Anatomy of a Win-Win Acquisition: Synergy, Growth, AI, and the Future of SaaS | E2047
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I sorry, I have to know, right? And private c, we for a second, I want they make, they make tremendous amounts of money, you know, one of the, one of the great players in modern capitalism. But one of my rules is never be on the other side of transaction, private IT, because they have a spend sheet about how to take all of your surplus away during that transaction.

Do if you want to talk about where the F, T, C should regulate, can regulate the hell out of private equity, like that would be my first order thing. Because like if you look at their playbooks, most their playbooks are hay, consolidate market share to create monopoly or suda monos and raise Prices on consumers. yes.

And if you look at U. S. Anti trust legislation, the test of are you behaving anti competitive ly is due Prices go up for consumers or down for down for consumers. And like the private equity playbook, one a one. So lena onic, you're listening to this, or whatever the next person the troubled administration is, can take a hamer to this.

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Everyone is alex. Welcome back to this week in startups now on the show. Quite a lot. In the last couple of months and quarters, we have talked about start up imma and more precisely, a lack of start up M A.

If you look at this chart that we have here from the N V C A Q three report, you can see that overall exit volume for starts in the us. Has gone down dramatically. Essentially since two thousand and twenty one, we've seen the exit market for startups collapse.

And what that means is we care quite a lot about deals that do get done. Now pick your poison is a regulatory oversight that too much to if evaluations were too high, IT doesn't matter. What doesn't matter is that we just haven't seen as many start up exits lately as we would like to see.

So when deals happen, I like to talk to the people behind them. So today on the show, we are not going to talk about yet and repair, pal. Instead, we are going to talk about a deal that I think is much more interesting, which is implicated buying command A I. Now if you're not familiar, implicit is a former star that a public back in two thousand and twenty one. IT is a public unicorn today.

And when A I is a start up, that race, about twenty four million dollars in known capital, well, private, including a nineteen million dollar, roughly series a back in mid two thousand twenty two, which pitch book pegs at the evaluation of one hundred and twenty three million dollars on a post money basis. I wanted to learn more about how that deal got done, what amp. Tudes saw in this art up, why command A I decided to sell, and also what founders like your self can learn from the deal. So please welcome to the show. We have been or gates C E O and co founder of and James Evans C E O and cofounder of command A I hi guys, I don't.

alex. Fantasti C2Be her e and we cou ld sta rt up.

I thinks. So what I do is I just change jobs and then I make you come talk to me whatever job that I have.

Alexi, a huge fan of years from tech crunch to this to whatever you're doing next, is it's always a pleasure you genuinely curious, uh, about this world, in a way, a lot of other journalist. Arf, so it's always a pleasure to hang out with you.

I to pay fifteen dollars to say that also, James, well, to show you, I just actually familiar with your company. Can you tell people to little about background? I know you are a pain back in the day.

Yeah, something. Thanks for having me. It's fun to have a place to talk about this. That's not a press release or linked in. So I appreciate the duty. Yeah I started my career bank capital um on the private equity team where, among other core experiences, I was exposed to the law of crappy software that LED in a circular path to our coverity committee. So in not sure what we do, we call that user assistance software. The idea is make the internet, whether that you know like piece of software you log into or you know an e comes for, you want to buy something to make IT easier people to use. And the kind of motivating observation is that just look at the stuff we've logged into on the really look that different from today or just two years ago, even though there's been like a crazy proliferation of of stuff we can do in the power behind, we're still facing kind of like the same annoying usability chAllenges like where do I do x do I to read this helps our article like to figure out to do IT. Our company is basically technology to help solve that.

And I know we're going to let you show IT off here, but if I understand command A I, there's other software companies out there or that do nudges kind of user assistant stuff, but your pitches always been those are very annoying and users don't like them. And so i'm curious, how did you guys build something that people didn't hate because nothings to the world? When I going to saw for a pop up trying to help me, I scream and go leave me alone.

Use immediately close. I just like the dirty secret, like in our space. And when you ask, like people who use to do more legacy solutions, like, hey, just forget about your company.

Like as a user, when you encounter stuff like this, the stuff that you are like looking at your users, what you do, and people invariably say what you said, they just slike, yeah, I close and then IT, they are closing IT. It's probably not creating the impact you want to create. I think like it's kind of a visual product. So I gravel have opportunity show IT and like the previous kind of just in the putting.

yes, OK, let let's do that now. And James, you have agreed to sports cast in sport. I do want you to wait in as we go through this because of course, you're perspectives on what they've built in what you've now bought are pretty parameter ter or jam. So what am I looking at?

cool. okay. So there's A A few parts of our products. So i'll just origin to the basic physics. There's the place where our customers instrument experiences one of that and do they want to tweak something in our chatbot that's our dashboard that's really looking at here. So this is where you know whether it's A A market manager, customer sport person like this is the interface where you're building his experiences.

This feels very no code to me that you nailed.

Yes, exactly. You know there's yeah few scenario where IT makes sense are S K. But for the most part, we really want to make IT that anyone who has like a hypothesis or idea about how to solve the user problem or move a metric can come in here and like instrument that as an experience without having to bother engineering. Because if you have to the engineering like way of this.

actually, so and here what I have is a user flow in which I can essentially reward a user for doing something. And in this case, you're showing them a gift and a what else can I do? Button.

yeah. exactly. So this is the kind of thing that you might show user after they completed like some sort of a milestone to give them a dob, and also suggests like a next .

best action OK spent. One thing i'm actually not aware of is how no code friendly the user interface is over amplitude. Does this interface mesh reasonable? Well, with how amputee looks today?

