Meir Morgenstern, VP R&D at CloudOn (acquired by Dropbox)
Company name: CloudOn
Organization Size: 25 people
Description: CloudOn is a mobile productivity start-up, founded in 2009 and acquired by DropBox in 2014. They now serve as one of DropBox’s three R&D center, and are responsible for collaboration workflow and concurrent file editing features.
“If you have a startup and you’re deliberating about hiring Nextage – I wouldn’t think twice. They are very, very professional. They’re very client-oriented – they become part of your company that provides you with something that is beyond what you’d expect when working with a service provider. We would frequently consult them regarding various matters and their advice was extremely relevant, due to their experience and knowledge gained from working with other companies that are similar to us. They also have the ecosystem that saves you the ‘pain in the neck’ of selecting other vendors, and enables you to connect and seek advice from other members of industry. The entire experience is terrific, I highly recommend them.”
Two of the founders, us, are Israeli, and the third is an American who I work with at Cisco. We founded CloudOn as a two-headed company – in Israel and in Palo-Alto. One of the earliest challenges we faced was the Israeli-American unionization and finance issues. We initially established an American company – Apptou Inc., and later opened Apptou Software Technologies, owned by it. This was the recommended structure at the time.
In the first few months we self-financed, the US partner and I had just left Cisco, we had a first run with friends and family, and with that we designed and built the first product. At a later stage, our funding efforts were concentrated in the USA and we made another round, this time of Seed+ from a foundation capital.
This capital had already brought us to a product stage, though this product was still in our first direction – Legacy application streaming technology. We even had one or two clients working with it, but afterwards we decided that we should more on mobile, instead of a general product that turns Legacy apps into SaaS. Turning to mobile directed us towards Productivity.
Its first iteration, in 2012, was launching a mobile app that made it possible to work with Microsoft Office documents on an iPad, through streaming technology. We had to take it off the store on day one because there weren’t enough servers. Of all the free apps in the American App Store, we were first place. Many users joined and we reached great numbers. Over the course of three years we reached 10 Million users.
In mid-2013 we came to a decision that we would like to build a Next Generation, using completely different architecture. A product that combines the best of all worlds – improving mobile UX, and works well with Office files.
We then joined the Open Office group, taking that technology mobile, working for over a year on an editor app for iOS, based on Libra Office with an adapted mobile architecture. On top of that, we developed a gesture-based UI, combining the ability to open and edit Office files with a good mobile user experience. We launched it at the second half of 2014 and soon reached the top of the App Store again, because it was a great app.
The market was facing significant changes at the time. Microsoft had a new CEO and they started to become one of the key players in mobile, releasing products and free apps, then Google made a few major changes. We realized that even though we have the best product, we would still have trouble competing with those giants, especially when it’s the main business for one of them.
In 2014 we started to look for a strategic collaboration. When we launched the service, the files were saved on web-based storage providers, and Dropbox were the first providers we worked with. Over the first few months we brought them a million new customers who wanted to save their documents, so they signed up to Dropbox. This collaboration grew into joint campaigns and at the second half of 2014 it was the perfect time to advance our relationship to the next level. On our side it was the realization that that the market is highly competitive, so we would need a large partner; for Dropbox, the relevance was our knowledge in this field, the technology we’d developed.
Tell me about the moment when you realized that the sale is going to happen.
It was at some point when Dropbox were performing their due diligence process. Once we’d passed that stage, it was clear that things are going towards a sale. There still were a few details to discuss, but we could feel it happening and that it’s a win-win situation for both parties.
At which point did Nextage join, and how relevant were they?
They joined up rather early. As the small active startup that we were, we were looking for a way to manage payroll, and a friend who was a CEO of another startup recommended working with Nextage. I hadn’t heard of the company before. We met up with Ofer and simply started working. As time went by and business grew, this relationship became stronger. I’ve been working with the Nextage team for roughly four years and it really is like family, it has become a truly integrative part of the CEO and mine’s day to day. It’s the provider which we most felt like it’s a part of the company.
How did they practically help you?
There were 3 levels; on the daily level, everything that has to do with bookkeeping, payroll, those basic things. The second level was the issue of budget supervision, which is a very important thing for a startup. We had been working at two sites, one of which in the US, which complicates the process. We had to operate on two parallel axes, and to make sure that each Dollar and Shekel are going to the right place.
Additionally, the third level had to do with all the business model and funding issues, there too Nextage’s network of abilities guided us from the day to day, through to the most strategic matters. It’s a real part of their strength.
Were they available to you?
Etti, our acting CFO, was in direct contact with the CEO on all budget planning matters. They were fully involved and influential in every step of the way. Especially here in Israel, I don’t think a day went by that I didn’t talk to someone at Nextage, whether it was the CFO or the people from accounting.
Would you have arrived at the same point without Nextage?
They were involved in the financial aspect of every strategic decision – especially with fundraising and business model design, where there was a real collaboration of all the product people, the CEO and the acting CFO. They also helped us with difficult issues that required a lot of planning, such as bridge loans. They have a considerable part in our success.
The company was sold to Dropbox in January of 2015. As part of their growth process, Dropbox eventually decided to emphasize company globalization, and a part of that are acquisitions.
The Due Diligence process performed during the course of the sale is a highly busy and stressful time, for management, for the financial staff and for the lawyers. One side has to do with essence – the product, the technology, the people; the other side includes all the legal and financial aspects, where you go into tiniest details with a fine tooth comb.
Nextage worked very hard during this period, to bring us to the other side of the deal as quickly as possible, and they accomplished their goal.