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Why Loom got acquired, really? 🙇🏻♂️
The $975 million (mostly cash) acquisition has a deeper insight.
Welcome to the 188th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 94,400+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
This is one of the 21 acquisitions by Atlassian so far. It’s biggest acquisition was Trello ($425 million) back in 2017. It’s been on a acquisition spree since then - most being smaller cheque sizes/ stock-swap deals.
Last week was different.
Atlassian announced the $975 million mostly cash deal to acquire Loom, a video messaging tool that helps you screen-record & send video messages instantly. Their best product market fit is for remote distributed orgs - and for the obvious reason.
But, that market isn’t growing anymore - remote isn’t growing. So, loom had to pivot into a new pitch - “With Loom, send AI-powered video messages for your team & customers”.
But, that’s not easy. Getting your customers to consume loom videos isn’t an easy adoption curve if it’s a standalone offering. And that’s exactly where the acquisition deal starts making sense.
Enter Atlassian, makes $3.5 Billion in annual revenues, which has the perfect distribution.
Atlassian has 882 enterprise customers that spend $500,000+ annually, up 44% from a year ago - that’s ~$440 million right there, friend. For context, Loom’s 2023 revenue was $35 million 1/100th of the whole Atlassian world.
And, Loom plugged into JIRA is massive 🤯
The JIRA ecosystem has one major problem. It does not have a video walkthrough feature. The Atlassian marketplace has a bunch of these free tools (shown below) but the adoption is extremely poor. Native adoption is negligible.
JIRA is hard to adopt for first-time users, especially for large organizations with hundreds/thousands of users. The native Loom record will solve two large problems. First, the Jira ticket description can be a video (eventually transcripts into summary/ action items and more). Second, it will replace the scrum meetings that happen just to explain a ticket and align someone (considering Loom has two-way communication in terms of comments and reactions).
But, is the $975 price tag too much?
I am no public market expert but distribution is definitely not the play JIRA wanted when it acquired Loom. What Jira wants to do is offer the upsell on their existing $7.75 per Jira user pricing. And it will use Loom to do just that. And of course, the added adoption from first-time JIRA users will solve account expansion and new revenue retention (adoption driving retention, classic).
That’s all on the acquisition, for now. If you liked this issue, do share it to your co-workers to earn good karma ✨