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Harness makes first acquisition, snagging open source CI company Drone.io

Harness has made a name for itself creating tools like continuous delivery (CD) for software engineers to give them the kind of power that has been traditionally reserved for companies with large engineering teams like Google, Facebook and Netflix. Today, the company announced it has acquired Drone.io, an open source continuous integration (CI) company, marking the company’s first steps into open source, as well as its first acquisition.

The companies did not share the purchase price.

“Drone is a continuous integration software. It helps developers to continuously build, test and deploy their code. The project was started in 2012, and it was the first cloud native, container native continuous integration solution on the market, and we open sourced it,” company co- founder Brad Rydzewski told TechCrunch.

Drone delivers pipeline configuration information as code in a Docker container. Image: Drone.io

While Harness had previously lacked a CI tool to go with its continuous delivery tooling, founder and CEO Jyoti Bansal said this was less about filling in a hole than expanding the current platform.

“I would call it an expansion of our vision and where we were going. As you and I have talked in the past, the mission of Harness is to be a next generation software delivery platform for everyone,” he said. He added that buying Drone had a lot of upside.”It’s all of those things — the size of the open source community, the simplicity of the product — and it [made sense], for Harness and Drone to come together and bring this integrated CI/CD to the market.”

While this is Harness’ first foray into open source, Bansal says it’s just the starting point and they want to embrace open source as a company moving forward. “We are committed togetting more and more involved in open source and actually making even more parts of Harness, our original products, open source over time as well,” he said.

For Drone community members who might be concerned about the acquisition, Bansal said he was “100% committed” to continuing to support the open source Drone product. In fact, Rydzewski said he wanted to team with Harness because he felt he could do so much more with them than he could have done continuing as a stand-alone company.

“Drone was a growing community, a growing project and a growing business. It really came down to I think the timing being right and wanting to partner with a company like Harness to build the future. Drone laid a lot of the groundwork, but it’s a matter of taking it to the next level,” he said.

Bansal says that Harness intends to also offer a commercial version of Drone with some enterprise features on the Harness platform, even while continuing to support the open source side of it.

Drone was founded in 2012. The only money it raised was $28,000 when it participated in the Alchemist Accelerator in 2013, according to Crunchbase data. The deal has closed and Rydzewski has joined the Harness team,

Trump calls TikTok a hot brand, demands a chunk of its sale price

Today the President appeared to bless the budding Microsoft-TikTok deal, continuing his evolution on a possible transaction. After stating last Friday that he’d rather see TikTok banned than sold to a US-based company, Trump changed his tune over the weekend. TikTok is owned by China-based company ByteDance, which owns a portfolio of apps and services.

A weekend phone call between Satya Nadella, the CEO of Microsoft, and the American prime appeared to change his mind, leading to the software company sharing publicly on Sunday that it was pursuing a deal.

Then today the President, endorsing a deal between an American company and ByteDance over TikTok, also said that he expects a chunk of the sale price to wind up in the accounts of the American government.

The American President has long struggled with basic economic concepts. For example, who pays tariffs. But to see Trump state that he expects a chunk of a deal between two private companies that he is effectively forcing to the altar is surreal. To fully grok his take, we’ve roughly transcribed the pertinent few minutes of his explanation from this morning, when asked about the weekend call with Microsoft’s Nadella. It’s worth a read (bold highlights are TechCrunch’s):

We had a great conversation, uh, he called me, to see whether or not, uh, how I felt about it. And I said look, it can’t be controlled, for security reasons, by China. Too big, too invasive. And it can’t be. And here’s the deal. I don’t mind if, whether it’s Microsoft or somebody else — a big company, a secure company, a very American company — buy it.

It’s probably easier to buy the whole thing than to buy 30% of it. ‘Cause I say how do you do 30%? Who’s going to get the name? The name is hot, the brand is hot. And who’s going to get the name? How do you do that if it’s owned by two different companies? So, my personal opinion was, you are probably better off buying the whole thing rather than buying 30% of it. I think buying 30% is complicated.

And, uh, I suggested that he can go ahead, he can try. We set a date, I set a date, of around September 15th, at which point it’s going to be out of business in the United States. But if somebody, whether it’s Microsoft or somebody else, buys it, that’ll be interesting.

