Update: Automated Insights CEO Robbie Allen blogs about the exit here.
Sometimes, a deal is just too good to pass up.
The Durham startup with "robot" computers that turn millions of pieces of data each day into stories for the Associated Press and Yahoo! has agreed to be acquired by a top-performing national private equity firm and merged with its portfolio company STATS, the world's largest provider of sports data. It's a deal Automated Insights (AI) founder and CEO Robbie Allen never would have predicted when the company closed a $5.5 million series B round just seven months ago, but one so ideal that he couldn't say no. Austin-based Vista Equity Partners promises Allen capital and resources to grow even faster than planned, access to additional industries to test and implement his products, the ability to grow the business and team in its hometown of Durham, and all at a valuation pleasing to everyone in the deal.
"It's pretty surreal," says Allen, who started work on AI-predecessor StatSheet in 2007 while an employee at Cisco. "This isn't something I expected to do at this point—we just raised money and things were going really well. But it was just the right mix of opportunity—and everything."
For the Triangle, the sale of a company at so early a stage, but in a deal investor Lister Delgado says makes "every single investor happy" suggests our region has the talent and wherewithal to start and scale software companies in emerging new fields like artificial intelligence and machine learning. (The company says it's the first exit in the natural language generation space.)
"You need exits to demonstrate to investors it's worth spending their time here," says Delgado of Idea Fund Partners. The sale marks Idea Fund's second to Vista—last year, the firm acquired Social Solutions, a Baltimore company that Idea Fund funded initially in 2008.
"We're making sure we stay good friends with them," Delgado says. "If they want to keep buying our companies, we don't mind."
How the deal happened and why it makes sense
The Vista connection was not made by Idea Fund, nor by AP, which along with partner FOX Sports sold STATS to Vista last year. According to Allen, Vista and STATS contacted him last fall to discuss what more they could do with sports data, and that collected by Vista's other 26 portfolio companies, most of which revolve around data. STATS has been aggressively acquiring companies, only yesterday announcing the purchase
of sports data and information source, The Sports Network.
In that news release, STATS CEO Gary Walrath said, "The growing appetite for sports content, data and analytics continues to revolutionize the experience of sport in every arena for fans, teams and brands alike."
Allen declines to share terms of his deal (or revenue) but says it is strategic for all three entities—Automated Insights' products will be integrated into many of Vista's $14 billion worth of portfolio companies, which target agriculture, financial planning, automotive, law, hospitality, etc. The Durham startup gets easy access to data it was already purchasing from STATS, and the ability to offer its products to other STATS customers. The two companies plan to develop additional sports-related data analysis and narrative products together. And Automated Insights can keep, and grow, its relationships with other partners.
As reported by The Verge and other national media last month, AP will continue to expand its automated quarterly earnings reporting. And Allen says the news organization will add sports coverage too. More "exciting deals" are closing now, Allen says, and the company's Wordsmith for Marketing product continues the tremendous growth experienced over the last six months. A new product will be in beta test this spring.
As for Vista's longer-term commitment? Allen is certain it's not a firm that starves its companies or tries to flip them quick, pointing to a track record that ranked it the world's top performing private equity firm from 2000-2009 in the 2014 HEC-Dow Jones Private Equity Performance Ranking. He expects a four-to-10 year engagement before Vista looks for a return.
"They see long-term value in what we're doing," Allen says. "They want to help us grow."
Vista's wasn't AI's first offer
Allen has fielded other acquisition offers. Most were massive business intelligence companies which Allen feared would fold his company into a division, eventually eliminating its name or brand and laying off its employees.
Instead, he focused on building products and a solid customer base and raising capital to support that growth. A $1.3 million round in 2010 brought in its first outside investors: Idea Fund, New York angel investor David Tisch and Virginia-based Valhalla Partners. OCA Ventures and Court Street Ventures joined that group in a $4 million series A round in 2011. And Osage Venture Partners led the $5.5 million series B round in June 2014. It was joined by Samsung Ventures and AOL co-founder Steve Case, who heard Allen pitch at last year's Google Demo Day.
That round raised the company's valuation significantly enough that it could drive a sale "attractive to not only the old investors but the new ones as well," Allen says. He will continue to serve as Automated Insights' CEO and will join its board of directors. He expects to hire at least a person a month this year, hiring just slowly enough to ensure the company's culture is maintained. It was a Triangle Business Journal Best Place to Work the last three years. Today, the company employs 35 at its new offices overlooking the Durham Bulls Athletic Park.
Allen, "the superstar CEO"
Despite that Allen is a first-time entrepreneur and CEO, Delgado credits his technical prowess, vision and leadership for the company's success. Not only has he won patents and published technology books, proving his technical capability, but he sold his idea, raised money and grew and managed a strong team.
"He really is the complete package," Delgado says. "He's one of the superstar CEOs we have here."
Beyond that, Allen's journey provides the perfect case study for the NC IDEA process, Delgado says. Allen was denied a grant in 2008 but resubmitted and won the following year. That $50,000 was the impetus for him to quit his job and pursue StatSheet full-time. He then secured early investment from NC IDEA partner Idea Fund Partners, which helped him raise additional funds from out-of-town investors. Today, he culminates that journey with a successful exit.
Delgado calls the deal "bittersweet." He once envisioned an IPO opportunity.
"This company is very unique and has a lot of potential to be much bigger than it is now," he says. But the small-in-size funds that invested over time made an earlier exit possible, and Delgado says the deal ended up best for everyone.
"The great thing for us is we're not going anywhere. The name of the company is not changing," he says. "This has been a great exit for everybody involved and we're going to maintain a very strong presence in Durham. And who knows? Over time, we could even see another exit at some point."