So there's two parts to IT first, yes, this is the direction. We just did a big launch of amplitude IT easy a few months ago, where the goal was to make IT friendly for low code and no code people who wanted to use the apple to platform. The second answer is there is no, are in that James vene and team have done such a phenomenal job of creating interfaces that feel native like that's actually none expertise that we have an attitude in a big pop art. Why were excited to acquire the command A I T OK .

that makes this? Because this looks pretty clean. But then again, if command A I couldn't make clean, well, find users often are they wouldn't be very good helping other people do that. So I guess.

kind of table states in the and are, yes, we have to bear.

okay. And what else can you guys do apart from from judging gift? I know there's, I think, a survey .

component, James. A A I this is what i'm talking about. So you're you know you work at company, your interest experiences or your users. This right here, uh is just like a sample act rebuilt uh to demo command AI. The head is like a calendar to do this step.

So I mean this this product, maybe it's my first time or i'm just not an expert and I am putting around like i'm doing the thing where I don't really know how IT works. Maybe i'm going to find something and i've kind of got these like static mouse movement. This is the kind of thing.

If you watch sessions, people notice all the type. It's like very obvious when a user is confused and you just want to like, reach through the screen and be like, what do you to do? And so one of our most popular loops is actually instrumented that.

So i'm like, look around here, we can actually throw a what we call nudge to can intercept that confusion here. What i'm doing here is in the top right of the screen, a little message popped up and says, hey, you seem like a bit lost. Let's hope that you on track.

What do you want to do? And i'm presenting the user with some options. So here were showing things that we think based on what we know about the user, they might be certain this to just be things that are like common on born action.

But to be clear, if you were just, uh, using the service, this wouldn't pop up instead tracking mouse movements to see when you might be lost. So ever you've told that how note when a user is just kind of like flipping around ah exactly.

it's really important to pick up on that because. Key problem that many tools in the spacewalk is they show things to users at times when they don't care or are interpreting them.

The word is often it's just just as basic as you had a page and you immediately see a pop up, which is actually, if you think like the worst time to show the pop up because you just took on the page, you want to see what's on the page before maybe interaction with the pop up. So we put a lot of evidence on these trigger. We got the wind.

And in this case, this is one the most popular trigger. It's confusion and detection trigger. So looking for exactly this mouse, okay.

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Service dogs, I love knowing what people think. I want to see the survey element of this.

Oh, sure, I can see service. So yes, so here i'm doing. I I got out of the jeff and I added a text input. So this could be a survey that you show a user after the same milestone, but kind of what can get they're and what has happened, and this is something we find companies actually kind of criminally under use, is they think of surveys is like these long things that you hit user sweet like infrequently. We actually encourage everyone to do more of mr.

Survey approach where you're constantly showing things are trying to get the pulse of what the user or visitor feels that what they're seeing and the really cool thing as you can actually then use that same information that you're getting for targeting. So really basic example would be, and instead of a text input here when we actually do are Operating input, so start rating. So here I can maybe rate, you know how that experience. Just one.

I look the fact what you guys saw earlier with the confusion detection that when we saw that, that is working genius, because you are intercepting the user at the right time in the right context is shown that if you have a pop up in the right context, that is five or ten times more engaging than just spamming you with something.

So getting something that's personalized to your behavior, to what you might be experiencing, what might you want to do next, like that next level. And so i'm excited to live in a world software that does that. This customize for me and customized for each one of us.

I would actually friendly differently because I get here with the pop. To me, it's not up a zero or something that makes me a much more negative experience. So if this can be a positive thing, it's not just going from .

zero to five. Every other Price in the space, you have to measure the rate, which you just close your problems. Everyone does that people frame IT in the in the context of click rate.

So what percent of users who had an impression of this, this nudge, what person i'm actually kind of to the next action could to make up? We also measure something that I think no one else in the space would like dare to measure. And we call IT a rage close.

And this is if a user closes a pop up quickly, if a user closes a pop up quick, it's so much worse than not clicking through. You're exactly right. It's annoying.

And IT contributes to the sense of light. This product is early, should at me, it's not personalized. So i'm just gonna develop pop up blindness and just never pay attention. These six actually see that if someone raised closes three ops a row in a site or a product, you basically lost them forever and you'll never be able to engage and you will not be able to pick that up unless you differences between the state of like how they didn't engage with that, whatever no harm and file, which is like, no, they actually hated.

So you won't think we focus a lot on our numerous product, which is the kind of proactive messaging kind of getting in, in front the user before, then maybe know what they are going to do. Yeah we also have another product, which we call copilot which is A A A I powered jp. I basically we want to use that. I think I thought .

the b site said it's not A P pot. It's the .

next level here. Give me example. So how do I create new? So here um we're utilizing a lot of information that we have about the products example helps and our internal wiki. But one of the things that we do that no other things that call myalls chap hot do is actually teach the user how to use underline product and make a lot of people treat chat in their faces is like a fallback that's like H I can't use the website so i'm onna talk to someone through the chat. We think the right mental model is like, no, the chat interface is just, uh, we first way helping the user and often the best thing to do is I should to teach them efficient that I just like tell them how efficient here instead of giving me like a long text and is just saying, like OK, I going to show you so I click here now it's doing a hot spot and pointing out in the interface where I can do the thing and IT can take me to the next step as well if I were a remote step. Well, and this this is like we think is just takes the chat up for reactor, makes IT like way more useful.

Well, I I think that I actually would be useful because the last thing I everyone is and then sent to a helps into article that I then have to read and then reload back into the applications I got logged out and then to go back to where I was, and then I just give .

up and go back to using goole dogs. And that might answer your question, but probably is something trying to finish from the international.

I've always read that as we could hire humans to help you, both for two cheap. So hear some text that we had A I right for you and we hope you you like IT and too bad if you don't.

