The Exchanges

Q David, what was the spark that started that? Was it Insight at the board meeting saying, hey, you guys should look at this other company. David, if you like it, let us know. We can make an intro.

A Um, Insight played a key role, as you alluded to, and really there was interest both sides. So they, they, uh, saw that Trisantis was very strong in Europe, moving into the U.S., Very strong in selling to the sea level, very strong with systems integrators. They saw the U S that QA symphony had, uh, almost all of its business in the U S and was trying to break into Europe. And that was an important growth area that we were more, uh, selling into the user base and trying to move up. And so it was extremely complimentary. And really what the big picture is though, is the space, um, like many software spaces is shifting away from kind of older antiquated legacy software providers. To more modern providers. And we believe, as one company now, we are extremely well positioned to undoubtedly lead this space of overall software testing, which is a thirty five billion dollar market. Historically, you saw a very successful company called Mercury Interactive that was acquired by HP in 2006. HP has owned them ever since. Uh, HP merged with its software business with Microfocus a year ago. And, uh, it's again, public record that that business has been declining very rapidly. So we're really well positioned to, to, um, increase our market share each and every year and lead that, that category.

AI assessment note: “Insight played a key role, as you alluded to, and really there was interest both sides.”

Q get someone right on the back of a merger, right? So, so when people think about, should I merge with a competitor or someone in my space, maybe not a competitor, maybe something complimentary. The first question is, especially from an ego, ego perspective is wait, are they going to be CEO or am I going to be CEO? Let's just start right there. How do you handle that question?

A Sure. Um, very, very relevant question. Um, ultimately, uh, what, what I, Have used as my guiding principles are some businesses and one in particular that I worked at, uh, years ago, I worked at a public company called choice point, and I saw a model there that, um, I really saw it was very successful where there was a CEO and a COO who were very complimentary and, you know, terrific business partners. And I saw that that combination, both of those guys, by the way, were terrific mentors of mine. Um, I saw that that combination was quite effective. So that same model is one that Uh, we've embraced, uh, here at, uh, Tricentis. The company will be, um, uh, named Tricentis when we close. And, um, I will take on the COO role. Um, and, uh, Sandeep, um, is, uh, the CEO there. He, he has, uh, a background that's really unique. He was at HP and led the acquisition of Mercury back in 2006. So his knowledge of this space arguably is better than anybody else in the entire Globe today, and he brings that history, that experience, as well as having started successfully many other software companies. He's out in Silicon Valley. Um, so I, I feel very lucky to have someone with his experience on the team, um, and his His knowledge and his, um, you know, uh, overall, uh, view here is invaluable to us.

AI assessment note: “I will take on the COO role. Um, and, uh, Sandeep, um, is, uh, the CEO there.”

Q So, so tell us what QA Symphony does, and then tell us what the revenue model is. Is it pure play SaaS or is it a professional services component?

A We're a hundred percent SaaS company. We, we have a, a software solution that targets large and midsize enterprises. Um, and specifically we provide a, uh, workflow testing end-to-end solution that drives, uh, faster speed to market and much higher quality. Um, we've had tremendous success over the past few years. We've grown essentially from zero to twenty million in less than four years. It's a hundred percent of a recurring business model. We charge per user. We've got, um, large clients all over the globe, um, across a number of key verticals, and we're happy to, to, to expand on any of them. Um, but, but really what's been most exciting is the, the area that we're focused on in terms of, um, providing more, uh, productivity enhancement, And quality enhancement to software developers and testers is really part of a broad theme that we're seeing today. I mean, really, as you sure heard, companies all over the world are putting more emphasis and more strategic focus on their software, um, uh, initiatives, whether they're a software company or whether they're a manufacturing company or financial services. Software is becoming increasingly important, and so the ability for them to drive improved speed and quality is of prime importance.

AI assessment note: “We're a hundred percent SaaS company. We, we have a, a software solution”

Q So, um, when you joined the company, did you come in as an EIR inside one of these VC firms that led the series A?

A No, uh, great question. I, I, um, was introduced to the company actually through a recruiter in town, and the timing was really, um, you know, fortunate for all of us. I was with another business that was in the process of being sold, so I knew that there would be an endpoint. Which one? So Digistrive was an e-commerce company, and we were in the middle of selling that to a private company in San Francisco called Deem. And, um, and, and so with that, um, uh, completion, uh, planned for the middle of 2014, I was beginning to look at other opportunities. It was introduced to To Vu Lam and Josh Lieberman, the founders, uh, in the spring of 14. And, uh, there was really good alignment, and so it was a very logical place for me to jump into, because where the company was strong on the technology side, complemented the strengths that I brought in terms of sales, marketing, and overall finance. And so, um, you know, it was a terrific fit.

