Splunk
SignalFx CEO Karthik Rau and Splunk CEO Doug Merritt
- On Wednesday, Splunk announced it would acquire the analytics startup SignalFx for $1.05 billion.
- This is two times the last private valuation of SignalFx, which was $500 million.
- Many of Splunk's customers had long been using SignalFx or were trying to build their own tools that are similar to what SignalFx offers, convincing Splunk that the time was right to make this acquisition.
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Splunk announced its biggest ever acquisition last week, with a $1.05 billion cash and stock deal to buy SignalFx.
The San Francisco data analytics company paid a hefty premium for SignalFx, and according to Splunk's Senior Vice President of IT Markets Rick Fitz, there was little time to waste.
Splunk's data analytics product is used by customers to investigate the root causes of technical outages and other incidents affecting their services. But many customers were asking for real-time analytics and monitoring, Fitz said. So much so that customers started building their own tools.
"This trend is moving pretty fast," Fitz told Business Insider in an interview. "It became very clear to us that we need to move very fast to capitalize on this shift."
As Splunk executives weighed whether to build the technology in-house or to acquire an existing product, they took a close look at SignalFx and were struck by the breadth of features and capabilities. And the urgency among customers.
"That made us step back and go, 'Whoa, that's going to require a lot of work for us to do this,'" Fitz said.
'Software doesn't build itself. People do'
SignalFx had just raised $75 million in June, at at valuation of $500 million. The startup had raised $178.5 million from investors like Andreessen Horowitz, Charles River Ventures, and General Catalyst.
For Splunk, which went public in 2012, SignalFx will be its largest acquisition to date. Before the SignalFx deal, Splunk's largest acquisition was the the 2018 acquisition of Phantom for $350 million.
Fitz says that for Splunk, it's a win because customers want the technology that SignalFx offers. As for SignalFx, it can make use of Splunk's sales and marketing chops since it's a large public company.
Already, Splunk and SignalFx are partners and have integrations with each other, making it easier for customers who want to use both their products. That's how their relationship started, Fitz says.
"There's an integration that exists in our technologies and their technologies," Fitz said. "We will probably take that capability and further enhance it."
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Fitz also says that this acquisition was a "natural" cultural fit.
"We are a very employee focused culture here," Fitz said. "Software doesn't build itself. People do. We want to make sure the people and culture were part of this evaluation and it was a good fit. Them being part of Splunk is natural for them and natural for us."