Alex, the worst part about IT is you hit on IT, which is that humans crave that authenticity and they can tell if they're talking to an A I or talking to another human. And so if you're just getting a long wall of text, you're not actually getting any value out of what IT is you're interacting with, whether if you are being guided and shown the experience like that is a magical use of A I for me as an end user. And so the fact that James in the in team had this incredible vision for what this could be, that's what got us, that what you'd very excited to work with them.

yeah. So let's put up back the ample tude. Now when I think about your company, for sure, I think of IT as a digital analytics with a product focus. Is that first, that's okay.

And I was going through your last earnings call, but you guys talked about this transaction quite a lot through that, and you said a couple things that roasted out to me because I want to get into why do this deal? And you said customers are looking for consolidated solutions. And essentially, I read that as point solutions are becoming just harder to sell and so forth.

Why not build something? Why buy in this case? Because I love a gender team, have built, but empty, has a lot of resources. Your public company, you can do quite a lot of why, in this case, buying a built .

James and vane team have an incredible amount of expertise by working on this problem for the last four years. Four years. Is that right? Yeah, four years, four years.

And so that way beyond any expertise, anyone implicated as. And so we could spend three or four years to try to get to the same point. They already built this amazing product to.

Or we can say, hey, let's partner with you and let's bring you in as part of aptitude and let's have our combined expertise get this to market a lot. worker. We've actually set a very aggressive internal goal for this to get out in the first ninety days. So ninety days from when the transaction close, we want to get .

this out to our customer base and get them using ash. So have the same .

day that was the same day on the day we announce. Yes, that's right. That's right. Was A A bit of a hero.

yeah. There's no there's no net under that type rope. okay. Well, shout to you guys for being bored. I suppose the things that I am kind of surprised by your entire sensor is when I think about the way some investors really on the private equity, i'd think about software. They say things like software taste like chicken.

It's all kind of the same, but you're describing a much more craft and almost like art to the science when IT comes to building software like this. Is that a standard element of building modern enterprise sofa that people kind of want to use? Because I don't think that user experience was as much of a priority ten years ago.

I think particularly for B2B, we're undergoing a rena sad style where the great products without if you look at companies like data dog or on eat lab, they have done an amazing job crafting these wonderful user experiences. And they are winning because largely because of that, because there are other lots of other pieces of software that do very similar things from prior generations to what they do.

But they've won because they've made IT similar, because they they ve made them unusable because. Theyve just created these amazing and to end experiences. And so I need to believe that the next generation would be to be soft and going to look like that.

And so we've been intentional about that at all to one of the big strategic pillars that we have, as we call simple, which is about how do you make IT much easy start. Analytics is a scary, intimate thing. You know, when average person here's analytics. So like, that sounds like that I hate math.

What is this? And r thing is, hey, how can we make IT accessible if you're not technical, if you don't know, see, well, if you aren't an engineer like an instrument code, how can we help you understand what your users are doing? And so that's why we've added things like session and replay.

That's why we did that easy a few months ago. That's why we're really excited to to work with the the command. A, I, T.

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It's funny though to hear you talk about this because when I think about having, uh, easier to use Better software, I think about product lady growth. And I I feel like particularly growth as a concept has lost some of its, I would say, favor in the market.

But when you're describing helps people start using apple tude, you guys talked about um in real organs call, I think like forty percent more customers are sending data to ample to you kind of now. So clearly you are seeing the momentum and this make IT easier to you sign up and then and hopeful ly expand your foot in. But that does seem counter silicon. Is the narrative out in the market today about business soft simply wrong and people .

do care about craft? Uh, so I think there are tons of great examples of companies that have driven, you know, I named to get lab, a data dog up spots. Another one that's really had a great job of cracking IT.

I think one of the things we've seen in, in the digital analyst world is where in the middle of transition. So if you go back to the previous generation of software and you look at what ornata has doesn't be built out, they Frankly, you know, and i'd love, I love the on the your team. I love john and I love brad, and we have Catherine on our board.

And and you know, we're tight with a lot of the folks that, that built the company, but they Frankly had a worst product. They had a worst product then a lot of their competition. And that was okay because they were killer on the sale side, and that was kind of generation one doto of sas.

You don't have to build the best crafted experience. You just have to build the best and most scale sales force. I think what we're changing to his generation to doto sas, which is where the the protests matters a lot.

Now in our space for design alya s specifically, we are a sales LED motion. So we're still that part does matter. It's not like this put IT out there and and have all these folks come. But the way that they're choosing in the sales, it's about, okay, well, I need to enable thousands of people to self serve on data. Which tool is gonna let me be most successful at that and gonna choose that.

okay. So essentially the the idea the um invest equity part approach of Operates like chicken big sales teams simply limit for every single company doesn't entirely go away. But he has to be combined with great user experience and the things that we so see the product like growth.

So the answer is not that one way of selling was the only way to go, but instead a blended approach that seems of high qualities offer and a high quality sales team that fits under my impression that this has gotten harder in the last couple of years as expectations have gone up in pricing pressures have also increased. So that, that fits now spent will put U S I D A for a second. Jane spence are just saying your Prices about the team, the software, you guys raise money. Uh I think up to nine 4 evaluation cool company。 Y S L.

Now great question. I think that sort of like um and there is an unhelpful mean that exists. And like startups, which is like if you don't need to sell and you consider selling, would you like even tain like the consequence acquisition, like your your week and you're like not a committed founder actually like suck is to blame.

I think the like suck I was like twenty one year old suck walking yahoo and foot fps and like turning damp in dog acquisition. I think I think contributions to this me a lot. So for us, IT came down to a couple of things. First of all, I say like you're not going to consider selling the company if you don't need to if you don't feel like the value is fair to the team and investors and like that the decision you make the report. So I only you can really have this conversation without talking about value.

okay. But to be clear, best of way, you just said, commander, I was not out of cash. You were not no ceiling burning down.

