telemedicine and online education, she added.
“We believe that this platform gives us permission, with the kind of help that [the BlueJeans] team brings to the overall business, to really reimagine and redefine how healthcare will be provided and the role of video — and how education will be provided,” Irwin said. “And we think that this positions us to accelerate work and solutions on behalf of those two verticals.”
Hinchcliffe also sees this as a key aspect. “Their effort to go out of their way to deeply connect the acquisition to their 5G roadmap shows how critical this kind of capability will be to stay a serious player in mobile video communications,” he said.
High rise BlueJeans
BlueJeans chairman and co-founder Krish Ramakrishnan says the company was considering different ways to grow before it approached Verizon with the initial reselling idea. “We felt that we needed a lot more capital to gain market share, and so we were looking at different ways to finance and to grow,” Ramakrishnan told TechCrunch. “We could raise money and try to be an independent company, or find a big partner with lots of technology to gain market share.”
The deal began last year as a partnership designed to expand go-to market capabilities, initially involving Verizon as an authorized reseller. Talk of an acquisition began a few months later and discussions started to accelerate in January, he said.
Gartner analyst Mike Fasciani, who covers digital workplace applications, says this acquisition gives BlueJeans the capital and lift it was seeking. “This acquisition answers questions for BlueJeans on how to grow its reach beyond the larger enterprise base. Verizon represents various routes to market across all market segments,” he said.
But Fasciani points out that this is not a slam-dunk: “Verizon acquired a video meetings platform and an R&D team that is as innovative as any in the market today. But this raises questions for Verizon. Acquisitions like this are unusual for service providers like Verizon,” he said.
He says the company will face obstacles around adding new applications like this into existing portfolios, sales practices and service operations, but sees the deal as mostly positive. “In this case, I think there is a clearer path to bring the BlueJeans video platform into existing UCaaS (Unified Communications as a Service) offerings as well as layering it on top of 5G network deployments,” he said.
While the deal certainly didn’t knock anyone’s socks off in terms of sale price to money raised ratios, it did serve to pay off BlueJeans’ investors and reward long-time employees, all of whom will now become part of Verizon.
Sometimes it takes time to see how deals like this play out, but with BlueJeans, Verizon gets enterprise-grade video conferencing at a time when there is a big future in this space, and BlueJeans gets a chance to fight another day with a deep-pocketed partner behind it.