Acompli, Sunrise, and Wunderlist (with Kurt DelBene)

00:00All right, listeners, now is a great time to tell you about longtime friend of the show, Vanta. So, David, I want to paint a picture that many founders listening will recognize. You're about to close your biggest customer yet. The product team has hit a bunch of milestones. The sales team built this fantastic relationship. Everyone at the potential customer is fired up. Your legal team has the contract done. But then an email comes in from the security team. Ah, yes, it's usually a very polite email asking something like, before proceeding, could you share your SOC 2 report? Or do you mind sharing your ISO 27001? If you don't have one, that deal just went from closing this month to closing next quarter, maybe. Now you have to go find an auditor, go through every system, write the policies, and then prove that you follow them. Right. Or you could just use Vanta.

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01:34A recent industry report says that Vanta's customers see a 526% return over three years, and that it pays for itself within the first three months. If you've ever had one of these security emails stall a deal, you know exactly how that math works. More than 16,000 companies now run on Vanta. 16,000! Listeners, there were 2,000 when David and I started working with Vanta. That's incredible what they've accomplished. And these are companies from large enterprises like Atlassian and Snowflake to the NewGuard, like Ramp and Cursor. We've been fans of Vanta for years, and hundreds, like literally hundreds, maybe even at this point thousands of acquired listeners have become Vanta customers over that time. If you want $1,000 off, check out Vanta.com slash acquired. That's V-A-N-T-A dot com slash acquired. And just tell them that Ben and David sent you. Four score and seven years ago.

02:28Our forefathers brought forth in this continent. How far can you go with that? I actually forgot. That's as far as you got? Oh, you didn't even get that far? What did you learn in civics in elementary school? Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth? Welcome to episode number eight of Acquired. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today we have a very special episode. We have a guest at Microsoft, Kurt Delbeni. Yeah, we are very lucky to have Kurt Delbeni with us today. He's been a great friend and mentor to both of us in different ways. And actually both of us at Madrona too.

03:21So Kurt started his career actually at the very famous and renowned Bell Labs and spent five years there and then went to a booth and got his MBA at Chicago. Went to did a short stint at McKinsey after that and then went to Microsoft and had an over 20 year career at Microsoft that culminated when Ben was there in Kurt being the president of office, which he was until December 2013. And then afterwards he went to healthcare. And then afterwards he went to healthcare.gov and did a stint there helping launch Obamacare. And after that ended up with us for a little while. We were really lucky to have him at Madrona as a venture partner. And then last spring, Kurt returned to Microsoft and is the EVP of corporate strategy and planning. So thank you, Kurt, for gracing us. Hey, it's good to be here and good to talk to you guys again. Just one little correction on healthcare.gov.

04:23I came in after the launch to help them repair it. You did. And for listeners, I had the privilege of waking up real early one morning and coming in to hear Kurt talk about that at Madrona. It is absolutely fascinating to hear how to mop up a gigantic software project like that and getting all the right people on the bus, all the right consultants and contracting firms that are putting that whole thing together. It is, Kurt, that looked like an absolute ballet. Well, it was super rewarding and super challenging. So maybe we can do a future podcast just on that. It's an interesting topic. You needed to get some good R&R, so you went to a venture firm for 10 months afterwards. So today with Kurt, we're going to talk about hopefully a very topical acquisition.

05:18And we're actually going to lump a few in here, but the main focus is going to be Accompli, which is now the mobile outlook on iOS and Android. So I'm going to run through quickly. We're going to do Accompli, and then we'll sprinkle in little bits of both Sunrise and Wunderlist, which are also office productivity apps that Microsoft all acquired in the past 18 months or so. And so I'm going to run through quickly the acquisition history and facts. Accompli, founded April 2013 by Javier Soltero, JJ Zhuang, and Kevin Henriksen. It's interesting. Javier was CMU engineer and then an early employee at Netscape. Javier spent three and a half years at VMware before kind of coming back to his productivity roots and founding Accompli, which I was a user from day one when it launched in beta and thought it was on my iPhone.

06:19And thought it was just a great, really the first mobile app that combined mail and calendar all in one app. The magic that Outlook had been doing for so many years and no one really did on iOS. What's old is new again. They raised a $7.3 million Series A from Redpoint, led by Redpoint, where Javier had been in EIR after VMware, and Harrison Metal and Felicis. And then about 18 months later, Microsoft acquired the company in December 2014 for a reported $200 million. It was interesting. There's actually a... Everybody knew this acquisition was going to happen because Microsoft wrote a blog post about it, and it leaked about two weeks before the acquisition actually went live. Yeah, not a shining moment. Not a shining moment. But it was successful. The acquisition happened. There were about 25 employees, all based in San Francisco. They all joined Microsoft.

07:22And David, that was only, I think, like seven, eight months after launch, nine months maybe? I think it launched in April of that same year. It was 18 months, less than 18 months after the founding of the company. And so it was very quick. And this was right after Dropbox had acquired Mailbox. So it was the era of mobile email acquisitions. Begun the iOS mail app wars have. Yes. Shortly thereafter, Microsoft then acquired the calendar app Sunrise in February 2015. And then in June of 2015, Microsoft acquired Wunderlist, the to-do list app, which I know probably has a soft spot in Kurt's heart knowing how much he loves lists. I do love Wunderlist. It is a great app. I joked when that happened, I think, with Kurt, that Microsoft was trying to buy my entire iPhone home screen. Exactly. So you'll have to tell us at the end what you're using these days.