Oh my lord, we need to save you. I'm going to call Spencer. We can do a deal.

but we were not thinking about in the company we can run girls good. What I think that is the question of like okay, entertain IT, no, they number one value number two. I think there's there's A A way of approaching this, which is just like for debt, all like the trapping of of an acquisition, like you know, going to work at the company and all that.

Can you achieve what you want to achieve as a company more, Better, faster by being part of another company? And for us like my like sort of existential concern or of fear with building a sandal one company is I really think we've built like already a tremendous product that can create a should turn of value for companies are also just like baked the internet a Better place. Like a is like annoying experiences, like people get more Better use. And that's where .

scale really comes into play because if you could have your same level of good you have before, IT would take ten times as long, which is number people. And if you can plan to and sport back me up here, you said that you know thirty five hundred paying customers .

have ever all right to get our stuff into their hands. And fear is like you could build a great product like best on enough. And if you can't crack distribution and if you can keep getting the right, like you're not going to be able to achieve as much as you wanted to. And for me, if was just such a natural like a gic fit sell to those five hundred customers and all you know more customers will go bad.

And the last thing I says, there is a lot of like uh, the physical of our business alone, really naturally with physics amp tude like feel the demo I showed yeah you don't create something in committee unless you have found out something that's not working in your product to your customer base or how do like a hypothesis to sign to work Better. And nine, five time those ideas are coming from a tool like amy, like someone is using amie, figuring out that like, oh, you know, users of this type are using this feature. Okay, great.

I think they have been able to do an ample suit is let me go fix that straight from the products. It's okay. I'll go back engineering and something we media almost finishing the feedback loop of the of the thing that starts an aptitude. And that logic is what ultimately let us to think he was a great diet.

okay. So the but this in the roles of project terms for everyone listening, people use products ample, who keeps track of what they do and how they do IT. And then with command A, I even then go, okay, here's, here's a bottom that we ve discovered. And we are not going to go apply one of our tools to help unstick people or help them get more done or more value out of this. So it's kind of you're on top of the stack.

if you will. Exactly like we think of IT is like you've got a and a relatively fixed rigid layer, which is the product we're not trying to real place like the websites of the APP forever. Then you've got this kind of word liquid layer that you can experiment with and could be more personalized and battle were .

attaching onto all orchestra like that. But again, kind shops, you haven't had this before because you mentioned in your in your nose that people asking for this construct that employee didn't build kind of a quicker version of IT just to have something in place before this deal came to be. Is that just you guys been focused?

yes. So we've always been focused on being the best in class in digital analytics. It's only more recently in the last few years that we have started to branch out to experimental session replay and other things. And so this was one of the things that we were looking at, and he was really clear to us that we'd much rather partner with a talented team because that, again, I would take us a bunch of years to figure out how to do this herselfe, like a bunch of expertise that James just showed in the demo that we didn't have.

Yeah, how do you create an interface where a pop up looks natural and in context of what's already on the screen, how do you think about the management interface for you know tens or hundreds of these nudes and guides ah how do you think about you know creating all the right temples for service? So like so many of these interactions that we just didn't have expertise on. And so we're not you know as big as we may see as a company.

We're not that big. And one of the superpowers said. That we've hold over time is how to state focused.

And so I made a ton more sense to to to partner with the with the command. Do you think I want to say on that is that acquisitions are incredibly risky. There's a SAT where ninety percent of acquisitions fail. And so this is something you know it's it's not like that was the obvious pat, either uh for for aptitude or for command. AI.

that's funny because IT feels from warm sitting based on what you've told me. IT does feel relatives natural because people want you. Platforms not point solutions. Your customers were asking for this specific capability.

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I know you guys had, if not customer overlap, some information that I know community. I was seeing customers attitude advice first a so to me, IT actually IT doesn't seem that risky on the surface, Spencer. So tell me, you know, what is the risk that you're going to managing now that this deal is done? Just overpaying or like integrated .

like you know that I think you have all this overhead where a cost a bunch of work and effort and you know change and both sides. And so you're you're kind of it's a high barrier to say, okay, hey, that makes sense to do this. But the incredible benefit is that you have this combined vision.

So we strongly believe in a world where products in no longer a frustrate, everyone has had a frustrating experience in their life of technology. And it's because you have to adapt your brain how the technology works. And we believe with data, you can actually make technology adapt to your brain much, much Better than he does today.

And so we want a partner with other great teams that have that vision as well. And so IT wasn't just okay. The commander I team at the fantastic product expertise that was no that was obviously kind of uh, part of IT and that was a great proof point of their capabilities. But I really was, hey, we have the same view of how great software should be built, and we want to allow every single company out there to to use that.

So you had vision alignment central.

Yeah and the the only thing i'll say on that is I I think the biggest mistake make a lot of companies making this is they're not clear about what the end state you're going towards. And so we were really clear from the start that, hey, is give me one platform together and that's what we're going towards. A lot of times, companies will leave in vigorous ous not be like, well, you'll let you stand alone, but they will kind of integrate you.

And that's like the worst of all worlds. You either leave something fully alone and let you run or if if the point is, hey, we have a combined vision to create this Better, this product is Better together, then you want to rebuild this part of one platforming. So one of the things were very deliberate and talking what James in the name from the start was a, uh, it's got to be one company in one platform and one product and one for end at the end.

okay. So James, I I want ask this to you because here the company been purchased and I have known Spencer for years now. He seems very affable. I've always enjoy talking to him, but I don't see him behind closed doors when something goes Brown. So how does you know that joining his company in his culture was going to be the right fit for for your your team and its own unique culture? And so yeah.

the first thing i'll say is like he is always a risk, right? You can only do so much of that diligence like outside in and you're never going to get two hundred percent comfort. And that is like one of the things that definitely wait on me.

