Acquired - Special—An Acquirer’s View into M&A with Taylor Barada, head of Corp Dev at Adobe

0:00Who got the truth? Is it you, is it you, is it you? Who got the truth now? Is it you, is it you, is it you? Send it down, say it straight, another story over who got the truth. Welcome to episode 18 of Acquired, the podcast where we talk about technology acquisitions. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today we have a very special episode that kind of breaks the mold of the show.

0:31We had an opportunity that we absolutely couldn't pass up, and even though we're not covering a single specific deal, we think this is going to be a super, super interesting episode for listeners out there. So David, do you want to tell them about our guests? Yeah, we are lucky to be joined by a special guest today, Taylor Barada, who is the VP and head of CorpDev, CorpStrategy, and Strategic Partnerships at Adobe. So welcome, Taylor. Thanks for joining us.

1:00Yeah. Excited to be here, guys. Thanks for having me. Of course, quick background on Taylor. He joined Adobe in 2013. Before that, he was the VP of Business at Zinga. And before that, he was also relevant to our show, head of Corp. Dev at Yahoo. He has a JDMBA from Northwestern. And after Northwestern, it's been a couple of years at Bane before getting into the deal making world.

1:24Perhaps most interestingly, you are the first guest on our show who is a former professional athlete. Taylor played professional soccer or... probably more accurately football in England. Maybe we'll get into that. Lots of deal-making in that world. Yeah, exactly. I would say looking back on I didn't have the language at the time, but there was no real US scene when I came out of college and so effectively I became a independent solo soccer entrepreneur. I had to go kind of figure out how to insert myself into the European game and it was an amazing life experience.

2:02Not always the easiest. Yeah, man, that could be like a whole separate episode. Probably not at this podcast, but I'm sure it's a cool story. So what we thought we'd do for this episode is kind of stick to our typical structure, but instead, as Ben mentioned, of talking about one acquisition in particular, we just thought we'd use it as a vehicle to tailor get your insights kind of from the inside of being in Corp. Dev and how you think about deals and acquisitions as you're going through them. So we have a bunch of questions, but it thought we'd start with sort of the acquisition history and facts section as usual. And I think the best way to kick off would be something that probably most of our listeners are curious about, and I'm curious about, how do conversations typically start between corpdev and startups? Either when you're approaching startups or when they're approaching you,

3:02What's the beginning of the story usually look like? Yeah, it's funny. I mean, I think you guys even doing this podcast and this focus is, I think, filling a nice gap and need because it's not something I've spent a ton of time thinking about because at some point, it's just sort of natural and it seems very fluid and relationship driven and not some big moment of, you know, hey, warfare sale. Those things do happen.

3:31Yeah, and I think it can be very sort of mystical and seem like this dark black art that you know and I find sometimes that entrepreneurs When it feels that way they tend to pull back and be very reserved because they're not sure what they can and can't say and they want to say the wrong thing and all which is totally fair and so on our end what I've always done individually when I've been a deal lead and then what the culture I try to create on our group is that you remember that the process is fluid and it's hard to know which ones are gonna actually go the distance and lead to a deal and which ones aren't. The valley is we all talk about and sort of the broader technology industry outside of the valley is incredibly small and so because of that it's very relationship oriented and because of that the way these conversations often start is just literally a connection and intro like hey you guys are in this space

4:29This company is doing interesting things. You guys should just get to know each other. I've always liked, after stumbling across it, some point in the last couple of years, Mark Sisters, blog post on investing in lines, not dots. And I think his concept is...

4:48is that it's very hard to make a decision when you only have one point in time, but when you've had connections over time and you have the benefit of sort of seeing people say what they're going to go do and then hopefully go do it or something, something better, it develops credibility and you have time to sort of process and have a perspective so that on how it fits in. And so oftentimes it's as simple as that we get introduced, we sort of say you should talk to someone. There absolutely is the the other sort of 20% case where some companies been going off in a space that we haven't been tracking or a company that we haven't necessarily focused on that decide they either get the stereotypical inbound strategic interest from someone else in the space and they decide that they want to talk to others and see if they want to sell or they want to sell.

5:41to us, or frankly, sell to the highest bidder, that type of thing. And we'll get those calls, we'll take those calls, and we will sometimes do those. But those are, that's a high bar, and we try hard to develop relationships so that sort of 80% of it is more strategy driven, more relationship driven, and there's broader perspective and a broader context that's developed over a long period of time.

6:02Yeah, and in that original kind of introduction when someone says hey, you know, this company is a newer company They're playing around in sort of a similar space or similar customers segment to you guys What's the context for starting that relationship? Is it a partnership or is it just like? You know, let's not play any games We sort of know that there might be some acquisition at some point in the future or you know What's the incentive for that entrepreneur to kind of start that conversation?

