- Amplitude CEO Spenser Skates said he knew acquisitions are risky especially for a startup. But the 6-year-old startup is buying AI startup ClearBrain to add AI to its predictive analytics technology.
- The merger combines two young companies that helps businesses use analytics to analyze customer behavior.
- "This is our first acquisition and we've never done this before," Skates told Business Insider. "And it's going to be a big proving point for everyone around the table. It's gonna be a big test."
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Spenser Skates, CEO and cofounder of Amplitude, is well aware of the warning about acquisitions: most of them fail.
"I've done a lot of homework on this as a founder," he told Business Insider. "There's some stat out there that nine out of 10 acquisitions don't work. So you're just like, 'Oh, you know, you don't want that to happen.'"
Skates said he's confident that's not going to happen as his 6-year-old startup makes its first big buy. Amplitude, which helps businesses predict the behavior of customers, is acquiring ClearBrain, which uses AI for similar goals.
"This is our first acquisition and we've never done this before," Skates said. "And it's going to be a big proving point for everyone around the table. It's gonna be a big test."
Amplitude, which is based in San Francisco, has raised $136 million from investors including Sequoia Capital and Battery Ventures. It was valued at $850 million when it raised a Series D round in December 2018.
ClearBrain, which was founded in 2016, has raised $3.2 million from investors including Pear Ventures.
Buying ClearBrain would enable Amplitude to add AI to its technology which is now used by major companies, including Microsoft, Twitter, Capital One and NBC.
NBC "figured out which shows were really popular to cross promote on their product as a result of using Amplitude," Skates said.
He said discussions about a merger with ClearBrain began last year.
"They were trying to figure out the next steps were for their company," Skates said. "They were looking into a bunch of different things, whether to do another fundraising round or to be acquired. Because they knew we had a lot of respect for our technology, they ended up coming to us and saying, 'Hey, you know, would it make sense for us to join forces.'"
Skates said he consulted with colleagues and friends, including Jay Larsen, CEO of prominent A/B testing company Optimizely, on moving forward with an acquisition.
"The reason why most don't work is that there's not a strong alignment," which typically means the companies are not selling to the same customer, he said.
"Normally, you're like, 'Oh, we sell the marketing teams. Wouldn't it be great to sell the sales teams as well? Let me acquire this other company that sells to sales teams.'" Skates said. "But as it turns out, acquiring another company is not enough to just do that. You actually want to acquire companies that sell to the same customer."
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