Partner, rival, acquirer: A startup’s CFO’s perspective on navigating a competitive market

Joe Moran steered Looker as its longstanding partnership with Google turned into a $2.6 billion acquisition

For many tech startups, success is sealed through an acquisition. In fact, acquisitions outnumber public offerings by roughly 4-to-1. And the gravitational pull of M&A is particularly powerful in markets dominated by a handful of incumbents that act as consolidators in sectors like cloud computing, internet security, and e-commerce.

For a disruptive upstart, it can be tricky to navigate the waters that may lead to a successful acquisition. You must compete hard to prove your worth to customers and rivals alike. You have to be a good partner to incumbents, when necessary, to help your business. But you need to make sure you’re not tilting too heavily toward one powerful partner at the expense of another. And you have to chart a path that allows you to control your destiny, regardless of what industry players ultimately do.

Joe Moran learned these and other lessons as CFO of Looker, the data analytics and business intelligence powerhouse. Moran joined Looker in 2013 and helped to lead it through a phase of explosive growth. In June 2019, as the company was getting ready for an IPO, it was acquired by Google for $2.6 billion.

Moran’s story, which he shared with Silicon Valley Bank, can serve as a guide for other high-growth companies competing in a crowded market where the lines separating partners, rivals and potential acquirers are often blurry.

Long before Google acquired Looker, the two companies began developing a close relationship. How did it start?

It was about four years ago. We were a lot smaller then. We probably had less than 300 employees, and maybe 400 customers.

The way that the Looker product works, it relies on accessing data that’s stored in databases, and most of our customers use more than one. Maybe 50 plus percent of our customers use AWS to house their data, a third may use Snowflake and a third may use Google’s BigQuery. Our product helps to drive demand towards those databases and we are reliant upon them to access the data. So we need to understand how our products work together and how our field organizations serve customers. That means we need to have a good relationship with all of them.

The Google relationship started as a go-to-market, tactical relationship. One of our joint customers was the biggest user of BigQuery.

How did the partnership evolve?

Over the course of the next four years, we really grew up. We went from SMB and mid-market type of applications to usage in large installations and large enterprises. We also drove a lot of usage for BigQuery. As customers were successful in using Looker on BigQuery, we were increasingly used as a reference for Google Cloud. Its field sales force understood that bringing Looker into an opportunity could help them close deals at a faster pace.

As that happened, it made sense for the engineering teams to work more closely, so both sides could understand where each other’s product was going, and so that we could build features that worked well with BigQuery. That kind of relationship builds over time. You get an understanding of each other's technology, technical skills and capabilities of each of the teams.

You are known as a platform-agnostic player, so presumably you were building similar relationships with Google’s rivals.

Yes. We did so with other cloud data platforms like Snowflake and Amazon’s RedShift. We do participate in their conferences and their customer events and they participate in ours. Overall, Amazon is so big in the cloud that on a relative importance basis we are more important to Snowflake and Google Cloud, than we were to Amazon.

Joe Moran, CFO, Looker

So one day your CEO gets a call from Google. Did they come out and say they wanted to buy you?

I was not part of the call, but it was a conversation about the strength of the relationship, the mutual respect that they had for the field teams, the go-to-market and on the product side. Google is well known for its engineering prowess. So when they have a partner that they work with and with whom they're impressed, it carries a lot of weight.

So it was a conversation around what the vision would look like if we combined as one team. Both sides talked about the importance of remaining multi-cloud. A combination would not tie Looker down to one database because the enterprise does not want to be locked into anything. Companies that move to the cloud don’t want to be locked into Amazon. They don't want to be locked into Google. They want the ability to work with whoever they want to.

When this happened you were a ways down the path to an IPO. You were talking to investors and banks and you were drafting your S-1. How did you weigh the pros and cons of the two different paths?

It was not an easy decision. There was a lot of debate around it. A big factor was execution risk. Could we continue to execute as we had in the past? The analytics market is crowded and has been around for a long time. A new player could come up and begin to work around our value. Second, we were at historically high valuations in the SAAS market. We could still execute really well and experience a lower valuation over time. Third, we cared about how our customers would be treated. Would they be taken care of? Would they be able to operate across these other databases so we wouldn’t leave anybody high and dry. That was very important. And of course, we wanted our employees to be taken care of as well.

Looker’s relationship with Google, how deep inside the company did it reach, and what role did it play in weighing all these factors?

We were about 1000 people total at the time of the acquisition. I’d say probably in the order of 150 of our sales people and sales engineers in the field were in direct contact with Google. On the engineering side, another 100 would have the occasion to interact with Google. And I think all of the engineering team would have an understanding of our work with Google.

We really understood each other’s sales processes. If the relationship hadn’t been there, we wouldn’t have the same confidence that our customers would be well treated. It wouldn’t have been as clear that we shared a vision for where to take the product. The future of our employees wouldn’t have been as clear.

Would we have come to the same conclusion? I don’t know. There would have been a lot more questions.

What are the lessons for how a company should think back on partnerships with bigger players?

There's a couple of things. One is that these partnerships have to be symbiotic, meaning both parties are getting value out of them. Two, a young software company always does have in the back of their mind, that if there is an acquisition, it’s far more likely to come from someone who knows you well. And the better they know you and the more competent you are, the higher value they will likely put on you.

But it’s also really clear you can't count on any of that stuff. You have to be able to perform as you would as a stand-alone company. You have to run a business. And by doing that, your growth probably looks better, your metrics probably look better and that, in turn, makes you a more attractive company. You don’t want to have an acquisition as your only option, because then you have no leverage.

Would there have been dangers in betting on a Google acquisition earlier on? Would Looker have operated differently?

We probably wouldn’t have put as much focus on building our relationships with Snowflake and Amazon. Given that 60% of our customers also operate on those two platforms, we would have been giving up potential growth opportunities.

What’s more, by focusing on our future as a standalone company, we also built the internal processes and controls that would make us a viable public company. That, in turn, helped during the acquisition. The due diligence process we went through with Google was extreme. A large public company doesn’t want to pick up a problem child. So by doing all the things necessary to be a good, attractive standalone company, we created a lot more value.

Any regrets?

I don’t think so. As a CFO, taking a company public may be one of the defining moments of your career. So it’s hard to walk away from that opportunity, especially with a company that would have done well. But part of the role is balancing all the factors that go into that decision. It was the right decision.