08:29I am still using all of these products. That's an endorsement right there. Yeah. There you go. I appreciate that. Yeah. So with that, you know, what's happened since then? At that same time, right after the Wunderlist acquisition, Javier was actually promoted within Microsoft to be the corporate VP running all of Outlook. So not just the Outlook mobile app, but Outlook on desktop as well. Shortly thereafter, after that, Sunrise calendar was rolled into Outlook. Wunderlist has remained independent today, but has been announced that further integrations may be coming on that front. So maybe Kurt can enlighten us on that. But with that, Kurt would love to hear kind of how you thought about all of these products. Sure. So the first thing I should say is the acquisition happened during my time away from Microsoft. But I know the whole history of it.

09:35The corporate strategy team, which I lead now, was intimately involved in the acquisition. So and I obviously know the space super well. I spent a ton of time in office. So when I saw it happen, I said, OK, this one makes complete sense. This is an example. I mean, there are different reasons that Microsoft makes acquisitions, as I'm sure there are for all companies. There are places where we look at our position in a particular area and say we need a technology. We need a particular product. There are other cases where we opportunistically look at a product or company that's doing well in a space and say, wow, we can see an adjacency to the business that we have. And so we want to we want to acquire the company to kind of build up and build out that adjacency. There's some more rare cases where we'll do it to get a particular set of talent.

10:29You know, we see a team that's super, super good. But I think that tends to be the exception. This one was the was kind of, I would say, a strategic acquisition. If you think about the journey that Office has been on, the core competency has been on the desktop, you know, the Office suite. And by desktop, I mean both the Windows PC and, you know, kind of leading productivity on the Mac as well. And so coming from that core, as other OS's became popular, particularly in the mobile space, the team actually was a corporate strategy effort with the team, with the ASG team as well. We said, OK, this is clearly a place where we've got to make an acquisition or build ourselves. But we need to have a great app for the core Office 365 scenarios. And those are email contacts, calendaring and to do. And so we said, do we want to make or do we want to buy?

11:31And is there somebody out there that we would love to have? And really just said, OK, what would if we do want to acquire, what would that look like? What would it look like to make it internally? And are there candidates there that would would be great for us to acquire? So that's what kind of got us started on the path. And it kind of went from there. Cool. Thanks, Kurt. I think it's one of the things that you read a lot about these days is Microsoft shifting from the Windows and Office company to a mobile first cloud first company. And, you know, I think that from a high level, first of all, as a consumer and just, you know, from the public perception of Microsoft these days, everyone is loving that.

12:12I mean, the whole focus on build a really great cross platform experience, have your same data with you everywhere, access to the same services, you know, the same core office services that you know and love. And huge value prop for consumers as you guys transition to, you know, these free mobile apps that are on platforms that you don't own. And how do you look at that as sort of the the revenue future of Microsoft? And how does that replace the the giants of your with selling Windows and Office box software? The giants of your. I love that. I think there's a couple of ways to look at it. The first thing is you have to recognize that Office 365, the cloud versions of Exchange, SharePoint and Skype for Business are strong in rapidly growing revenue streams for Microsoft in, you know, by themselves.

13:05So in some sense, it's always been the case that when you buy Exchange, you get a client experience that goes with that, you know, go all the way back to the exchange clients in the mid 90s. There's always a client that came with it and that model has stayed. And so, again, looking at a company in particular, they were really developing a very fast leadership position in terms of downloads, in terms of monthly active users that was very appealing to us. And so I think just that's a natural to when it comes to mobile, you've got to have a certain free experience. And then you can think about having a paid experience incremental to what the expectation in the market of what is free. So in the case of email, you know, the expectation is you're going to have a single client that will work against your free mail, but also work against your enterprise mail.

13:59You can think about features that you put behind a firewall, you know, a pay firewall. We do that by having certain tiers within Office 365. And then there's certain tiers within the client, too, which is also available as a subscription. So we think about there's a certain free thing that free piece that you want to give to everybody. There's a certain set of features that can be made available as add ons. There are particular areas where that works well. So features where to communicate to somebody else, you've got to have the paid one. That doesn't work very well because you want to have a common capability across the across all the people using the service. But things like enterprise features like retention policies and anything around usage analysis, etc. Those are all features where people will pay for pay extra for them, but you don't have to build it into the core product.

14:55So we definitely see the ability to kind of tier things that way. The other thing you have to think about is people have multiple devices. You know, they have a PC, they have an Android phone, they have a Windows phone, they have a Mac and an iPhone. And so you have to think about the client experience as being a single set of client experiences that go across all those different devices. And if you can package those together into a subscription, then you can sell the value proposition of the entire subscription, regardless of what device you happen to have. But then again, you still have to think about we need to have a leadership position in all of the devices that people find popular. And so we want to have Office be the best experience, regardless of whether you're on an iOS device, whether you're on an Android device.

