Fizzback Scores $80M Payday, but Did It Sell Too Soon?
News came in Monday morning, Sept. 19, that British startup Fizzback—a software business focused on helping companies improve customer service—had finalized an $80 million acquisition by Israeli firm Nice Systems (NICE).
It appears to be a pretty good deal for both sides: Nice is a major force in customer relations software, with 25,000 clients including most of the Fortune 100. But it has tended to focus on analyzing voice responses to understand what customers think, leaving a space for Fizzback, which lets businesses ask people for real-time text feedback on their mobile, the Web, or via social media.
Since 2004, the British company has been building a service that analyzes what customers are saying and provides analytics and feedback that help businesses do a better job. Do customers think the product is good? Was their contact with the company enjoyable? How can it get better? It has proven popular, with customers including Tesco (TESO), the world’s third-largest retailer, top mobile networks such as Vodafone (VOD), O2, and T-Mobile, and Best Buy Europe. Nice suggested that the deal really gives it the missing link for its services, allowing it to (in corporate lingo, at least) “deliver a holistic understanding of the customer.”
But while it’s an apparently solid partnership for both companies, founder Rob Keve, and Fizzback’s investors, the move almost immediately raised a question: Is Fizzback selling too early?
When to Sell?
Nice, for example, told shareholders the company expects to have earned back the money paid out on Fizzback within a fiscal year. That’s fast.
Then one of the company’s directors, Robin Klein of The Accelerator Group, a Fizzback investor, wrote a post suggesting he would have liked to see the business carry on growing rather than be acquired.
“In many ways this is a great result for the team and the investors to be celebrated,” he wrote. “On the other hand, it’s a disappointment that a company which had begun to make a global impact in the world of Customer Experience Management, had captured some of the largest corporate clients worldwide, is not going solo ‘all the way.’ ”
There is no suggestion in the post that Klein was seriously upset, but rather, it was part of the bigger conversation about when entrepreneurs should risk turning down a good acquisition offer. It’s what some refer to as “pulling a Patzer” in honor of Mint.com founder Aaron Patzer, who many think sold his disruptive finance startup far too early.
So what happened with Fizzback?
I spoke to another of the company’s investors, Mike Chalfen of Advent Venture Capital, which put money into the company in two separate rounds. He said that Fizzback had serious potential in the longer term—in fact, he suggested that Advent would have been prepared to invest more money in Fizzback than any other company in its portfolio. But he also seemed a little more zen about the sale.
“We had some very attractive alternatives, but it was the entrepreneur’s judgment that this was the best way to maximize the product,” he told me, shortly after attending an all-hands meeting in which Nice discussed the acquisition with Fizzback’s 100 or so employees.
He also wrote a post explaining his thoughts on the sale, but told me Advent had made back a little more than 5x on its original investment.
“We’d have been very happy to keep backing the company,” he said. “Fizzback has been off-the-charts spectacular. It’s got a staggeringly committed culture that has been led from the top. So we’re really indebted to them. … No doubt it could have been bigger, but in the end it’s a risk/reward question, and I’m glad there are entrepreneurs out there who actually take that into account.
“Either way, it’s a high-class problem to have.”
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