Accounting software company Intuit Inc. said Friday, April 27, it has agreed to buy privately held Demandforce Inc., which develops customer relationship management software for small businesses, for $423.5 million in cash.
Mountain View, Calif.-based Intuit said the deal, one of the priciest acquisitions in its history, will boost its expansion into software-as-a-service, or SaaS, products for small and medium-sized businesses. Demandforce, with headquarters in San Francisco, offers software that automates marketing and customer communications with a host of e-mail, mobile and social networking tools targeted at a variety of businesses including dental offices, automotive shops, spas and salons, optometrists and chiropractors.
For example, an automated appointment reminder received from one's dentist is very likely to have been generated by Demandforce software.
Kiran Patel, Intuit's executive vice president and small business group general manager, said that his company has already built a strong presence in "back-office" offerings for SMBs, including its QuickBooks accounting software, payments processing and payroll services. But SMBs are seeking ways to keep in touch with and manage their customer base; Demandforce will help Intuit provide them with the tools to do so, Patel said.
"This is a very, very strategic deal for us," Patel said in an interview Friday. "As we talked to customers about their needs, the big pain point is: How do I get and keep customers, and, in a digital world, how do I manage my company's reputation?"
The transaction builds directly on Intuit's $170 million acquisition in 2007 of Homestead Technologies, which offered website creation and e-commerce tools to SMBs, Patel said. Demandforce typically charges a $300 monthly fee for its services. With more than 15,000 customers, the company books roughly $50 million annually in revenue, and is growing at an annual rate of about 80%, Patel said.
Demandforce was not shopping itself, the Intuit executive said. Rather, Intuit's active corporate development team and its connections with venture capitalists led to a meeting about three months ago with Demandforce founder and president Rick Berry, Patel said.
Founded in 2003, Demandforce has received venture backing from Benchmark Capital, Palo Alto Venture Partners and angel investor Mike Maples. Benchmark general partner Bill Gurley, who led his firm's investment in Demandforce and sits on the company's board, said in a blog Friday that Benchmark is the startup's largest institutional investor.
Gurley noted that Benchmark also was the largest nonindividual investor in mobile photo sharing startup Instagram Inc., which Facebook Inc. earlier this month agreed to acquire for $1 billion. Unlike Instagram, Demandforce has kept a decidedly low profile, the venture capitalist said.
"We never even announced Benchmark's funding of the company, which I believe is unprecedented," Gurley wrote. "The Demandforce team always felt that the attention should be focused on the customer rather than the company."
The deal is part of Intuit's push to sharpen its focus on "connected services" for small businesses, of which the company estimates there are about 30 million. Intuit has been both buying companies and selling divisions to that end. For example, the company in March sold its commercial banking business to payments and document automation provider Bottomline Technologies Inc. for $20 million in cash.
Last year Intuit acquired Medfusion Inc., which develops software to help healthcare providers schedule appointments, pay bills and undertake other administrative tasks, for $91 million in cash. In 2009 Intuit sold its real estate software business to San Francisco private equity firm Vista Equity Partners for $128 million.
Demandforce will become a new division in Intuit's small business group and will be led by Berry. The deal is set to close in May, Intuit said.
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