I did say that if you buy it, whatever the price is, that goes to whoever owns it, because I guess it’s China, essentially, but more than anything else, I said a very substantial portion of that price is going to have to come into the Treasury of the United States. Because we’re making it possible for this deal to happen. Right now they don’t have any rights, unless we give it to ’em. So if we’re going to give them the rights, then it has to come into, it has to come into this country.

It’s a little bit like the landlord-tenant [relationship]. Uh, without a lease, the tenant has nothing. So they pay what is called “key money” or they pay something. But the United States should be reimbursed, or should be paid a substantial amount of money because without the United States they don’t have anything, at least having to do with the 30%.

So, uh, I told him that. I think we are going to have, uh, maybe a deal is going to be made, it’s a great asset, it’s a great asset. But it’s not a great asset in the United States unless they have the approval of the United States.

So it’ll close down on September 15th, unless Microsoft or somebody else is able to buy it, and work out a deal, an appropriate deal, so the Treasury of the–, really the Treasury, I suppose you would say, of the United States, gets a lot of money. A lot of money.

When building a startup, think like a buyer

“Never run a dual-track process.”

You’ll probably hear this advice if you ask an investor about raising money and selling a business concurrently, and it’s good advice. The two processes are so different, so all-consuming and require such different priorities that it is nearly impossible to do both well. Running a sale process, though, is much different from positioning your company for sale, and positioning for a sale is very easy to do while you are focused on execution and fundraising. In fact, thinking like a buyer often helps make your business better even if you never sell, and if you do end up exiting through a merger or acquisition (far more common than an IPO in any event), you’ll be that much farther ahead.

It’s not just about your KPIs anymore

Investors care about results far more than methods. If the business is growing and the results are strong, founders are apt to face few questions from investors about the details of how they run their businesses.

It can come as quite a shock, then, when a buyer begins questioning everything during a sale. An acquisition represents not just the purchase of a revenue stream but also the team, technology, culture and a swarm of contractual relationships. Consider that a buyer is acquiring everything you have built up to this point, and they will take a close interest in all of it, not just your results.

At times, it can feel infuriatingly unfair. When I sold my first startup, Prism, several buyers castigated us for building on .NET. The product worked beautifully, and we had strong revenue growth. The tech stack was efficient and reliable. In fact, buyers would often congratulate us for the technology we had built and in the same breath insult our method of building it. Unfair, perhaps, but entirely reasonable considering that the buyer had to consider not just our results but how to integrate our team and product into their company. I’ve heard similar stories from founders concerning issues that range from culture and hiring practices to core hours and partnerships.

While growth is always the priority, looking at the business objectively can pay handsome dividends even if no buyer ever materializes and starts asking questions. It is easy for teams to become insular and to ignore problems festering underneath the shiny performance metrics, and forcing yourself to think like a buyer can help uncover problems early. Security and accounting are the best and most obvious examples here, but are far from the only ones. Even if you decide not to make a given change (we would not have changed our tech stack, for example), you will be able to get in front of any objections. A good offense is always the best defense, and the more you address incompatibilities proactively with a buyer, the stronger your position will be.

A peek behind the curtain

So how does a sale actually happen, and how does your preparation pay off? Typically, there are two general paths: the traditional process and the “serendipitous” encounter. In a traditional process, the founder explicitly seeks to sell the company. In a large transaction, it’s common to hire an investment bank to run the process; founders tend to manage smaller transactions themselves. Either way, the founder or the banker will comb through a list of potential acquirers and pitch the business to them in a process that feels somewhat like raising money.

The “serendipitous” encounter is a much looser construction. Sometimes, it is truly happenstance, when an acquirer expresses genuinely unexpected interest. More often, those scare quotes are doing yeoman’s work, and the founder starts feeling out potential buyers by casually discussing how great their business is with those around them. Some founders are better at this dance than others, but once a buyer expresses genuine interest, the next steps look exactly like the formal process. Look, there may be environments in which having zero competition for your deal makes sense, just like there may be environments in which “Well, at this point, the best path forward definitely is to wrestle with that alligator” is a sensible thing to say. Both environments are equally likely. In almost all cases, it is imperative to get others interested in your company, even if you would prefer to sell to the first buyer. Auctions drive up prices and improve your negotiating position on literally everything, so you need to run a process just as if you’d planned one from the beginning.