N va. Was in today. We're in total control of decisions, but also culture. And like we know we're not not going to be the case as were required.

And so honestly, I don't a great answer for you other than I just hung g out a good amount before the deal and I just got comfortable that product. And like strategy perspective, we had a lion man. And from a culture perspective, like actually it's funny and there was an empty as three values. We have five values and there's overlapping two of them. And so we felt like there was you know, we were we were gonna be part of like a team with relatively similar.

you know and knows that the conflict with more stated .

values is more virtuous, dai our virtuous ness by entering a company with fewer bodies.

And S S. Two.

that over ownership and growth .

mindset words very. So I wanted go back to the start of this going from partnership to transaction. Which of you was the first to say, hey, what if we just did this as one company?

Some focus on the product side had a tremendous respect for what the commander I. T. Not built. And we've had reached out to them. And James in the ate, we're incredibly friendly and we're willing to share what they had built. I think the the thing that both the product experience in the fact that we had a lot of overlap and customers, that was kind of the initial signal that I would be worthwhile to have a conversation as we got more serious about considering buying a company that, that, that was able to do nudges .

and guides and service. yeah. And then just how fast was the company growing before the deal came to be? So um I don't know like half us, did you guys grow year of a year? In the first half of four.

we were running about three x.

So that's that's real quick. And even for A A series start up, that's triple, double, double, double everyone talks about. So giving your growth and the fact that you raise a good amount of venture capital, how much work was IT to get to your investors and get them comfortable with the transaction terms and taking in exit for an asset that has potentially more room run? Yeah.

I mean, totally, that's like the fundamental thing that is what kept us up at night, Frankly, was determining you have been really confident that this was actually the outcome we wanted, starting with that kind of linked in D M. That's when I clicked off the whole process, but he was a linked in the link.

And that is the most N B A thing i've ever heard. You got to do a twitter D M to cash. Come on.

I god, I I saw IT. Yeah.

I know. I I was about a joke that I D never actually .

read my linked.

N D I I now wonder with there .

yeah maybe someone is just require you.

god reaches out and then you have a decision to make on your right with your board and your beard.

I've heard like four stories where you know founders have one view and industry have another view. And like that just wasn't the case with us. Like our investors were super supportive.

Like hope does reason through, you know how could this fail? What's like? What path? What's the path to glory? You stand alone but like ultimately their their vibe was like I didn't help you make a decision, but like it's your decision to make. And if you think this is the read for the company, it's probably the right fit for us as industry. So we IT was a very like um high day but but you know raw reason and kind of not an emotional conversation I got to give .

James tremendous credit for how he navigated and handle bit. IT took us a little bit longer to get there. We were dealing with a few things as an r, including A C, F O transition. But you know he saw the vision of what could be we saw the vision of of what could be combined. And they were actually command I was in the middle thunder ing process and .

they were good to go OK.

So they they were in good shape to build a very successful stand alone an SaaS business and continue that path alone. Um and so you know I took us uh quite a bunch of back and force to figure out, okay, A I conviction that the equity of these two companies combined is much more valuable together than separately. So how can we create a construct? And so you know we negotiate a quite a bit and James is, James is i'll give more on a credit. Very good.

IT helps, I think IT IT comes back to leg. Do you are you like, have you decided your song, your company that's just like a totally different style of conversation and like that process verses, you're excited about the company. You you know you're gonna make you if the deal falls apart overnight, it's fine.

You just keep going. And that very much how we approached the conversation was like, you guys, we are happy we don't have to do this deal, but we were really excited about the potential during yet. And here's what we care about. Um and I just made a really clear, you know we kind of describe with the deal that was interesting to us and we were locate no worries like if this isn't the deal is question to you, like you mentioned earlier, amp te you know try to build the functionality IT IT wasn't you know we had to make you work. I think that made IT much more like a conversation versus light, you know a really uh intense you zero some style cussion.

okay. So from the first linked dm to the deal being closed, what was the time line? Like I asked, because we have a lot of founders.

I wash the show and I think. The time lines of imminent transactions are pretty open. So I just kind of I want to get as much details I can to help those folks understand .

how these things actually happened. The first conversation was sort of like late spring, early summer, like I I think people are may, but I won't say I was like we weren't like negotiating an acquisition since April ler. May IT was more of like an exploratory like hey, maybe that makes sense to partner, like maybe it's to go to market partnership. We really have our immigration made to immigration. So I don't think we really started like focusing on the you know hailo trying to make an acquisition happen until like middle summer o Spencer.

I know you have a new CFO and I was reading their early commentary and they said, I believe is a draw. First, we are not a growth at all cost company, uh, we are investing in appropriate to drive accelerating growth while generating positive free cash flow. And then of course, when he comes to leverage, you'll make decisions about how hard is IT to get your sea sweet and board on board with purchasing in. And I said that just given what i've learned about the company probably wasn't cheap. And I said that dog, is this the more of a IT was growing fast?

No, look, I mean, James had this past, you know, he was really growing very fast. Command has grown very fast. They were very successful. They could definitely be incredibly successful in them and and company. And so we needed to make IT worthwhile for them to do so.

I was very lucky to have an incredible board of directors that seen the good, bad and ugly on transactions like this and to get their guidance through this process. And so we had done us a few smaller ones uh, earlier a few years back and in both a clear brain as well as iteratively. And so we had a little different experience. I think this was by far that the largest one that we had ever done and IT came back to by conviction in the conviction of the team, that this was a really valuable combination for amp tude and that this was something our customers were asking for, that we could sell a lot of. And so we put that case together and they were very supportive of what are doing.