15:43You know, we'd love to have you think of Windows as your home, but we need to have a great experience regardless of the devices that you use. Well, I think, you know, this is something that Microsoft and you have really done a great job with. I mean, going back to the origin of Office 365, you know, Ben, when you were working at Microsoft, you were working on Office for iPad, right? It was. That was so much fun. Well, we did get around to shipping that. And, you know, the importance of, you know, as a consumer, you know, it's not about my experience with my mail client or with Excel or with Word on a particular device. Now, it's about how that works in concert across all of the areas where I'm doing my computing. A related area that I'm curious if you guys thought about with the accompli acquisition and the strategy is something that Ben touched on, the unified inbox.

16:46And I remember in my first job in finance out of college, I had obviously Outlook. I was working in a bank and all of my work email was on Outlook on my computer and my workstation. And the iPhone had just launched and I loved it because it meant I could get my Gmail at work. And now, you know, the concept of having different inboxes, for me at least, is something I think for probably most of our listeners is something that we wouldn't even think about anymore. Was that part of the strategy here, too? Yeah, I think that accompli does a great job of giving you a single unified inbox. The Windows phone also on its client also can get you can link together a couple inboxes together. But if you go all the way back to when Outlook was first created, it was a total different look at what had historically been separate products for email versus calendaring. We had Schedule Plus.

17:53Those of you older in your blogosphere listeners will remember Schedule Plus. It became a verb. It was so popular. And in fact, still echoes around the hallways of Microsoft about sending us pluses around. Exactly. Every time I correct them and I call it a meeting request because Schedule Plus is long since dead. But this notion that things come together and become unified, it really just follows how people expect to use the product. So when you start building a bunch of meeting request capability into Schedule Plus, all of a sudden it starts to look a lot like email. And so Outlook and under Brian McDonald, who is the kind of the father of Outlook way back when it was called Ren, as in Ren and Stimpy. He had this idea that you want to bring these different mail and calendaring and tasks all together into a single user experience, which clearly has been borne out.

18:49Early on, the versions of Outlook were not up to the task, really, I will say, in retrospect. There was a period of time when Outlook was called Lookout because you wanted to stay away from it because it was pretty slow when it first happened. But it's become really the leader in this integrated set of products. And I think that's happening on mobile devices as well because those scenarios are so deeply integrated together. I think you find calendaring deeply integrated. That's why Sunrise got integrated into Comply. Task management actually is a little bit different. And so we think that there's, you know, if anything, the mobile, the paradigm on mobile is different applications for different use cases. And so it's not necessarily the case that what you do for the PC is what makes sense to do on a mobile device as well.

19:40And I can tell you there aren't any particular plans to take Wunderlist and deeply integrated with a Comply where the scenarios crossover probably makes a lot of sense. But then, you know, the personality needs to be preserved of those different applications. And we think they're big applications in and of themselves. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. So, David, here's a question that I do not think most enterprise CIOs or CEOs could actually answer today if they were asked. How many agents actually run inside your business? Yes, I don't think anybody really knows. And, of course, then there's the harder questions like what can they access and who gave them that access? And is any of this paying for itself? ServiceNow has an answer to all those questions. The super intelligence control tower.

20:35As friend of the show, CEO Bill McDermott says, it's the one place to see, secure, measure, and help govern your agents' models and workflows across your entire business, no matter who built it. Yep. So, for example, it finds the agent that someone in procurement spun up on their own and then tracks what it's doing and its ongoing cost. When the CFO inevitably asks whether any of this is working and if there's ROI, you'll be ready with the number. And importantly, if something goes wrong, it can detect and revoke access immediately. There's even a kill switch built into the product. And ServiceNow is uniquely positioned for this because they've spent the last 20 years building the operating backbone of the enterprise from IT to HR, sales, service, and cybersecurity. They know how work gets done, helping support over 100 billion workflows a year across more than 90% of the Fortune 500.

21:29The world's most complicated businesses, like many that we've covered here on Acquired, already run on ServiceNow. And now they're running their AI there too. If you're trying to turn AI ambition into real outcomes, just go to servicenow.com slash acquired and just tell them that Ben and David sent you. You know, we're talking about integration of software right now. Let's talk about integration of people. What were the different options you guys looked at for how you could integrate the teams in terms of location, in terms of hierarchy, in terms of, you know, focusing on retention? And what decisions did you guys make with primarily the Accompli team? It's a really, it's a great question. It is super, super important for us to retain both the particular talent, the fact that they're a team as well, but also the personality of the organization itself.

22:26So it is not this get integrated into the collective and you are just part of Microsoft. We work really, really hard to keep the teams separate while we take the opportunity of being part of Microsoft to be an accelerant to the objectives of the team. And so a lot of folks, these teams come on and they're just super excited about being able to leverage the breadth of Microsoft to do more great things. Unless I'm mistaken, all of these teams are still in their original locations. Well, that's the other thing. None of them are in Redmond, right? Right. It doesn't make much sense to have everybody come to Redmond. It's not necessary. We are already a broad company that has locations everywhere. And so there's not a need from that perspective. And, you know, there's no purpose in them moving. They have cool locations. They have homes where their family are.

23:27And so in most cases, we actually don't relocate them. And that's definitely been the case here as well. The Wunderlist guys are in Germany and they love being there. And we're just as happy to have them there as well. I mean, the nature of software is it is a global business now. And so we can definitely accommodate that. The other thing that we've tried to really do is figure out how do we take advantage of the skills that the team has and the vision that they have. That's why you see Javier become the leader of Outlook overall. And that's just a recognition that, hey, these guys did something really incredible. And we want to make sure that we take advantage of that as much as humanly possible. And so that's we definitely look for cases like that as well.