6:31Yeah, look you can waste an enormous amount of time if you just you know run around the valley talking to all the big companies, right? That's not your job your jobs to build value for customers and at some point you're going to be able to monetize that value either through an IPO or the sale of the company and With you know that is context. I think sometimes you get into a scenario of like, well, and I've had, I've had introductions where a VC was an investor in a company, tried to make an introduction for us, and the entrepreneur told the VC who was on his board, like, why would I even take that meeting? I'm not trying to sell the company, you know that. And I've always found that kind of humorous because the whole point is, you know, it's like the old saying of, you know, when you want money, ask for advice, when you want, you know, advice, ask for money, and that whole thing, it's like, if you're like calling us asking to be sold,

7:22It certainly can happen, but if your first interaction is that, it puts an awful lot of weight on that interaction and doesn't need to be that way. I think it also ignores the point which I always make, and when we sort of talk about it over time, as things develop, is that if you're smart as a seller, you're going to have a fiduciary duty to get the highest value you can for the business when it comes to that time.

7:52That just is. But at some point, once the deal takes place, you and the team will be working there. And so is it a place where you think your vision cannot just sort of go and get parked, but hopefully can be accelerated? And it's not an end as much as it is beginning. And is it the type of people that you want to work with? Do they see the world the same way?

8:18And those things, sometimes you think that, oh, that doesn't matter, we're just gonna sell the highest bidder. And it's like, yes, of course, we get that. Everyone gets that. But it doesn't mean that you should ignore all other stakeholders, all other factors. And the way you sort of suss those out and frankly do diligence on us and other places and try to see whether it feels right is by getting to know people over time. So I actually think it's best when it's explicitly not around a specific conversation. It's certainly fine if there is a specific partnership that seems very interesting with the big company but those also can be colossal waste of time. Every small company thinks that every big company is the keys to the kingdom and a partnership with them will unlock everything but oftentimes

9:09they take a very long time to get done. Once they're done, they take a very long time to mature, and the ones that are truly game-changing for startups are few and far between. And so it doesn't mean you shouldn't do them. It just means you have to be pragmatic about what you should expect from them. And so if there is a partnership you want, we oftentimes act as sort of a concierge into this wildly complex 15,000-person company.

9:34which we sort of know how to navigate and from the outside, it's probably extremely hard to figure out who to get to if you want to talk about a partnership around one particular product line. So we can definitely do that, but like I said, I think it's best oftentimes if it's much more open-ended and it's just, hey, we're in the space, we'd love to meet this VC that we both know, thought we should get to know each other and not looking for funding, not looking to sell, but we'd love to grab coffee and just talk about what we're doing.

10:02It's amazing, you know, as we're talking about this and even as we were preparing for the episode, like how much this mirrors the process of raising venture capital to, which to be honest, it's an education for me. I never really thought about that, but we coach our companies when they're thinking about raising around, you know, all the time, you know, you're always raising, you're not always closing, but you're always raising because of this very, you know, it takes time to build relationships and VC investors, as you point out, you know, the she's their blog post is great about wanting to invest in needing to invest in lines not dots. And occasionally, they'll be a dot that, you know, is so compelling you have to invest in or it would seem for you guys you have to buy. But it takes time to build these relationships. What, what do you think, you know, as you're doing that, maybe talk a little bit about kind of the importance of

10:58culture and that relationship and the people fit. I know it's something that's really important to you and Adobe. How are you assessing that when you're talking to entrepreneurs? I'd say Adobe, it's uniquely important to us and we've walked away from extremely large deals north of billion dollar because we didn't feel like the culture fit was there. And part of it just has to do with how we think about What we're doing and what we think has made us in an enduring business over 30 years in a really dynamic space and You know the company is morphed from you know post-script and printing tools and things like that, you know into desktop publishing and then creative tools and now into marketing and and now what is an acquisition a long time ago

11:45Yes, yeah. Again, that's somewhat unique and then my understanding was it was a couple guys and a product, but yes, the nascent piece was there and then they built around it. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired. LaGora, the agentic operating system that is redefining how the world's best legal teams work.

12:09Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Legora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm.

12:36for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts, and it pulls every key term into a grid a lawyer can actually work with. Lagora's bed here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

13:05And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves when they have a head-to-head pilot with their top competitor they win 70% of the time LaGora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries and crazily they went from one million to a hundred million in ARR in about 18 months truly insane numbers and that is the real test

13:57Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at logora.com slash acquired and just tell them that Ben and David sent you.

14:18You know, you talk about the qualities that you look for when you're acquiring someone to be a culture fit. How does that impact the outcome of the acquisition? And is there like anything and specifically that you sort of look for as, okay, this is going to be, you know, this is going to make this outcome financially successful for Adobe because this person has X mindset. Yeah. I think it's definitely related. I mean, I always say, you know, we don't care about winning the press release.

14:48You know, you create value in one of the reasons why valuing companies is art not science in a strategic acquire a scenario, you know, versus a private equity or what not, is that like...

