When considering first exits of startups with venture backing, the deal for Github ranks ahead of all other acquisitions of enterprise software companies.
With a cloud industry estimated to be a $200B+ market, providers are looking for ways to differentiate their products and avoid commoditization.
In particular, Amazon, Google, and Microsoft are all trying to offer the best software development tools on the market as they race to attract developers.
This was the primary motivator behind Microsoft’s acquisition of GitHub, which was purchased for $7.5B on Monday. It’s one of the many enterprise software acquisitions by Microsoft in recent years and the largest in the company’s history — behind only LinkedIn and Skype.
In fact, according to a CB Insights’ deal search, the GitHub acquisition is actually the largest VC-backed enterprise software acquisition in history (when considering only first-time acquisitions). The company’s exit valuation beat out Workday‘s $4.5B IPO in 2012 and DocuSign‘s recent $4.4B IPO earlier in 2018.
| Rank | Company | Exit | Valuation | Date |
|---|---|---|---|---|
| 1 | Dropbox | IPO | $12.62B | 3/23/2018 |
| 2 | GitHub | Acquired by Microsoft | $7.50B | 6/4/2018 |
| 3 | Workday | IPO | $4.49B | 10/12/2012 |
| 4 | DocuSign | IPO | $4.41B | 4/27/2018 |
| 5 | Veeva | IPO | $4.40B | 10/16/2013 |
| 6 | AppDynamics | Acquired by Cisco | $3.70B | 1/24/2017 |
| 7 | Octane | Acquired by E.piphany | $3.41B | 5/8/2000 |
| 8 | MuleSoft | IPO | $2.90B | 3/17/2017 |
| 9 | FireEye | IPO | $2.35B | 9/20/2013 |
| 10 | Nutanix | IPO | $2.18B | 9/30/2016 |
What’s particularly unique about this acquisition is the community using GitHub.
The company provides version control and source code management tools for more than 28 million developers worldwide, many of whom use the product to host open-source software projects.
While Microsoft’s Azure cloud products will certainly benefit from Github’s proprietary tools and 57M+ repositories, the community will likely provide ongoing lead generation for Microsoft’s growing cloud business.
According to reports, GitHub generates approximately $100M in revenue from enterprise customers. Combining this business with Azure’s suite of cloud services may lead to big business for Microsoft.
GitHub will remain independently operated and open-source for the foreseeable future. Indeed, Microsoft’s growing adoption of Linux and other open-source services may signal a new trend behind Microsoft’s cloud strategy.
Note: We excluded social networking platforms like LinkedIn from our list of enterprise software exits.
For a list of Microsoft’s acquisitions, check out our Microsoft Acquisitions Tracker.
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