So I wanted ask about the the public committee perspective because one thing i've heard from some founders, and i'll say some vcs, is that the government has so heavily slammed the door on acquisitions because of essentially anti trust concerns that no one can do a deal. Transactions are could put and so for but i'm sitting here talking to you guys and not once this far, and I don't know, talking for half an hour. So have you guys mentioned concerns about regulator's oversight? So did that come into concerns conversations .

at all now where this part of this sort of acquisition is small enough that you know it's not something that's on the radar of the ftc. So but they are they are definitely cracking down for much larger companies and much larger transactions.

right? But I mean, not everyone has met a right. And so to me, like I hear you guys talk about the deal this, i'm almost surprised. I don't see more of this stuff happening because there are so many cool companies out there building needs software and not all of them are going to go public. Maybe no, jane, in the community I team. Could I guess the complaint that I hear and I also talking to myself right now, complaint that I hear about, it's all doesn't match the reality of talking to you guys about this transaction because IT doesn't sounds like you were terrified .

of the fc kicking the door. And for first stuff of this scale, you this this is ultimately this is Better for amplitude customers is just not a there's not it's not like the market that were in disuse and politics nudges assistance. It's so already like nobody knows what's going to happen.

And so you are this is many, many years before anyone has any regulatory concerns about this market. I I will say the reason that this doesn't happen and that you see them go down is because I think there is a mismatch and valuation. So if you're a public company or recently public company valuation most also are actually quite low. If you look at you know revenue or A R multiples a lot time and you'll get like two, three, four X A R private markets are still actually very high.

Know at times I mean see some of the A I companies I get like two hundred X A R R um but even for mid stage stuff, do you know you often be ten, twenty, you know or more A R and so what that means is those companies can run independently for a long period time in that means a lot of the natural virus, larger companies aren't gonna be able to pay that much because they don't have IT worth that much. And so you actually it's a much higher hurdle to clear. You have to have conviction that, that there's going to a huge german value combined. You can just say OK, these companies are ten percent more valuable together because then you know the private company minders will continue running because its valuations already pretty high. You need to be able to say, hey, we can create five or ten times more value together than we would separately.

Yeah it's of you mention the air companies. I had a question in here that I didn't have to get to because we talked about the a command day I could raise more. But I was going to ask, given A I excitement to command A I copes, I would think you could have phraya more. And the answer is, yeah, because everyone wants to pour money into A I I think .

I think people simplify or I think I think at least of speaking to the fatter perspective, like I think people simply y the decision as oh, if we can raise add a Better valuation, say you say you're deciding between raising no evaluation and sound your companies for less evaluation, oh, course you would take the higher valuation in some case.

Is that totally correct? If you're growing ten next year on year and you know your past, I T O is like two years and I all means like I am not suggestion that everyone sell our company or self up for less than its word, but you can make that comparison isn't as straight forward as I think a lot of founder make IT is. And I think a lot of founders don't entertain the idea that just think of IT simple, simple part experiment, what's more likely and we get sold for three x, what we get sold ford, or that we can react the .

value of the combination ity that's predicated on being purchased in equity versus cash. Because I O, R, you shared what deal done. There was dollars, shares, monopoly money, small shells.

We did a small amount cash uh, for some of the existing investors, but for James and for the whole existing team， it's all amplico equity because we want them .

to share in the combined .

upside as well.

No, IT makes a lot of sense to me. I want to get to um A I and also liberate about the enterprise in the second. But there's attention between what you guys to tell me that, that I want to unpack a little bit spender big on offered a platform attached rates, you know multi product customers.

I think you said something like twenty three percent of current customers have more than one product here today. And then I have James and commander I, which was more pointed solution versus broad, and they were going at three x. So those seem to be statements that go in different directions. I know need to be more platform but also points doing well. So what am I not understanding their to harmonized those two different databases.

Alice, is why I make sure understand your question. You're saying that the command A I independently is growing you at this great rate, but doesn't make sense to have as part of this platform versus run independently.

no. Is, is that you're emphasizing the importance at an implicit of having A A sweeter products that work together so you can offer a non point solution. The point solution that, that command A I was salad in the market was doing well. And so i'm just confused between why you're telling me this, but i'm also seen this over here and I presume that i'm just missing something in between.

So the whole reason that we do this is because it's that good three ex can be a lot faster with ample tudes customer based because we have thousands of customers worth commanded. A is much, much earlier in. So by getting the product into the apple custom race instead of growing three X A year, you're more great growing twenty x or thirty x or even more terms of the growth rate because it's part of that platform that so many other people are using.

And how many of your existing customers do you think will be using command A S software via amplitude and say, twelve months post closing? Is that is that half is twenty five percent.

As a good question, we actually haven't we haven't looked at IT from that lens. I think we wanted be really aggressive in getting IT out next. Probably you'll probably be you know kish percent in the first years is is a good rate. But then yeah eventually you wanted get IT to fifty than one hundred.

James, ten percent in the first year feels like crap members to me. Can you get twenty five percent?

I only am allowed to make ford looking statements is one of the things. So I been good. But I think just go out to your question er like points lation verses platform. Yeah I sort of like a misconception in the space. I like if you have a platform, if you have a bundle, your products the the bundle products are like kind of shit.