15:00Look, even in private equities, this is really true if you get down to it, is that your valuation comes because of a present value of your future cash flows. What drives those future cash flows is what you actually go do in the market together. And inevitably, we're not like a holding company that's just going to buy great properties and let them roll. We're trying to have a point of view around the market and say, hey, look, we can come together and maybe it's not one and one equals three, but there's some sort of element.

15:29of that overused word of synergy. And we're looking for leverage and looking for perspective that we can accelerate the vision of the entrepreneur, but also, frankly, accelerate our own vision and hopefully even broaden it at times, just as we did when we went from creative to marketing with the amateur acquisition. So the reason it's so important is that if you have an incredible strategy and incredible vision. We all know it's meaningless. It's about execution. Big companies are no different than startups in that effect. Execution creates value. Strategy is what allows you to have the opportunity to get into that mode, but you gotta go do it. And I think the one last thing, and we've touched on this a little bit when we were catching up before the call, is that to me, if I had to pick one hallmark that gives me a

16:24sort of good positive early indicator that we're on the right track is when I start to see through the back and forth and comparing notes on the strategy and the vision that this concept of accelerating the entrepreneur's vision around where they're going is there but it's not that's not the only thing the other thing is they actually start to embrace the broader vision that we have and say you know what I actually think I can expand your vision and I want to get in and if I could if I could work with you guys on that I can do something bigger and so oftentimes you'll see over time that the deals that work really well and where particularly works well for the founders or CEOs is where they end up loving the concept of getting inside a bigger company and maybe they're really dying the whole product people and all this raising money and all this other stuff is

17:16you know, part of what they have to do, but it's not what they love and all of a sudden they're unleashed and they get to just go do what they want and spend all of their energy there. So whether it's here or, you know, two of the smaller deals I did while I was at Yahoo! One was for a company called Citizen Sports Founder named Mike Kerns. I found that company with another guy named Jeff Ma, who's well-known from the bringing down the house days and all that from MIT.

17:43So Mike came in and just did phenomenally well and then another was coming called into now that was founded and spun out by a guy named Adam Kahung and those two guys stuck around Yahoo for Mike just left about a year ago and I think Adam's I think still at still at Yahoo and they rose to be you know two of Marissa's SVPs a product and these were you know smaller acquisition so it's not like they came in the door doing that but they had a real passion for sort of online media and where it could go and sort of not just what they were doing with their product but what you could do if you applied some of the principles of social and mobile to the broader Yahoo business. And we've seen the same thing here at Adobe and I think it's a classic sign that things will work out quite well.

18:33It's really cool to hear you talk about that. In one of our early episodes, we had Kurt DelBenny from Microsoft on and we talked about the Accompli acquisition. He talked about this very fact that one of the things that Microsoft is thinking about now in terms of M&A is just what you're talking about, about the people and the culture of it. Kurt's now leading the LinkedIn acquisition, which is much bigger and more complex.

18:57for Javier at Saltero at a company. He's now running all of Outlook and exactly mirrored these themes. Let's move on. So we sort of break acquisition history and facts into two parts. And my favorite part is sort of the stories of the acquisition, sort of what we've been talking about here. But I bet a lot of our listeners will be really curious about it.

19:22What's the process? You know, once you've realized that there's a relationship here that could bear fruit, what are the steps in the process when you're actually working through a deal at that point, you know, from L.O.I. to term sheet to definitive agreements? What are the key milestones for you guys? Yeah. And what specifically are you looking for? Is it cool? Financial check? Cool. There's no lawsuits against them. Check. Cool. Your product is growing with users. Check those sorts of things.

19:50Yeah. Look, you have to ultimately, you're going to do a deal, you know, if it makes, you know, strategic sense. The technology product fit is there. And in the financials, you think makes sense for your shareholders, right? And for us, the fourth one that I would put it over, you know, because it cuts across all of that is just the people that as we've already talked about.

20:14The hard part about the deal is these are all, even though we have a quote unquote process and every large acquireer that is sort of a repeat player, right? And so all the places that I've been and done this role are definitely in that. And the other ones are people like you've mentioned, so Microsoft, Oracle, Facebook, et cetera. Repeat players absolutely have a process and there's different flavors in each company has different places where different types of decisions either take place or which parts of the org are responsible for them. So there's definitely a number of different ways to do it. But it's, you know, every deal is its own, you know, sort of perfect snowflake. They're all snowflakes. So they're deals and there's unbelievable, you know, correlations from them. And when you get into the grain or, you know, everyone is decided we're going to make this happen. It becomes kind of a machine and

21:12the legal side and the diligent side starts to take on a life of its own and that really does happen. So I would say in general this is tough because on the outside, particularly if you're not going through a hardcore sort of auction process and have hired a bank or whatever, but it's a place where you sort of think, well, we're not really for sale, but they seem to be interested. So I'm open to doing this, but I don't want to waste all my bandwidth and emotional energy and sort of exploring this, how would we do it? So typically there's usually an early meeting with someone in the business unit that's responsible for the product area where there is the strategic interest in the overlap and trying to get an understanding for the product vision, the product technology, maybe a bit of a demo, some a little early point of view on numbers. And I think sometimes it can be tough to decide when do you share what?

