Dan Rudich Shares the Story of Anamolous Networks’ Exit
Back in January, Anomalous Networks announced that they had been acquired by Tangoe. It was the first significant acquisition in 2012 in Montreal. I reached out to Dan Rudich, CEO and co-founder of Anomalous to learn more about the story and his experience.
Anomalous Networks started in 2010. They raised at least one round of funding in December 2010. The company provided a real-time expense management application for mobile devices, and worked extensively through the telecom industry.
The acquisition price was not disclosed. Dan remains with Tangoe as SVP rTEM Business Development.
NextMontreal: Many young entrepreneurs don’t know what the experience of an acquisition is like, although most dream of it. Can you walk us through how it happened?
Dan: It really started with the founding of the company. We (my partner Jaan Leemet and I) had always planned to build a company that would be valuable to a larger company to acquire. We took great pains to build a company with strong fundamentals. We were generating significant revenue with satisfied customers and channel partners fairly quickly. We were detail oriented to ensure we kept the accounting and legal details very clean for an eventual due diligence process. We also made sure we positioned our product in a way that it was synergistic and strategic in a hot market with many large players. We knew if we were successful it would get the attention of the larger companies and we did.
We were actually in the process of raising a second round of financing when one of the VC’s forwarded our name to the CEO of Tangoe as a potential good target. We had a couple of really good calls with their executive team and it was clear there was a good fit. We had to make a decision on whether we went ahead and raised another round of financing or combine forces with a much larger company. Given that our business was scaling so quickly on an international level it would have been almost impossible to raise more VC financing and then scale international sales and support quickly enough to optimize the opportunities in front of us. By joining Tangoe we immediately become part of a publicly traded, 1,000 person company with global 24/7 support capabilities in 13 offices. Since we were in the financing process we had a pretty good idea about our valuation so it made the negotiations fairly simple. After some “friendly” negotiations we got the deal done in about 3 months.
NextMontreal: How were the negotiations in comparison to raising money?
Dan: They were very similar. They are both all about valuation and due diligence.
NextMontreal: Why did you decide it was time to sell Anomalous Networks?
Dan: From the perspective of the business, it was the right time. We needed to scale quickly and support customers around the world and Tangoe offered that capability immediately. They also brought a large install base of customers and some very interesting strategic initiatives to the table. Personally, it was a tougher decision because you never know when the right time is. We could have held out longer and maybe sold for more. In the end, Tangoe offered a deal that would allow the founders to continue to share in the upside and gave us significant downside protection if there was ever a rainy day. It just felt like the right deal.
NextMontreal: What sort of transition will there be for employees? People staying in Montreal? Operations scaling with more resources from Tangoe? How did employees respond?
Dan: Tangoe is really excited about our product and team. That is why they bought us. They are keeping the team entirely intact and will be investing heavily to help us grow the team further. We will run as a separate division inside of Tangoe but with the ability to leverage their global sales and support resources. The feedback I have received from employees was all very positive. Tangoe is a dynamic, fast paced, entrepreneurial company despite their size. Our employees still have the startup feel but with big company security. It also helps that their options are now with a publicly traded company.
NextMontreal: Do you feel as if you experienced the “startup roller coaster”?
Dan: There were definitely highs and lows as part of the process but nothing too dramatic. Looking back 99% of days were really fun. I have no regrets and would not change a thing.
NextMontreal: Any suggestions to other startup founders going through the acquisition process now?
Dan:I think the reasons we were successful was due to the following:
- We built a fundamentally sound business first. We proved customers would pay money for our product.
- We strategically positioned the product in a very “hot” market.
- We made ourselves easy to acquire by working with Tier 1 law firms and accountants to make the business “clean”.
- We stayed focused on our plan despite many temptations to follow alternate paths.
The last thing I would add is that during the actual negotiation you need to have a realistic view of what price you are willing to sell for. That is harder than is sounds when 10 people give you 10 different valuations. You have to know the value intrinsically and then stay firm to that.
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