24:16I mean, the third thing I would say is the trickiest aspect of it from our perspective is we have places where we want to drive synergy between their product and other products at Microsoft. And that's a very, very tricky piece because these guys all come in with a set of plans that they have in place that they want to accomplish. And if you divert them too far from that mission, you can ruin what's special that you did the acquisition for in the first place. And so we try to be really, really careful. I'm not sure we always get the balance right. There's sometimes when we over-index on the integration and we find that we lose a little of the secret sauce because the product starts coming out more slowly and the innovation doesn't come through as well. And we're learning all the time too. And so I'm not sure we always get it right.

25:10I actually think on these acquisitions that we're talking about, we set the balance pretty well. Yeah. And I can speak to that. I just put out a tweet a couple days ago sort of asking about who's using Outlook for iPhone. And I got a response from someone I knew on the team over there. And his response was something along the lines of, let me know how you like it. We move fast. Yep. And I want feedback. Yeah. And it seems like that team, and I'm not certain, but I think he was at Microsoft pre-acquisition. So it seems like some of that DNA sort of bleeds into the existing team and kind of lights a fire. Yeah. Even simple things like if you use Outlook for iPhone, there's a way, actually for either platform, you can give user feedback on the product directly from within the product, from the context that you're in.

26:01And it'll bundle up everything that it knows about what you're trying to do and basically send it directly to us. And so that's a place where we'd love to take those learnings of how they got that 360 feedback loop and really, really intensively follow it and collect the data. So as your friend said, they can move super, super fast. Yeah. And from a leadership perspective, I mean, when you have people that have made their whole career and their life's work outlook, and then you do an acquisition like this, and the leadership of the broader outlook becomes someone from this new and outside team, you know, how do you make sure that lands organizationally? Well, it actually, it's not as hard as you might think. Probably the biggest challenge is if you've got particular people who are in line for that job or a job in specific.

26:55It's, you know, I think it's a misconception that people at Microsoft are not, you know, are not open or embracing of new things that come in. I'm not actually even sure if it's a misconception. It's definitely not the case. And so when a new team like this comes in, and in Comply in particular, or any of these products, Sunrise, Wunderlist, it's like the overall view is, oh my gosh, this is a fantastic thing. Let's bring them in. Let's embrace them as a team. Let's learn from them. And we'll all do great things together. So it's not as hard as you might think. Absent of particular positions where somebody from the entering team might get a position that somebody else might have thought they were in line for. I mean, I remember when Javier was promoted to corporate VP and hearing about it in the press, but then also hearing friends at Microsoft talk about it.

27:56You know, so often, you know, you see, you know, we see looking at lots of acquisitions, the CEO or the management team of the target company will end up with some meaningless VP title at the inquiry. And they'll stay for 18 months until they've passed and then they're gone and on to their next thing. I mean, this is a major, major role at Microsoft and really was, you know, I don't know if promotion is the right word, given that he was CEO of Comply. But a real recognition of a scope that really was much broader than just the Comply mobile app. Absolutely. And it was it truly was a recognition that he has skills that we want to leverage more broadly than just within the Comply team per se. And it's working out really, really well. Actually, I was going to bring this up later, but, you know, Javier wrote in the blog post announcing the acquisition.

28:59He wrote the he wrote these these sentences here that I'll read. He said 18 months ago, we started building a team and a product around the idea that we can make mobile email better. Today, that journey continues as part of a larger organization with the technology, talent and market reach that will help us take the vision of a Comply to hundreds of millions of mobile users across the world. And I just thought when I read that, as we were researching this episode, you see some version of that in every acquisition that gets announced. Oh, yeah, we you know, we're going to get the scale and the resources that are really going to enable us to impact many more users. And usually it's pretty hollow. But but here, you know, kudos to you and to Microsoft for really giving a giving them that in truth.

29:45But but it's really rare to see the team embrace this as much as as as Javier and the Accompli team have. Yeah, no, I appreciate that. And it really was the intention. You know, there is a bit of a scale difference, too, though, because there are a billion users of Office across the planet. And so if you were somebody who wanted to see your vision get delivered, just think about it just in the context of business users that say, hey, I'm running Office and now Microsoft says we have a great Outlook client for iPhone and for Android. You're basically just sanctioning that product as being the product that they should use. Now, the great thing about Accompli is it had a huge user base or quickly growing user base from a strong core. And so we were both able to take advantage of that in terms of getting a stronger footprint in mobile right there.

30:43But there, you know, Javier was right in terms of the leverage that came from just announcing it and starting to distribute it with Office, etc. We gave them a big boost and we took advantage of the boost that they gave us as well. I'm curious, as you were when you made the acquisition, did Javier's background from Netscape and then from VMware especially, did that play into it? Did you did did you Microsoft see him as a potential leader when you when you bought the company? And was that a factor? Well, we definitely look at the talent, the specific talent as part of our due diligence process. I would not say that we there are times when we actually do look for talent as the as I discussed earlier, talent as the primary reason for doing an acquisition. The primary reason for this acquisition was they had a great product in a in a space that we thought was super complimentary to us.