22:08we're always fine if an entrepreneur feels like they want to get an NDA in place before they share some financials and things like that. We tend to try to make sure that we kind of have checkpoints. If we get someone who's trying to sort of take a read on the market because they're about to do a fundraising round, they just figure they better think about it and they want to talk to a handful of people that are sort of the logical.

22:35fits for that business and say they decide we're one of them and then, you know, sort of check in with us. You know, we will oftentimes do at least one call without an NDA where we just sort of say, you know, tells the story and we'll go through that. So there's sort of a high-level business product check early on and then at some point you start to kind of have a feel for the financial side as well as you go through that.

23:00The biggest milestone you'll find with large acquires is kind of the LLI or the term sheet, and that almost always, and I truly mean almost always, includes a no-shop provision, you know, at some period of time, you know, typically sort of 45 to 60 days, sometimes 30 days, those are the types of things where once you get to that stage, you'll have a lawyer involved and they can advise you what is, quote, unquote, market.

23:29So funny how's that parallel? You're going to have, yes, you're going to have your lawyer and they're going to be able to tell you what's market, they'll educate you on what the business ramifications are of what is being done. Every big company has slightly nuanced ways of doing things. And because we are repeat players and lawyers are repeat players, there's certain things where, you know, it's basically like, yeah, we're not, you know, we're not going to do that because of the precedent of it and that type of thing. So oftentimes those are, but they, you know, depending on you know, where the leverage lies depends on how much those things get negotiated by the buyer of the seller. Again, exactly like a venture round in that respect. And then once you get through that, that's when you see the circle of knowledge on both sides expand but particularly on the buy side. Sometimes it can be overwhelming because then we're going to, you know, jump in and do a, you know, a day minimum, oftentimes two or three days of kind of a deep dive, take us through the business, you know, beginning to end.

24:26in terms of go through the product, go through the go-to-market, go through the financials, go through the operations, go through the technology architecture, et cetera. And then that's when you build out a very detailed data room. And I think with the super early stage companies, sometimes you'll run into some issues where they didn't have their house in order, they didn't get good legal advice early enough on, and maybe they would working with a couple of outside agencies and they didn't have them sign an intervention and sign an agreement that's of a self. At this point, I saw that more 10 years ago than I do today. I think the breadth of startup legal advice and smart experienced angels is certainly the venture community. You just people tend to have a pretty buttoned up shop, particularly if they're venture backed.

25:17and things are pretty clean. But if you're outside of the valley, and maybe the company was lucky enough to grow boots strapped or whatever, and they kind of just made all work, every on then you'll run across things where they didn't have their house in order. And then it's rarely a deal killer, but it usually is end up being something you got to sort of work around. So you drive through that. At some point you put in place a definitive agreement where our lawyers will put together an acquisition agreement depending on if it's share purchase or an asset purchase, et cetera.

25:47And you kind of go back and forth on that and try to get it finalized and ultimately, deals are announced once the definitive agreement has been signed. And then there's a question of is it a simultaneous sign and announce and close, meaning we signed it, we sent the money, we own it, or is there a split sign and close where we sign it, we announce it, and then there's 30 days to meet XYZ closing conditions before we would actually close. You'll see both.

26:16Yeah, and you mentioned, throughout all these steps, there was one point in there where the business owner talks with the company they're acquiring and compares vision and strategy and digs them with CorpDev. How involved is the business owner throughout that entire process? Are they in every single meeting? Are they in that first meeting? Is it the business owner that first contacts that company? What is their role and what is the role of CorpDev throughout the entire acquisition process?

26:45Yeah, it's critical. So I mean, one thing to know is you can't ignore CorpDev and in many ways they're going to be your guide and your partner throughout this. And I truly view it as a much more collaborative thing. If you're going to get a deal done eventually, it's going to be because everyone thinks it makes sense and you're able to get together at a valuation that everyone feels good about, right? So I very much try to make it clear to people and make sure that our deal leads make it clear that No one can quote unquote make you do anything you don't want to do so that is one thing I think out of the gates to kind of demystify the whole process and and take a little pressure off The relationship with the business owner is critically important I mean in the language I use and again every company has sort of slightly different ways of thinking about this But I think that as there's an executive sponsor and there's a business owner Often times you will see particularly if a company's kind of got some VC and troves and things like that they will be

27:43really focused on like trying to get in to meet the CEO or get to meet the head of the whole business unit. I've never been guilty of that. Yeah, and it's fine, like everyone gets it, it's the old thing of coming high and work down and well, sometimes it can be fine. Other times it can be either off-putting or even sort of countering.

