I am excited to announce that Postini has entered into an agreement to be acquired by Google for $625 million in cash, subject to working capital and other adjustments, and Postini will become a wholly-owned subsidiary of Google. As investors, we at Mobius Venture Capital couldn’t be happier with this development. I’ve had the pleasure of working with the world-class team of management, investors and fellow board members at Postini since we invested in October of 2001. I have watched the company grow from a small and relatively obscure service with perhaps a couple hundred customers to a significant company with international operations and multiple data centers supporting over ten million users across 35,000 businesses. Postini’s scale is impressive; their servers block a billion spams a day while processing as many as two billion SMTP connections every 24 hours.
Postini is a great example of a company that managed to grow and prosper during the “nuclear winter” in the technology and venture capital industry following the bursting of the bubble in 2000/2001. To put the time of our investment in context, I sat across my dining room table from Postini’s founder Scott Petry and then-CEO Shinya Akamine on the morning of September 11th as we negotiated the term sheet for Mobius’ investment in the company.
What attracted us most to Postini was Scott Petry’s vision of building out a true platform company built around the simple notion that email had become more important to corporate America than the telephone. A company that could build a suite of services around messaging would have the potential to harness a huge customer base given the broad horizontal nature of email. The total addressable market was every email address in the world.
Equally important was Postini’s architecture and deployment model. Postini was a SaaS company well before SaaS was cool, and probably even before the acronym of SaaS had been coined. We loved the ease of deployment (just a change to the MX record in DNS) and the recurring revenue subscription model. And while the most notable SaaS companies to date have been built around specific vertical business applications, Postini is arguably among the first SaaS infrastructure companies.
Our main concern as investors early on was whether enterprise customers would buy an outsourced security service for email that ran “in the cloud”. Happily, Postini’s choice to focus on anti-spam and anti-virus as the initial applications to deploy on their elegant and highly efficient message-processing architecture proved to be prescient, and when the spam problem exploded in 2002 and 2003, Postini’s revenues ramped prodigiously. Of course, the CAN-SPAM act of 2003 did nothing to put a dent in the spam problem, and Postini’s growth continued unabated. Today, Postini’s customers range from ISPs and small and medium sized enterprises with minimal or non-existent IT staff, all the way up to big companies with sophisticated and demanding IT departments such as Merrill Lynch, Business Objects, Cooley Godward, Johnson Controls, Mitsubishi Motors and United Technologies, to name but a few.
By late 2005, Postini had grown substantially and we had the good fortune of attracting Quentin Gallivan (formerly an executive at Netscape and then Verisign) to join the company as CEO. Under Quentin’s able leadership, the company’s growth accelerated further and began to fulfill Scott Petry’s original platform vision when Postini released a series of new products for instant messaging and archiving that have seen great uptake within Postini’s existing customer base and have also served to bring many new customers into the Postini fold.
As we entered 2007, Postini began to prepare for an IPO. At the same time, in February of this year, the company announced a partnership with Google to provide their messaging security services to customers of Google Apps Premier Edition. As often happens, following the early success of this initial partnership, deeper discussions with Google about a more strategic relationship began. As the management teams of both companies got to know one another, it became clear that Google and Postini shared a common vision around the power and potential of email as the most important communications platform in the enterprise and the value and leverage that Postini’s communications suite could bring to Google’s broader enterprise vision. While the company had been pretty far down the IPO path, Google was the one M&A suitor Postini had encountered that was compelling enough to divert the company from a public offering. And with today’s announcement, Postini is now quite happily joining forces with the most significant technology company to emerge in a generation.
Congratulations to Quentin, Scott, Jocelyn, Ramesh, Cindy, Don and everyone on the team at Postini. And congrats to Google as well for recognizing the incredible technology and enviable customer base Postini has built over the years. I can’t wait to see what Postini will do in combination with Google’s world-class technology, infrastructure and distribution, though I will sorely miss the day-to-day opportunity I have had over the past six years to work with such a great company.