31:43And so, you know, that's the reason to do it there. But we definitely look at the talent and figure out how do we retain those key people on the way? The other thing that I would say is there's this whole question that often comes up, at least at Microsoft and I'm sure elsewhere, is there are times when you think you can buy the second best or the third best person or product or company. And there are times when, you know, you just need to buy the best. And this is a case. All three of those are the case where we wanted to buy the leader in the space. And in that sense, if that's your first and foremost goal and you believe you've got a great team, then the acquisition kind of writes itself. It's it just makes a ton of sense and it works out super well. And that's what kind of what happened in this case. I want to push on that a little bit.

32:39Why is it so important to have the absolute best clients? Wunderlist and Outlook Outlook for iPhone and and Sunrise. I guess that'll eventually just be an Outlook when those are our free products that can access both Microsoft services and other services. And the money is made on Office 365 subscriptions, which can also be accessed by a variety of clients. That's a good question. I think above all, we now live in a world where individual pull of applications is in particular categories like email is incredibly important and in some ways more important than the push that can happen from Microsoft saying this is our solution for email. And so that's a big piece of it. So when you see that's a big mindset. Yeah, it is. It is.

33:31It's not you know, there are places where we think we can, quote unquote, make the market by driving innovation, you know, defining innovation, delivering on it and making a category. I think SharePoint was probably an example of that. And there are other places where other people are establishing what that category looks like, particularly on form factors like mobile. And you just recognize it and say, you know, this is a place where we we just want to get the best. The other thing is you always want to give yourself every advantage to do well. And in that case, if you're also having to overcome the fact that there's a leader in front of you that's got incredible end user pull, you know, it's just not worth settling for that second best app. It's true. For the sake of getting it out of the hands of a competitor or keeping it from being independent.

34:52It is a kind of nice byproduct in some cases where, you know, we think there's a good reason to have this application. And by the way, we'd rather the other guy didn't have it. But I don't think I can't think of a single time when that has been a predominant reason. It's kind of a nice bonus, if you will. It's really interesting that you say that the last episode we did was on YouTube. Yeah. And one of the really cool things about YouTube is there's all of this publicly available information about about the company and about the acquisition because of the lawsuit, the Viacom and YouTube and ultimately Google lawsuit. And it's interesting. Eric Schmidt testified that one of the key reasons, both both for the acquisition and for the price they paid for YouTube was the opposite of what you're saying was to keep it out of other people's hands.

35:45Really? Did you say whose hands they wanted to keep it out of? He I don't believe he named specific competitors, but implied that they were other very large technology companies. I stand by I can't think of an acquisition that we've done for that reason. You know, at the heart of it, the other thing I would say is, you know, Microsoft is a we are a product and a technology driven company. And what we're trying to do within each of the product groups is what is the, you know, the dominant meme, if you will, about the discussions that we have. It's like if you own the office business or you're part of the team, you're always thinking about your own product and how do you make it stronger? How do you make it better? You're not thinking about how you use it as a chess move, how you would make an acquisition to be a chess move to keep something out of somebody else's reach.

36:40I don't know, Ben, you were there. Can you imagine? Have you do you remember ever having such an acquisition? No, not while I was there. And I can't imagine, too, like the just thinking about the rest of the Office for iPad team, like if we had bought one of the weird kind of like Office clones for iPad that we were looking at as sort of like the not doing so well, but decent competitive landscape and like tried to bring them into the team, that that would have been really messed up. Yeah. You know, the other thing about it is it's there's a certain amount of risk in an acquisition, period. And so everything you want, everything going for you, because there's always going to be things that that help mess it up when you when you bring it in.

37:21So, you know, having some ulterior motive, which is pulled out of somebody's hands versus being led by what you want to proactively and positively do with the product. It just doesn't seem like a very good calculus to me. But maybe that's what Eric really had in mind when he bought YouTube. I don't know. You know, it seemed to work out for him pretty well. So we graded that one not super highly. Is that right? Yeah, we gave it a C, or at least I did. Wow. You guys are tough graders. YouTube 10 years later is a break even business. They've lost a lot of money on that business. Well, I guess that is true. And is it break even on an annual basis, including advertisements? As far as our research could determine. Yes. Interesting. I don't follow that space super closely. A lot of cogs in that business. I suppose that's true. Both on the technology and on the content and talent side.

38:20All right, listeners. Now is a great time to talk about one of our favorite companies. Lagora, the agentic operating system for legal work. Yes. Most of you have dropped a contract into a chatbot by now. But as a lawyer, how far can that really take you? It's never seen your firm's precedents. It doesn't respect confidentiality. And you can't check where its answer came from. So Lagora's founders approached this the way that great founders do. Early on, the team moved into the office of a big law firm in Stockholm and learned, for months, how the work actually gets done. A couple of thousands of enterprise customers and 100,000 users later, they still work that way. They employ 100 legal engineers on staff. These are lawyers sitting inside of firms and legal departments to deploy Lagora onto live situations like the deal closing this week or the policy review due Friday.

39:12The product has gotten very powerful in a short period of time. A year ago, the goal was a good answer from a chatbot. With the Lagora agent, you hand it the work and it comes back with a plan. Tasks like running diligence on a data room or reviewing a new vendor contract get completed inside the tool you use every day like Microsoft Word and against your own precedents and playbooks. Every finding is sourced, the lawyer directs the work and signs off before the system executes any steps. Every legal team can get access to the same AI models, so the models themselves do not give you an edge. What you can do with your own data, people, playbooks, that's the whole game. Today, over 100,000 legal professionals at more than 1,800 law firms and in-house legal teams in over 50 markets use Lagora. And when Lagora goes head-to-head with its top competitor in a pilot, it wins 70% of the time.