AI assessment note: “No, uh, great question. I, I, um, was introduced to the company actually through a recruiter”

Q And, and walk me through some, some other kind of caveats here before we talk about how you've driven this growth. So have you done this all bootstrapped or have you raised capital?

A Uh, no, we've certainly raised outside capital. Uh, the, the, the thing I would, um, highlight as a starting point, however, is our founders, um, came from a services company Uh, and, and have a significant services business based in Saigon, Vietnam. So they had the idea to build out the next generation agile testing platform back in 2011 and started the business by taking 30 of their developers from the services business called KMS and starting QA Symphony in a separate building. Um, over the next two and a half years, they funded the business, which was largely an intense R&D effort. When it started to, um, really see product market fit in early 2014 and appreciate some bigger clients, that's when I jumped in to, um, help take the company to the next level. So in addition to that early funding from KMS, we've done three rounds of financing. Um, these are all public. We did a series A round with primarily angels back in, um, 2015. We did a series B led by two local venture firms here in Atlanta.

AI assessment note: “no, we've certainly raised outside capital.”

Q Tell me about how you communicate this to your team. I imagine when you put out that initial press release, sometimes people see the upside. They say, yeah, that's going to be great. Others go, oh my gosh, am I going to have a job after the merger? How do you communicate this to the team?

A Well, you're certainly correct in that mergers. Um, you know, many folks have, have experiences of mergers that often involve a lot of cost reduction. What we were able to say here, uh, with a hundred percent confidence and credibility is that, There was no cost reduction, that this is all about growth, that the teams are entirely complimentary, and we literally are in a massive hiring phase and are not reducing any positions as a result of this. In fact, many folks on our team and on the Tricentis team are taking on significantly more responsibility from a global perspective, from an account ownership perspective. So there was certainly a lot of interest to understand the details. As we've gotten further into it, our team, you know, has gone from somewhat excited to Extremely excited because they see the power of, you know, the combined entities.

AI assessment note: “What we were able to say here... is that, There was no cost reduction”

Q All right, so how do you go from broadband to QA testing? How does that work?

A Well, um, I'm, uh, really someone who's been involved across all types of, uh, technologies, software services, data over my career. Um, I, uh, have a deep appreciation for technology, but I don't see myself as a pure technologist. Um, rather what I've been Uh, excited to do and able to do with the companies you mentioned, um, is come in and work with founders who are generally very technology focused, uh, who've started a business, taken it to a certain point in time, and then really taken over and scaled the business, uh, to the next level. So that's what I've done at QA Symphony. And, uh, whether it's broadband or whether it's testing to me, it's, you know, really a business model and the, and the overall, um, Technology, uh, leverage in the model is what I'm focused on.

AI assessment note: “whether it's broadband or whether it's testing to me, it's, you know, really a business model”

Q Interesting. Okay, great. Very good. Um, any other, any things that surprised you as these conversations went down? And specifically, David, what I'm hunting and digging for here is, People listening right now might be considering the same kind of thing. Is there anything they should be aware of that you weren't expecting going into this?

A Well, you know, as we all know, um, that folks have done M&A, M&A is hard. And, uh, what I would tell you is, uh, what's, what's really been critical to us is to have that global coverage, which we didn't have. But certainly now being a global company with offices in Australia and offices in, or throughout Europe and offices in India, it's just much more complex. So I would say, uh, get ready to buckle in and make sure, you know, you, you've, um, put the time in at home because the travel, the travel is, uh, is going to be extensive, but you know, if you're, if you're someone who loves change and likes to win and likes, uh, to be energized, Then this is the right move. And, you know, for us, uh, and me personally, it's been incredibly energizing and exciting.

AI assessment note: “get ready to buckle in... because the travel, the travel is, uh, is going to be extensive”

Q Got it. Okay, good. And what is driving most of the expansion revenue? Is it just more users, more product features, more usage?