28:08counterproductive in that if you get in front of them too early before the business owner in Corp. Dev been able to kind of frame it and and sus out in combination with you sort of your business well enough that then we can effectively translate and help people understand why this is exciting why this matters. They might take one meeting and be like, eh, I wasn't that interested. And then and then it creates this uphill battle where Corp. Dev and the business owner are like, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no,

28:38And so trust me out, it's so true. So even if you've got like this perfect, hey, my venture guy says he is like golfing buddies and best friends with the CEO or whatever, right? It's, it's just a card you, I generally just sort of say play it straight up, play it open and then treat the Corp. of person in the business owner as people that are your partners to figure out whether this makes sense. Not You know, not someone who you got to kind of like micromanage the thing because ultimately it's it's not like a enterprise software or sort of SaaS You're going in an IT group. They've got a need for a widget. You've got a widget You're gonna sell them on wise ears is the best and then, you know, we're done like get it done, right? It's just it's a it's a it's a it's a very subtle Collaborative dance where we're both sides are evaluating each other and getting to know each other and you can't I mean

29:36It's sort of overblown to say it's a marriage, but look, you're selling your baby that you put heart and soul into creating. You want to find out if we're good stewards of it, if our vision's aligned, and you should care about this. It's so funny going back to the parallels with Venture. I mean, it just keeps coming up, but like, we see companies make this mistake with us all the time is, you know, they come in, they meet with one partner and, you know, that relationship is progressing at a natural pace. And then, you know, in the worst case, the founder CEO or but oftentimes one of the other venture backers or somebody will come in and talk to another partner and it's called we call it partnership and like nothing will kill a deal faster than that. Yeah. Yeah. And there's less issue that here because we're not a partnership. There's a there's a natural organizational structure to a big company. But you're still going to somebody think has influence but actually has no context on the relationship and back to that being the most important thing.

30:33can totally see how that can blow up deals. Yeah, exactly. It really blows up deals. And that's the other thing why I say like there's almost no misstep that you can't get over if actually it makes business sense. Right. And that's the other reason why I say getting people in the mind space of like you're building a great business. Like you're going to get the exit you deserve and we're looking for a collaboration to figure out whether we're the right home for it, right? It's like it takes all the pressure off because the real answer is you don't need to micromanage it over manager like we do this off all the time and if we're approaching it with that mindset like we're going to together to figure it out right because the biggest reason people do that is because they're in like value optimization mode in the back of their mind they think I gotta maximize value and it's like yeah totally that's

31:21It is literally in the bylaws. It's your fiduciary responsibility, right? And we get it. And so it's part of that. But if you over-manage that and over-play it at the wrong times, it just, it comes across awkward. And again, if it actually makes sense, you're probably going to recover from it. So even if you do, it's not that big a deal. Like I said, I've never not done a deal, but I've had deals where it was much harder to get there because we someone figured out some way to get in front of you to the CEO or some you know some other head of a business unit or something earlier than we probably would have ideally wanted or Sometimes it comes in that way and that's fine too, but then it's like you know people got kind of do job the where To bring that whole thread back around to the core question, you know that you asked I think it was Ben The business owner that sort of had a product is actually extremely

32:12important relationship as well. Like, you should have a sense of where, you know, if you were King for Day and ran that business, where would you think that, you know, the startup that you run fits in? And then how do you figure out who's responsible for that part of the business? And that's absolutely just as important a relationship. I would never say, you know, only focus on that relationship and ignore Corp Depp, but I would also never say focus on Corp Depp and don't worry about that relationship. You kind of have to have both. And sometimes Again, it's, this probably also is like the venture, it's very organic and wherever you have an in, you know, in an Alwarmentro, take the Alwarmentro and then ask the questions of, you know, hey, should I talk to someone, incorporate whatever? I have business unit partners who are very sophisticated, have sponsored deals many times and they, part of the job of running a good, you know, being a good product manager, let alone, I'll kind of business, you know, product owner or GM.

33:07is understanding the outside market and knowing the ecosystem that you're in so they should be out there meeting startups and stuff so oftentimes they will meet someone and they'll hand it off and say you know what I've met with this guy once or twice for coffee I kind of like where he's headed you should like nothing to do here I'm not looking to do it he's not looking to sell but I just kind of want to get him on Corp Des Rader can you meet with him that's the other thing other times we're you know we've partnered with the business unit to develop a strategy and overall, and we kind of know the spaces that we're particularly interested in. We'll find the relationship or company, and we'll get in trouble, and we'll pass them through. I think that is one difference between the VC and M&A world is that sourcing is not some big magical thing. We, every now and then, we'll find something that we didn't expect because we've made an extra effort to get out and beat the bushes, but we're out there in the market. There's only so many acquires.