But like collectively, they make sense because platform, because one by term, because like this kind of pricing, it's not like at we're taking our product that was selling well, independently differentiated and like making IT worse so that I can fit to a bundle like it's the same product. But now when you create a code or an able tude, you just immediately get to use IT in the community or you can view the sessions where users have impressions of your assistant stuff in amp tude. So it's like getting Better, but it's sound like it's losing the ability to stand alone, compete against other. And I and one of the reasons why can make sense for to a to build because you're getting that light stand a differentiation of the box.

okay. So given the endorsement there are of buying versus build, i'm just curious and I know public company and agitated deals, this is actually brought question, but you know how attractive is doing more acquisitions in the next pick time frame for ami tude? And I asking this because I want to understand what other polar communications might be thinking about. You know, the market was available in Prices.

So first on our and we're absolutely going to be doing more. I think there's lots of great technology in the space out there with, uh, people who are just a smarter the folks that we have here at the aptitude that we would love to partner with. So we're going to be doing more.

We're also going to be building more internally. It's going to be both. I think that the great company is are able to be to to do both.

One of the things I talk a lot about is that we are so early in our space that product in a victims ames is point product is not like the innovative done. It's like that exact the really early days of innovation. What you guys saw like that is the bleeding edge from the commander I demo of what great user assistance and great nudges look like, looks like.

And there are so many other similar adjacent spaces that I think that make a lot of sense with the digital analytic ics and with the platform. And so we're absolutely gonna talking to our teams and gonna doing more acquisitions in future. The one other thing I I did want to say is part of what made this so exciting, uh, for my samp point, as as an applied c yells the thing we're always behind on us as we grow and scale, as great leaders.

So just great leadership, you know, as you grow as a company, the ability it's like you're always at a deficit or you know if you grow ten percent in a year, you need ten percent more leadership because thirty percent, you know, you need thirty percent more leadership. And so we're always behind them that you're always trying to play cash up and in a technology organization. And so being able to work with like James and bene are really important part. They're not just over the command AI founders. They're actually, I think, a lot about how do we get great product and engineering leaders here and the implicit to own bigger parts of the stack and of the platform and of the future as things that we're building.

That's very interesting because there was a me and I said very partly in the start of world in the last six months, founder mode. And instead of federal responsibility to individual leaders at a company who were subsidiary to the CEO, the founders instead kind of constraining that authority and decision making to some degree inside the singular executive. But IT sounds, spenser, like you're comfortable with having some distributed leadership and proves more than the founder mode meme said was correct.

I want to give a little more new. I was actually at bryans talk.

and he was everything.

Yeah, he was basically, I just come out other side of religious experience and to hear that directly, the level of passion and intensity and just like, yeah, religious ness that he had about what I meant to run a great organization at this great thing or it's like he had takes twelve years to make a good C E. O, you know, because he felt he was a bad one for the for the for first twelve years of B N B.

The thing that the thing that I think the it's fun and and he actually wasn't the one that came up with founder mood, that was polo gram, who is an incredible market. The thing that the point is actually not either of the scenarios you talk about, alex, it's not delegation and it's not like i'm i'm deciding all the stuff myself. It's actually the point brian made was that you are in the details of what is critical path for your company.

And so for airbnb, that's a great product experience for amplitude, that is also the great product and as well as have you sell this product and you can't delegate those. And what I am looking for is fantastic leaders who I can partner with in those details. And so as an example, one of the things i've had for the last years, I do a two hour a week product review of how do we make the platform easier to use.

What i'm looking for in that meeting is who are focused that I can go back and force with as peers to say, hey, what does a great experience look like and it's not just me saying, hey, do this, do this, do this to this is saying, okay, hey, here's what I think and then they'll say, hey, here's what I think and it's that back and force that leads to that combine great outcome. So it's not a delegation, but it's also not a micro management. It's about I want to get people at aptitude that I can have an interaction with, and that's what we're always at a deficit for.

okay. So turning this into a wild war, one analogy, because that's from my brain, went first. You're not back at headquarters twenty miles behind the front line, nor are you the only person aiming down a rifle yarn said in the trenches, yeah and and very involved with the street. Okay, that makes a lot of sense to me.

The two point on the founder mode is there is you have to be in the details for whatever is important your company, you cannot delegate that. That's not to say you don't work with other people, you absolutely do. And that's not to say you might to manage them, but you're working with peers in the trenches .

with them yeah is the option of what boy did which was abstract readership only disempowered the engineers and turn IT into um i'm just going to keep making private equity jokes because there turn IT IT into your kind like the private .

equity of ideal of management. I A second I .

want they make .

tremendous amounts of money, you know, one of the one of the great players in in modern capitalism. But one of my rules is never be on the other side of transaction private equity because they have a spaced about how to take all of your surplus away during that transaction. So you know, you can either do a transaction and get no surplus or not do a transaction.

Most will not do a transaction. But I love, I love they're they're great, captain. I tremendous respect. Just don't do transaction.

I think you can be a capitalist as I am. And I have honor to disagreements with standard private equity approaches to personnel and staff and do if if you want .

to talk about where the ftc a should regulate, can regulate the hell out of private equity, like that would be my first order thing. Because like if you look at their playbooks, most their playbooks are hay, consolidate market share to create monopoly, or pu da a monopoly and raise Prices on consumers. yes.

And if you look at U. S. Anti trust legislation that actually the test of are you behaving anti competitive ly is due Prices go up for consumers or down for down for consumers and like the private equity playbook, one of one. So lena cotton, we're listen to this or whatever the next person the trolley administration can take a hair of the .

I really think that if you are hoping for private equity, take a walking to the wrong next present because I don't think that's going to be A A forty seven A O. We've got a little bit of the I want to bring to spend are what you're building. Ling, an attitude.

Is that mean very interested about you, your new turn goals in your new term focus? And you said that there's two things you're working on right now. The first is automated insights, which you can use to surface two customers practically without human intervention, and then automated actions where athlete de can quote, recommend and take actions that we know will improve the in customer experience.