40:08A demo is one thing, but what matters most is an associate who reaches for it at 2 in the morning during a closing or whether a general counsel trusts what it says before the board meeting. So if your legal team wants to check it out, whether you're at a firm or in-house, go to lagora.com slash acquired and be sure to tell them that Ben and David sent you. Let's move on. We're going to do two other categories that we like to do on the show or segments. First is Ben and I both, and Kurt, you're welcome to join in too. We assign a category to each acquisition we're looking at, and the categories we typically use are people, technology, product, and business line. And we give ourselves an out of an other. But Ben, you want to go ahead? Yeah, absolutely. This is a product acquisition. There's nice things that came along with it, but OWA, the Outlook Web Access app, was just not good.

41:09And as someone that was at Microsoft and using it for quite a while, I was getting a lot of encrypted mail in IRM. And so I had that old Outlook Web Access installed on my phone just to read the encrypted mail, and then I'd get out of there as fast as I could. And I'm like rooting for the home team. I'm trying so hard. And it was a shame seeing all these other really great mail clients out there. And this is right when Mailbox and Accomplit were popping up and useless for a lot of my mail. I remember even just as an exchange user at Madrona, it was really frustrating because all my friends who were working at startups were using Mailbox or the Gmail app, and they were great. And look, it came not a moment too soon. I think that for me, Accompli, I was using it before the acquisition. I was using it after the acquisition.

42:02I thought it was super impressive, the turnaround time from going from being an acquisition where they were trying to work out exactly what it was going to turn into and what the timelines were going to look like and what the people were going to look like. You can kind of like, you always figure all that will take like six months or so. Within two months, it shipped as Outlook for iPhone. And all the news stories were kind of funny that, oh, they just slapped a new label on it. Maybe they did, but who cares? It was great. That's a really good point. At some point, you don't want to mess with success. And there's a certain set of legal things you got to do to make it a Microsoft product, and that's probably what took the time. But keep giving people what they love. Yeah. So I'll go next. And I'm curious, Ben and particularly Kurt may beat me up for this one.

42:48But I'm going to go out of the box on this one. I'm going to call it an other. And I wrote down combo meal because I not only because it was multiple acquisitions, if you include Sunrise and Wunderlist. But I actually think there are elements of this that, as there are in every acquisition, but here that really hit on every category. We've talked about a lot of them already. I would say the reason for this is it was really a revitalization of a business line, not a creation of a new one, but a rethinking of an entire business line, in this case being Outlook as part of the broader office future in a mobile-first, cloud-first world. And part of that is technology, and big part of that is people, as we've talked about, and product as well. So I'm going to go with combo meal. I think there's something to that.

43:50I mean, there's clearly – I would say it's predominantly a product acquisition because that was – we had in mind something very specific we wanted to acquire. But there's clearly synergies with the other parts of the office business and office products. So think about the fact when you download a piece of email, it has an attachment. You want to fire up Word to read that attachment. There's a way of kind of linking those scenarios together that kind of goes towards your combo meal theory. But it also – you need to establish a footprint on mobile devices in the first workload, if you will, that people use, or the first three, I would say, are the three that we acquired in these three acquisitions. And so in that sense as well, it was in re-energizing the businesses also. So I guess I would – I think there's something to that. Maybe it's a combo meal that has at its heart a product deal.

44:54Maybe we call that a happy meal. That is interesting. You talk about the key scenarios on mobile there. It's like now Office is a full productivity suite and a mobile lightweight productivity suite, and those are dramatically different applications. I love the framing too that you have, Kurt, of workloads and what's your mobile workload? And I think the Office mobile apps, Word and PowerPoint and Excel are great, but I almost never use them. My mobile workload is email, calendar, to-do. Yep. No, I think that's right. The usage – we find that the applications are primarily used for great viewing, which the fidelity of viewing in our applications is better than others. And then light editing, which means there are scenarios.

45:48Like imagine if you're reading a document in Word and there's a set of comments that – or edit revisions that you've got to take a look at and react to and edit with others that are working on the document. It's those kinds of scenarios for which you would use Word, Excel, and PowerPoint. PowerPoint, you know, presenting – presentation mode works really well. But you have to rethink the scenarios. It's not just that you imagine doing the same things on a mobile device that you do on your desktop. They're just different. Let's move on, too. I want to make sure we have enough time for my favorite part of the show, which is our technology themes segment. And, Kurt, so what we do here is each of us talks about – and, again, please join in. We'd love to get your thoughts.

46:41You know, kind of what does this acquisition or these acquisitions highlight for you in terms of the eternal truths about our business and technology? And Ben and I usually take a startup, Ben, on this. But it'll be – I'm curious on your take, you know, having been at a big tech company for so long, having done a stint with us, you know, in the venture world, what themes are? So maybe Ben and I will go first, give you a little time to think about it. But, you know, for me, I'll go because – this will be quick. We've really already touched on it. But one big theme that all of these acquisitions highlight for me is – I think, Kurt, I think you said it. You know, innovation is distributed. It's global today. You know, Accompli is in San Francisco. Sunrise was in New York City. Wunderlist is in Berlin.