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35:59The next category that we talk about on the show is acquisition category and so every deal that we look at we assign we say you know, was this product acquisition or a business line acquisition or a people acquisition We're curious on your end like do you guys do the same thing or or is it more organic like as?

36:21You're looking at different companies and then they tend to fall like you guys thinking like this is definitely an aqua hire or like oh this could be like a huge business line acquisition or You know, how was that going through your heads? Yeah, I mean look there's there's industry stores standard lingo You know aqua hires tech and talent deals, you know like you know whatever sort of business acquisitions or product acquisitions those those types of things are definitely those have heard those use we've used those all the time We don't get to hung up on it. You know, one construct I've used inside of our businesses, you know, from my bean days, I had a respect for some of the profit from the core analysis and they've done, there was actually a book written a number of years ago called Profit from the Core and they've done analysis of like 2,000 companies and growth initiatives, both M&A and otherwise. And the concept was that once you understand what your core business is as a large scale company,

37:20Understanding the, you know, the business that drives the most profits and it's sort of the most enduring From a perspective of, you know, who is the customer? What's the channel to market? What's the geography you're playing in? What's the business model and what's the product? Anytime you change one of those five things you're like a one step adjacency further from the core and it creates risk and actually they show through analysis of all these different companies that you know, once you got, I think it was one step adjacency was maybe about a 30 to 40 percent chance to success, but once you got out like three or four of those things changed, you dropped off to like 10 percent chance of success. It doesn't mean that you don't take, you know, things that are multi-step adjacencies because sometimes those are where the biggest opportunities are, but you have to make sure that they're worth the risk. Otherwise, you're just leading to sort of undisciplined diversification and you have no better

38:17chances of success than just, you know, a private equity investor or a holding company and probably less because it's not really how your business has been set up to focus, you know, the resources of the company on, right? So something like amateur, we've gone back and looked at that, you know, in hindsight, and that was probably a four-step adjacency in many ways. It was, you know, SaaS, completely new product. It was an enterprise selling motion, which we didn't have in mature fashion at that point.

38:46and in the business model in terms of recurring revenue was new because we hadn't moved to that with the creative side of the business. It was after that that we moved from Creative Suite to Creative Cloud. That was in hindsight a very risky big bet, but it was a large big business that was the market leader, had real momentum, and so you could make that bet. Then if you focused on the rest of the things that you could control, it's ended up being a $2 billion plus, it's on the road to being more than that.

39:15business for us and so you it's not that you don't do those things but you do them for the right reasons and so as you think about that you know things that are in your core like meaning we're already in that part of the business that's where we're more likely to look for you know some tech and talent you know, smaller kind of deals or we look for like a little bit of a core expansion where it's kind of like a one-step, you know, adjacency where maybe we get a new product with a bit of a business around it's been proven in the market, but it's not scaled yet. We bring that in and we scale it. The marketing cloud in many ways are after the amateur acquisition, there were a number of other add-on acquisitions that were done to broaden out the product portfolio and then sell through the same channel. In the enterprise space in particular, you've seen that

40:01year after year, once it's extraordinarily and perhaps not even appreciated how unbelievably hard it is to build a true large-scale enterprise sales force and the companies that have done that, that's such an unbelievably huge investment over probably a decade to get there, that then it's a question of how do you maximize the throughput of that channel every year?

40:28And so finding additional products to put in the salesperson's bag is a big part of it. So on the B2B enterprise side, that's a big deal. In the consumer side, it's a slightly different element in terms, particularly all the networks and everything with the social networks and platforms we've seen have changed the dynamics there a bit. But historically, that was a little bit of Yahoo's original strategy was, OK, we have this portal. Let's just keep adding on things. That was before my time of Yahoo. But you see the approach driven by the business strategy and I think that's at Adobe that's in my personal sort of belief is that It has to be a strategy driven process and so the the categorization of what you're going after is driven by what you're trying to accomplish strategically cool

41:13Cool cool moving on to our next segment. We always talked about what would have happened otherwise and it's the part we try and figure out you know if this deal didn't go through whether other requires or you know what that company have grown on their own and I feel like a good question to to kind of dive into there is what percentage of deals that you look at actually end up happening. Yeah, it's very low. I mean very low and it's a question of what look at means right? Yeah You know, we've historically done sort of forward 10 plus deals a year. I mean, I think actually the market strategy is our sort of strategic umbrella is big enough to do meaningfully more than that. But we've kind of intentionally focused on a strategy that says, you know, we're going to make sure that the ones we do are going to work.

42:04Adobe's, I mean, we've had bankers come in and be like, what are you guys doing, how you do it? And because everyone around the valley is sort of saying that, you know, the ones you're doing seem to be working. And I think a lot of it is just the willingness to say no. And that starts at the top. And we have a CEO, Shantanu Ryan, who, you know, I describe as having found her level passion for, he's been here 19 years, he's been CEO nine.