A You know, what's been incredible is, um, and I've written blogs about this, our primary competitor was HPE. A quality center HP software business combined with a public company in England called Micro Focus. Um, and when they did that, uh, they really took on a strategy of significant cost reduction, and, um, that has played extremely well, uh, in, with us. We're, we're hearing each and every week from large organizations and big partners that they are not satisfied with Micro Focus. They don't have confidence that they can grow with them in the future, and, and their only choice is For companies that are really looking to scale is QA Symphony. So that's been the catalyst for us that we've taken advantage of and will continue to focus on here in the near term.

AI assessment note: “our primary competitor was HPE... they are not satisfied with Micro Focus.”

Q generally more healthy if you're at a hundred million versus twenty million, right? So they know that, especially if they're going to go out and try and sell it to like a Vista or, or a private equity firm, right? So, so how do you, how do you, how do you make sure you understand any bias that Insight is bringing to the table as an investor in both companies?

A I mean, all the time they're living in there, you know, known as one of the most successful investors in the software space. So actually having their, uh, strategic, um, uh, you know, views and, and reinforcement behind this is one of the things that gave me huge confidence that this was the right move because they've had so much success in, in bringing companies like ours together to ultimately achieve, you know, a terrific outcome. I mean, for, for, for us at QA Symphony, it's not about ego. It's about ensuring that we're the leader in the space. We like to, Win. You know, we'd like to have fun. We'd like to succeed and make an impact. And, you know, now this merger with Trisentis will put us even in a better position to do that, uh, longer term.

AI assessment note: “having their, uh, strategic, um, uh, you know, views and, and reinforcement behind this”

Q on recently, 7.5 million in monthly recurring revenue. Sauce Labs, I'm sure you probably know Charles as well. Uh, then there's others that, that don't compete directly with you, but CloudAbility, CloudChecker, all doing 20, thirty million bucks in ARR. Is this merger the start of what might look like a much larger roll up of some of these other tools as well? And this first merger is the hub?

A Um, I, I think that, uh, what you're noticing, uh, and, and pointing out is that there are many fast growing, uh, and successful companies in this space that bring the newer technology and the more modern approach. And we're all really, um, smaller players going after a huge pie where you see the legacy providers like Micro Focus and IBM CA struggling to maintain market share. And so, Uh, I think that there are going to be, uh, room for multiple winners, multiple, you know, companies that grow. We don't compete directly with those companies in a meaningful way. In fact, we often see folks like, like, uh, sauce as, you know, potential partners and, you know, complimentary, um, the, the reason and the ecosystem can be quite complex and, you know, the time here doesn't allow for that, but as you think about the entire end to end that a software developer and tester goes through in their, in their entire, um, uh, you know, daily, um, Approach to putting out excellent software very quickly. It involves multiple capabilities, and it's more than one company traditionally can do. So huge space, huge opportunity. Listen, we're growing as a collective company, you know, in kind of the, you know, 70% plus. We see the market is wide open. We have no reason to believe we can't get to be a billion dollar company, and I'm sure there'll be some others that also have a similar path.

AI assessment note: “we often see folks like, like, uh, sauce as, you know, potential partners”

Q plan to 20 to 30,000 dollar average starting ACVs, they start to think about things like, well, what if I lose customers? What if they churn, et cetera? What was the email? What was the communication to those customers when you made the decision that you were going to go up market? I'm talking about the ones that were with you for the, from the beginning, paying you lower prices.

A Sure. You know, like anything, as you can imagine, it was an evolution. It wasn't just one day we pressed a button and suddenly went up market. We, we were able to do it gradually over the past four years. Each and every quarter have seen a nice uptick in our, um, ASP. What, what really has been, um, paramount is two things. One is we were able to establish very close relationship with our partner, Atlassian. Atlassian has a product called Jira. It's one of their, um, several products. Jira has been, become almost ubiquitous across developers, uh, in the world, and so when we developed a very unique and differentiated integration to Jira, that was highly differentiated and really embraced by some of these bigger customers. The second thing that our customers told us that allowed us to really move up market is, While there were a lot of innovative firms that did what we did, there weren't innovative firms that also could scale to large enterprises. So as we built up the scalability, um, we were able to replace some of the legacy players with really the only solution that was both innovative and could scale to large enterprises. And it was that, uh, proving that, uh, dynamic to large businesses that allowed us to become very valuable in the enterprise space.

AI assessment note: “It wasn't just one day we pressed a button and suddenly went up market.”