47:35We haven't talked about it yet, but – and it's not in the same group, but Microsoft also recently acquired SwiftKey, another part of your strategy to take over my iPhone. But they're in London. And, again, don't know about SwiftKey, but the plan with all of the previous acquisitions is keep these teams where they are. And I think in a world of – you know, a consequence of this mobile-first, cloud-first world is, you know, with GitHub, with Slack, with Dropbox, with AWS, and, yes, with, you know, Office and Skype. But, you know, innovation can come from Redmond and Mountain View and San Francisco and Seattle, but also Berlin and also London and also New York. And what's important isn't so much the location. It's about the quality of the products.

48:27And I think about when we talked with Ed Fries about Bungie and how important it was to keep the Bungie culture, but they had to move them down the street to Redmond. You know, today, they would have stayed in Chicago. The one for me is, you know, translating a theme that we heard about over and over and over again five years ago, kind of one level up the stack. So, you know, it's been out of the news cycle recently, the phrase, bring your own device, because we all know that, yes, the BYOD world is here to stay. And people choose their own hardware, bring their own hardware to works. And for a long time, and kind of still, it's a nightmare for IT folks. I think we've taken one step further on the stack, and it's really bring your own client.

49:08And to the extent possible, except for, you know, certain very secure applications, the consumer expectation is that I choose the view in which my data is presented to me, and I view that data that is from a service that is mandated. So either you choose your own service as a consumer, and, you know, you choose Office 365 or Dropbox or, you know, a variety of different mail services, or like you work for a company and that company has a set of services. You don't necessarily assume that that set of services comes with a mandated set of clients. And you sort of expect, I choose my own software to consume those services.

49:49And I think, for me, like, the reason why I think that this was so important is, you know, if there are three best-in-class applications that people are going to choose to consume their services, it's kind of great to own the unified experience and be able to provide all the best connections between the two or the three possible. Yeah, I think this is really important. You know, certainly the desktop operating system wars have been over for a long time, but, you know, the mobile operating system war is over, too. And nobody won. Like, the points of interest and dynamicism in computing and technology, the sort of technology meeting consumers and products these days, it's not, you know, iOS or Android or Windows or Mac or platform. Or even browser versus desktop versus mobile. It's really shifted to the app layer. And it may soon shift to the messaging layer. We'll see.

50:58No, I think there's something to what all of you said. And I think those are all correct things. For me, it's hard for me in this one. The thing that if there's a theme for me, it's that good products rise to the top inevitably. And you look at one of these products like Accompli, like Sunrise, like Wunderlist, and you just look at them and say, wow, this is a great product. And, you know, it's that excitement that we all have when we download a new app and it just it changes how you it changes how you work. It changes how you work with others, et cetera. And each case of these, these were products like that. So as a theme, I think it is these products well crafted by creative artists that, you know, really think deeply about how the user uses them, have that passion.

51:53And they went out and they, you know, they get that opportunity to to be in, you know, tens and hundreds of millions of users across the planet. So that that's one theme. It just seems like that recurring that excitement that you get when you see a product like this that's really well done. And to have that those teams succeed by part of the acquisition, I think, is one key part of it. And then the second one for me is just that we are constantly learning of what the best way to to execute these kinds of acquisitions is. And we constantly get better at it. And I think we as a company took another step at getting better at it with these acquisitions, recognizing how do we keep the people energized? How do we as as you said, David, it's a global world and let's keep the teams where their families are and where they are. It's not about bringing them all to Redmond.

52:50And so we continually get better about it as well. And consistent with that is, you know, we're a bunch of engineers and product people. And we just love to, you know, you get these talented teams, you bring them in. And again, part of this getting better is to having them become in leadership positions, too, in our company and help us all get better and deliver better products as well. Yeah, it's really interesting. There's an interesting question that comes to mind in just thinking about some previous Microsoft acquisitions and then, you know, the world that exists today. Microsoft is a company that has a diverse portfolio of businesses across many different customer segments from enterprise to consumer and kind of all the way up the chain. Not all these businesses have aligned priorities. I mean, for Windows, it's to have all applications be best in class and first on Windows.

53:44And for, you know, Office, it's to have the best possible integrated experience across all platforms. How do you, when you do an acquisition like this, make sure that the leaders of all those organizations and that all the organizational priorities align around spending, you know, what comes to in total near half a billion dollars on a productivity suite for iOS. What's the best when you're a Windows, you know, an executive over in Windows? Yep. Well, you come in with a set of premises that are the fundamentals about what the fundamental assumptions under which you're making the acquisition. And in this case, for these apps, it was clear that cross platform was a key part of the acquisition premise. And so in that sense, one, it has to be championed by the leader of that particular product group. So Chi Lu in this case, and there has to be strong support there.

54:44And it has to be championed by the CEO as well. And so Satya has to look at the acquisition and say, you know, I like this acquisition. And Terry Meyerson, I understand this doesn't specifically help you. I think it indirectly helps you by making our services strong and making Windows an outlook for Windows, a great experience that also works on mobile devices. And this is relevant. Terry, for our listeners, is head of Windows, right? Yeah. Terry leads Windows. But there's always a balancing that happens. And you go into it not thinking that there may not be as strong a value proposition for some of the businesses as others. And any time you have a company that is as large as ours, and we're not the only one of this size, there's always going to be this balancing of priorities that comes out.