42:31no different than a founder who just feels it in their bones and feels that level of passion for protecting the mission and the vision that we're going after. And what that means is it's a very high bar on what makes it through the ribocon of strategy fit, tech fit, team fit, financial expectations, et cetera. And so you have to be willing to say no. And in order to make sure that you get the right ones, you have to be careful that that doesn't make you risk averse.

43:00and not moving quick enough and fast enough, but I wouldn't even know how to put a percentage on it, but I would probably say sub 10%. A lot of things have to align to make a deal happen, both on both the seller and the buyer side. So you're probably looking at that plus or minus 1,000 in bounds a year. I think we probably get...

43:21to the five emails a day with, hey, would you be interested in checking us out? That's what I think. A lot of those. Yeah, I mean, a lot of those, the answers, and it's probably, again, no different than VC. For us, it's just like, hey, that's not a fit, but I appreciate you thinking of us. And we try hard to give quick answers and quick knows if we just don't think it's worth it and we don't win this shop. If we take a meeting, it's because we think it could be interesting.

43:46That's awesome and that's a great lead in the next segment that we usually do is Tech themes where we look around and we try and figure out You know what technology themes are or themes in the industry and the world does this represent to you and I think a really good Kind of twist on themes here is what you know, how is how have you tackled M&A differently at the different companies you've been at and how have you guys?

44:13you know, taking a different kind of strategic organizational approach between each one. Yeah. Again, M&A is a tool. I mean, you know, I've always joked that if I ever do something noteworthy enough that requires a memoir at some point, and this stuff makes it in, it would be like, it's not about the deal. That would be, you know, there's the whole book with Lance Armstrong back in the day. It's not about the bike. It's like, it's not about the deal. I mean, the deal itself, is mechanical, and if you love that world, and there's people who do, and frankly, it's a fascinating, fun world on a lot of levels, if you love that world, those are the folks that end up in banking, and I've tons of respect for those guys because I think their jobs are really, really hard, and they only get paid if things get done. And then they oftentimes get a bad rap, and I think there's a lot of great ones out there. But it's just a tool, and so the question is, what is your strategy?

45:09If you sort of tie that back to your core question of like, how are things a little bit different in different companies? I'd say at Yahoo, we were going in a lot of different directions when I got in there. We were, this was 0809 when I joined and, you know, there was a little, I found at times things were bubbling up.

45:32Bottoms up in terms of people being entrepreneurial trying to get things going at the business level business unit level and there wasn't We're going through it was kind of a restructuring there wasn't as much of a clear hey, we got to go do this top sound and then you'd you'd get the inevitable Hey, we got a call and supposedly Google's looking at buying this and I was like so Like that's not a strat like doing what you're preparing is not a strategy, right? So we spent time around getting alignment around strategy. We spent time around locking in the concept of from a process perspective of an executive sponsor so that so that you got the alignment early tops down on strategy, and then it made sure that when we were spending time on things, it tied to that. But frankly, Minya who had a reputation and we worked hard on this, but it was just a little bit of the reality at some point of the culture was, you know, we had a reputation for being a little bit slow. And so we tried hard to make sure that we were transparent with entrepreneurs around the different

46:30hoops and stuff we were going to have to jump through together so they could feel in control of it and we could feel like we were in it together instead of just feeling like this monolithic bureaucratic thing and it wasn't that but it was just a nature of sort of how things got done and that culture and sort of where they were. And the culture of the company affects the process. Asanga, I mean, we had company had been founded like three years before. I mean, Marx is incredibly aggressive dynamic entrepreneur.

46:56if he believed it made sense and we could convince him that we could go do it. So I remember working on a deal and you know we found out that some entrepreneurs had spun off from one company that we thought was interesting and gone and done something else and you could just tell from talking to the guy that went left behind was that the real creative juice had walked out the door and and so it was basically like you got off the phone and it was like being in a movie I was like find those guys you know and so it's some of the team got the Someone on the team got them on the phone We literally like two hours later. We had them on the phone and I was like can you come to San Francisco tomorrow and they were like No, like are you crazy? I was like great. We'll be there at one o'clock And we like popped on a plane and went down and like it was sort of like it was this incredible You know, it was fun because you felt like you were gonna go make it happen immediately

47:48It was that type of time in that company and from a strategy perspective, we had the sort of tiger by the tail in terms of what was happening with social and everything. We knew the categories that we needed to add from a social gaming perspective. You need to find the teams to go do them because we didn't have enough people in the house to do it. It was that kind of voracious growth. And so it made strategic business sense to try to move that fast. And part of it was just again, the culture at the top.