Now the first one seems to be digital analytics. And also, I would say what common day I does. The second smells quite a lot like A I agents and people have been making a lot of and know is about agents ret tailor over sierre open the arms worth. And I am just kind of curious, is that the direction that you're pointing that here with that comment? And if so, what does that look like in an ample suit context?

Yes, absolutely. That's the exciting part. So you saw that great interaction that James just demode where you are asking the chat.

But how do I create a new project? And instead of just giving you a list, IT actually shows you that says, hey, here's on a credit tutorial just for you, and I walk you through this process. That is the future of software.

And so one of the things i'm really excited about is how can we automatically create right now, it's a very manual process to create those experiences. How can you automatically create them so we can every single person need a custom guide to the software. So the guide to the software is custom for me or for you, alex, for James, for anyone else.

But more than just guide though, because you're talking about where answer, you can take a recommend and take actions that will improve the inexperience .

that's more than so. So not of a very you like that's like the first towards towards doing a bunch of this. I think there's a whole bunch else like one of the areas were really excited about is starting to recommend different text or images on your website based on what we think will convert Better or resonate with a particular user or even change the layout of a website or break down and create functionality. That's where this is ultimately going, and that's what what I think about the end vision is. We want to create a world where products are always improving herself, improving all the time.

okay. And then this will all rest on an ocean of data. And one thing that you said that um one of the court really exciting things about ampezzo is that you have this enormous repository of data, customer behavior, one of largest in the world. So does that mean that there will eventually li be like an in house amplitude LLM or similar that you guys then deploy against your dataset .

for your customers? Yes, above.

So are you going to reason a billion .

dollars to train IT? Um we haven't gone to that point yet. I think where we're doing a bunch of different things with A I internally. And I I think what's interesting is that you have so many dollars good going to google and meta and microsoft and OpenAI where they're spending crazy amounts of money to create these phenomenon models.

And so our thing is not to get into the model bill business, our cells, our thing is to leverage those and then OK where what wear experts is putting them to work for this particular application. So how do we know how to train the model to recognize the right types of text that is going to lead to an engaging, great user experience or create their type of nudges and what have you? okay.

So then the question then becomes, and again, thinking about founders that are watching this, just helping them to learn how you think there are two approaches to using off the shelf AI technology. There is close source models and open source models OpenAI course, close source. Met as long a family medium open source, if you will. So where does the amplitude direction lie? Which way you're going?

Uh, we're using a lot of the OpenAI models, but there's no reason you can use the open source models with .

ample to as well. okay. So you're not you're agnostic, but currently giving some money OK, that's right. PS is losing .

money on every transaction is that's the crazy part. Open a ee is losing money on every every time you are as you sima quality to IT the anus.

Well, that's why the best way to take big AI down is to use lots of big AI. That's why I use GPT o one or one of the health called all the time because that's the and say and I found that once a but ghost margin negative is a weird place to be for any business IT is a weird IT is a .

weird spy is going to be interesting to see at least the other problem is a lot of AI businesses have much worse for tension ing characteristics. And so I eat is not sustainable current levels. So little, little be interest to see where the ends up. A few years from now.

things are not to get .

involved in the great race in swich. I think back in twenty twenty one, a few people figured out that this was the best bit of business model of all time. I mean, still is the best business model of all time. So we're we're just happy wake, creating a great product and continuing to sell IT more and more companies and going to be building a great business way.

I want to say that, that is a contrarian statement into the in late two thousand and twenty four that, that is still the best business .

model model.

It's taking lumps. But that's also a beautiful side. Way to my last question for you. To you guys talk about how you thought that the majority of overboard optimization contracts kind of gone through, but the micro environment is still chopping. Quote, buyer screwy remains high. So i'm just kind of curious from where you said, what is the of the B2B sof tware buy er tod ay? And how quickly is that improving or getting .

more healthy or not? So I think you had a lot of software buying back in twenty, twenty and twenty twenty one that Frankly just didn't get any scrutiny at all. So as long as you could justify IT, you could spend cry the amounts of dollars on IT.

I think what is changed is that people now want R Y for there are software. They want to make sure it's dressing their top priorities and their doctors spend anything on ah you know they're often to spend thing on whatever IT is that out there. And so I think that's gona continue.

Like people want to make sure that they're getting, uh, a real return for what they're doing. Now the great thing is data analytics and understand the user journey. That is a top priority of almost every single company we talk to out there. And so whether times have been good or whether times have been bad or or wherever in between, there's going to be a lot of demand for what IT is that we do. And so we're going be out there sell in IT.

I just realize something though about what you said, which is that in a higher scrutiny software bind environment, the fact that commander I was growing as fast as I was is actually more impressive because it's not growing that fast in two thousand and twenty one when everyone was just taking bricks of cash on going.

We as let me tell you, one of the most impressive thing actually, sub so commander, I was the number one rated on g two against much, much larger companies because that experience you saw w you can get that experience if you're using the top guidance product or the top service product or or someone else out there. So I had just, yeah, what they have done is is incredibly impressive and we're excited to to work with them.

right? H James, how much money did you guys have to pay? G two to top of the people of ranking?

It's a beautiful grid. A, I look at IT every day and I hope the whole software market is and that's .

what we call a very play dog, my dear friends. Anyway, Spencer James, thank you much for coming on. And Spencer just drop for people amp tudes website social.

You just call up or follow me on twitter at Spencer gates.

critically.

Spencer with an S S. Yes.

if you to see you not find them, switch search is garbage. But guys, thank you so much. Congrats on the deal and spend there. I'll be tuned into all your earning reports as always, and i'll talk to you in a early january.

Sounds great, alex. Thank you so much.

I appreciate everybody. I.