55:33The thing that we are constantly pushing towards is don't let that balancing of priorities mean that you're mediocre in everything. And you really have to say that, for example, in cheese business, for office to be the leading productivity solution on the planet, we've got to have a great story around cross-platform. And so you really do. It's excellence for all. It's not about the balancing out at some mediocre level where nothing is great. God, that's a great point. That's a really good way to think about it. Thanks, Kurt. Sure. Should we wrap up? Yeah, yeah. Render our grades? Yeah. Before I do that, I have a question for Kurt. So, you know, this acquisition is typically probably too early for the ones we usually do on this show.

56:28I mean, usually we like to see a little bit of proof in the pudding that you can like look at some spreadsheets and see, hey, you know, they bought the company for this much. And it turns out, you know, there's a lot of other ancillary value, but we can definitely attribute this value gain to the acquired property. And there was a multiplier on the value of the acquisition for the acquirer or post-acquisition. Great, clean math. Nice to justify. You know, we can look at Instagram being a multi-billion dollar business inside of Facebook right now and being acquired for a billion and go, great investment, guys. How, with this business, you know, it's definitely too early to say for sure one way or another. I think we need to wait a few years.

57:09But, you know, how do you look at the success metrics of, you know, we dropped some number of hundreds of millions of dollars on this suite of applications. What are you looking for from a financial perspective on a return? And how could you possibly measure that? You can't. And we don't look for a financial measurement on everything that we do. In fact, we very explicitly have a set of metrics that are around performance and others that are around, are we making progress in our category or, you know, so-called power metrics of do we have strength among users in using our products? And this one, the metrics around these products are all in that latter category. It's all about how many people are using and loving the product. And you can't even draw the indirect, you know, mathematical connection to greater office sales. And we don't even try.

58:04So we set goals that are for these products that are around how many monthly active users do we want to have? What's the level of engagement that we want to have with the products? Because we have confidence in the premise that if those are strong users, it will pull through sales of office. Now, the place where we do do some measurements is around customer sentiment about, you know, do you what fraction of the office users are also using our mobile clients? You can also make a measurement of what the value is of a customer that is both a user of the core office applications and the users of the mobile applications as well. Or do they use OneDrive, for instance? And we do find that the value of those customers are higher because they're more highly engaged users of office. And so that if you if you want to come up with a mathematical equation, I suppose you could.

59:02We don't tend to look at it that way, but we do tend to do these, you know, conjoint analyses of of, you know, of the connections of the different products today and what that implies about the strength of that person, that particular user as a customer. Fascinating. That is very cool. And, you know, it's great to, you know, I think this is one of the reasons why we started this show is to talk about stuff like this. You know, it's so opaque what what acquirers are looking for and what happens to companies post acquisition. And it's just, yeah, it's thank you for that. And it's it's great to great to get that insight into how, you know, we talk about categories of acquisition and we're thinking more from a theoretical perspective. But but yeah, what what really is the, you know, the measurement that you guys are using for different kinds of acquisitions?

59:58Yep, definitely different differs by acquisition. Grades, Ben. Grades. So I'm going to allow myself a plus or minus factor. That's the tolerance in which my grade can go up or down in notches over time since we're kind of early. And I'm going to rate it a B plus right now with a two notch variation. So it could go go to an A or B minus. But it's it's it's solidly an A or a B. I'm going to go. You know, I've been thinking about this for the whole episode. Um, I'm going to give this an A and I'm going to say that because I'm thinking about this in contrast to we did an episode on Siri. And Ben and I were both. So we were both quite, quite harsh in our judgment of of that. Um, and I and I and one of the reasons is clearly, uh, virtual assistants and voice based computing is a major, uh, paradigm that is important for technology companies going forward.

61:04You know, Amazon, but but, um, Apple's really not done so great on that. And I think about in contrast, um, office and Microsoft having been the leader in productivity. And when these acquisitions were made, really, you know, um, I think, I think Microsoft was under a lot of threat from a lot of different areas from Google Docs to, um, startups like Evernote to the other mail and calendar clients and task lists out there of which there were several. Um, and here we are several years later and I am a hundred percent an Apple guy. Um, and I love my cloud services and Dropbox and Slack. Um, and Dave, you are looking at a Google Doc right now. And I'm looking at a Google Doc. And yet, uh, you know, I've joked about it several times, but Microsoft basically owns my productivity on my iPhone. Um, I use Wunderlist every single day, all day. I use Outlook for iOS every single day, all day.

62:06Uh, and the calendaring features are, are the real differentiator for it. Uh, I use SwiftKey. Oh my God, send availability in Outlook is like the best feature. Um, and, and I, I contrast that with, uh, with Siri and I just think it's been a huge, huge win. So a lot of work to do to keep it up, but good job, Kurt. All right. Well, I'll take those. I think I'll take those and go grab a beer to celebrate, but, uh, I hope you'll, I'll help you ask me back. And, uh, Ben, we can celebrate, uh, you changing your grade to an A. All right. Sounds good. All right. Thank you, Kurt. All right. It's been a pleasure. See you guys. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Huh? All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes.

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