So what does “interest” look like? It’s a fuzzy concept, but typically it means that someone with agency (either a C-suite executive or someone in the corporate M&A group) tells you that they want to consider acquiring your business. A lot of euphemisms get thrown around at this point to avoid scaring founders; you’ll hear “building a closer relationship” or word salads like “working together in a more structurally consistent manner” or if the person has a New York investment banking background, “Let’s get a deal done” likely delivered staccato with a finger. jabbing. the. table. for. emphasis. These phrases all mean the same thing, namely that the company that person represents wants to consider buying your company.

At this point, the conversation is pretty high level. You typically won’t be tearing into the technical wizardry, but rather demonstrating that you have what it takes to play the game: a good business model, a reliable product, strong team chemistry, and a product that fits well into the acquirer’s business. You, your co-founders and probably some senior engineers will spend some time at the acquirer’s offices, meeting with the management and product teams, trying to get a sense for how well these various groups of people gel. The CEO will spend time with the other company’s CEO (or in the case of larger acquirers, divisional leadership), hashing out employee benefit packages and transition agreements. Pro tip: “Synergies” mean firing people, and if that’s off the table for you, make that clear upfront. Even if there’s a desire to keep the whole team, it’s pretty unusual for every last person to make the transition.

If these first couple meetings go well, you need to start formalizing the process. Your sale will be much more successful if you establish an internal champion (sometimes the CEO but ideally your head of corporate development, business unit leader or GC) who can navigate the sale. Having one key point person will streamline the process and allow the founders to focus on ensuring that the business doesn’t fall apart from all of the distraction.

At some point early in this process, you’ll want to ask for an Initial Indication of Interest, or “IOI.” Legally, it’s a worthless piece of paper, but it keeps honest people honest. In it are outlined the terms of the proposed deal, the expected timing and other major deal points. Much can and will change, but having a common and documented starting ground is essential. NDAs tend to get signed around this time as well or may already be in place if the process started more formally. At this point, you also need to communicate to your other potential buyers (you have a few, right?) that you’re “in exclusivity,” meaning you can’t negotiate with anyone else. Doing so typically heightens their interest, because they’re human beings. From then on, you’ll almost certainly be prohibited from talking to new buyers about the business at all, so your only fallback options are the others already in the process.

From then on, it’s a sprint to the finish. Technical diligence, legal diligence, security reviews, accounting reviews, etc. It all takes longer than it should and creates proliferating headaches. Anything can derail a deal, but most of this work just creates more negotiating room for the buyer. It’s like a really expensive and prolonged home inspection, and if you’ve done a good job on maintenance over the years, it’ll go smoothly (see previous section).

The sellers matter, too

Your investors, employees and customers all have a stake in this outcome as well. While you’re busy trying to think like a buyer, you also need to empathize with all of your selling stakeholders. Each situation is different, so it’s hard to give generic advice. More communication is better than less, especially to your lead investors who likely have to approve any M&A in the first place. If a transaction comes out of nowhere, it can feel desperate and leave investors wondering what was left on the table. Investors have come to associate poor communication with poor management, and it’s not an unfair assumption.

You’ll need to bring employees into the circle as the diligence process unfolds, and involving your top people is almost always the right initial step. You need your leaders on board with the deal, and it is much easier to get people excited when they have a say in the process and outcome. Unfortunately for your customers, they will have to wait for the public deal announcement, but be transparent and honest in that communication. It should come from one of the CEOs.

Finally, be sure to give people who have supported you in the past — journalists, bloggers, podcasters, advisors — a heads-up as well so they don’t feel blindsided. Doing so is especially important if an acquisition will significantly disrupt the product; if someone put their reputation on the line for you, do your best to tell them what’s happening before they wake up to the news alert.

Ultimately, think like a sales lead

Every CEO is in sales . Pitching investors, selling to customers, recruiting all-stars, courting acquirers: It’s all sales. Preparing to sell your most important asset — the company itself — should be no less a part of your DNA. Never stop selling.