Photo: TribeHR CEO Joseph Fung: “If you want to impact an industry at a global scale and you want to do it quickly, acquisition and partnership are legitimate methods to get there.”
The windows that wrap around TribeHR’s Waterloo Region office are big enough to brighten any day, regardless of the weather.
During a chilly and unsettled week in Waterloo Region, the effect was all the more pronounced as NetSuite, a leading developer of cloud-based enterprise resource management software, agreed to acquire TribeHR for an undisclosed sum.
The purchase of the four-year-old software-as-a-service company led by CEO Joseph Fung could expand NetSuite’s total addressable market by a whopping $10 billion, an analyst from Stephens said in a report released Wednesday.
“Having met with TribeHR a number of times we viewed them as one of the most innovative and exciting vendors in this space and believe that NetSuite will be able to leverage its technology across its large SMB customer base to drive accelerating growth,” Alex Zukin said in the report.
Growth is exactly what both Fung and NetSuite are looking for from this deal, which was announced Tuesday after NetSuite considered 70 companies worldwide and settled on TribeHR.
The acquisition not only provides NetSuite an entrée into the human capital management (HCM) space, thus broadening its enterprise software offerings, but it straps a booster rocket to TribeHR’s efforts to grow its customer base around the world.
“What this feels like is a graduation of sorts, like we’ve finished boot camp and now it’s time to get into the real problems,” Fung told Communitech in Tribe’s bright space on the eighth floor of a downtown Kitchener building.
“Now we get to work with the power of a sales organization that has hundreds of salespeople, hundreds of account reps and already has a global footprint,” he said of NetSuite. “They have 16,000 customers, and the impact we can have now is so large.”
TribeHR was anything but large in 2011 when, with Communitech’s encouragement, Fung travelled to the Under the Radar Conference in Mountain View, Calif., where startups pitch to key Silicon Valley decision makers. His presentation won a Judges’ Choice Award, and one of the judges happened to be NetSuite’s head of partnerships.
“That was our first introduction and our first conversation,” Fung recalled. “At that point we were still very early on, and they still hadn’t made any real decisions around what they were doing on their HR strategy, but it was a great introduction.”
When NetSuite later decided to bring on new partners and revisit their strategy around HCM, “that’s when we were invited back in to participate in the process,” he said.
While it’s easy in hindsight to say attending the conference was a great decision, Fung had no way of knowing whether the investment in travelling to California – no small matter for a fledgling Canadian startup – would pay off so handsomely.
“You put the money down at the beginning and you never know, is this going to be a quick return or a long bet?” he said. “This was long; it was a good two years ago.”
With the acquisition agreement now in hand, Fung’s 20-person team can focus on ramping up for the future, and one that will continue to unfold here in Waterloo Region.
Asked what he would say to critics who feel Canadian tech companies exit too quickly, Fung said, “It’s always easy to be an armchair commentator. When you look at any given opportunity – for us, it’s the HCM market – it really comes down to how quickly can we scale and become a global presence.”
In TribeHR’s case, “There wasn’t any faster way to build a sales force of 400 people,” he continued. “If you want to impact an industry at a global scale and you want to do it quickly, acquisition and partnership are legitimate methods to get there.”
By remaining in Waterloo Region, TribeHR’s employees will continue to contribute to the local tech ecosystem, while bringing a powerful new player, NetSuite, into it, Fung pointed out.
“For every company we can point at and say, ‘Hey, they exited too quickly; we need more large Canadian companies,’ I can also point to companies that have scaled on their own but moved south of the border,” he said. “And in that case, we’re losing not just the company, but we’re also losing the talent, the presence and the key participation in the ecosystem.”
As a client of the Waterloo-based Accelerator Program, TribeHR spent much of its early development in the Communitech Hub. It had access to the Startup Services (now Venture Services) program, including guidance from Cameron Hay, a former Communitech executive-in-residence who went on to join TribeHR’s board.
“Communitech and the Venture Services Group played a key role during our diligence work as we were raising money, and Cameron Hay has been an exceptional board member,” Fung said. “We never would have met him without the Communitech Venture Services program.”
“It would be erroneous for us to say, “Communitech introduced us to our buyer,” however, it would also be erroneous to say that we could have done this without Communitech.”
As NetSuite’s vice-president of HCM products, Fung will report to Evan Goldberg, the company’s co-founder and chief technology officer.
NetSuite employs more than 2,000 people in nine locations around the world.