48:16I guess my point is the culture of the company, the strategy of the company, where it is in the arc of its growth, will define what process it creates and how it goes about it, and then also what it sort of means. At Adobe, we have these bigger arcs that we're working against, and the thing from a corporate strategy perspective, What we've been focused on for several years are sort of three big turns. One is, as I sort of say, everyone in both the consumer and the enterprise side has been dealing with, which is this unbelievable wave of mobile. And like, you know, how do you get it to the point where it's truly a tailwind? There's only a handful of companies that I think have really cracked the code. Facebook, the pivot they did, and I was there at Zanga when they were trying to figure that out, and if neither one of us

49:09really had it working for us. They figured out how to make it work for them and it really took their business to another heights. And it's like every year when Mary Meeker, now a client of Perkins formerly, Morgan Stanley, comes out with that internet report. And there's that slide where she shows the percentage of time spent on the internet shifting the mobile. In every year, it outpaces the trend line from the year before.

49:34And it's like how do you get it to the point where that's truly a tailwind so that that is just naturally making your business exceed expectations? So that was one. It's like make mobile a tailwind across our entire business. Second was it's obvious when you look at the consumer internet that the last 10 years have been around unlocking network effects right through social networks, marketplace business models, platform business models, there's an interesting opportunity, I think, in the sort of SaaS-based enterprise to look at unlocking similar network effects. And the way you do that is by making data and content like really strategic assets. And historically, enterprise software has largely been, you know, we're tools. You know, we'll sell you a tool and you do whatever you want with that tool. Whereas consumer platforms look at data and content as the strategic assets that are sort of theirs. And there's a hybrid approach that

50:28I think you're starting to see emerge in the B2B businesses as well, where customers certainly have their own data, but they blend it with network level data from the technology providers as well. And so those are some big trends that we've been openly pursuing, and are really sort of came from outside in analysis of what was happening, not just in our own space, but actually was happening across the broader landscape, including the consumer world that I'd sort of seen at Yahoo & Zanga.

50:57Yeah, that's great. It's really cool. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part. Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making.

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53:08Do you guys have any kind of internal process where you look back, or even just isolated examples of what you look for and success metrics of yes, that was a good acquisition, and we should do more things like this? So one of the things that our teams responsible for under me is the M&A integration function. And I've always felt like that's a critical to be combined in the same group because otherwise it breeds a behavior that sort of feels like, hey, we're just responsible for banging out the deal.

53:38It doesn't matter if you throw it over the wall and someone else will integrate at that type of thing. I always myself have thought of the job as a growth job. It just happens that a deal is part of it and you have to partner with the entrepreneur and partner with the business owner and sort of be CEO of that growth opportunity until someone else can truly take the mantle that will be responsible for running that business. And if you think about it that way, there's little things where you put a little extra amount of care and attention and things like retention packages and even though the entrepreneur is telling you that this person is critical you're actually sensing that maybe that's more for historical reasons and they don't understand that in the bigger company once they're inside this person who's been their right-hand person from an operational perspective there's like three other functions that are going to serve that purpose for them and they're actually less important so you kind of underweight you sort of

54:29Talk to them and collaborate to figure out how actually you want to maybe reward them more at the time of the deal but actually put a little more Retention for someone else that's gonna their their their importance is gonna go up post acquisition those types of nuances if you're not focused on the integration when you're When you're doing the deal you just do things differently and and so that's important and so by having the integration function in there we We make sure that you know, they're in our weekly meetings and we share learnings and it's sort of part of the culture. So to me, it starts with culture inside the group, which is, you know, it's a growth leader function, not kind of a deal function. So that's one. From a formal sort of post-mortem evaluation process, we commit to reporting out to...

55:20in our CEO and CFO as well as the board every quarter. We do a report for two years after a deal that reports against basic key value drivers and metrics. As you might imagine, there's financial one. There's a product one. There's sort of employee retention depending on how many people were trying to retain that type of stuff. And excuse me, we try to make sure that we're being hard on ourselves.

55:49not just greens across the board, but we're being honest about where things are sort of yellow and red. And every once in a while, we'll do a more formal, deep dive post-mortem if something hasn't gone well. You know, nothing ever. These things are really hard. And as I alluded to earlier with the statistics from the profit from the core, I always joke that in general, you know, this is not MBA free-threat shooting. It's much more Hall of Fame.

56:15baseball hitting you know meaning yeah those that aren't sports fans you know it's not 70 80 90 percent it's it's probably plus or minus, you know, 30% is not all bad. And our track record at Adobe is actually, you know, dramatically higher than that. And every now and then, it's like you make a lemonade out of lemons where the things didn't work out that you expected into, but you had the right team and the culture fit and the product build from and you went in a slightly different direction. And that's okay too, right? And that goes back to why culture fit is important. It says if things go wrong and the market plays out differently, you can still create value.

56:49There are definitely companies that have meaningful hundreds of millions dollar bets that are effectively swinging misses in complete write downs. And we haven't had that. And I think a lot of it has to do with the culture of focusing on thinking about the long range before you even do the deal. So the post-border in the valuation is important, but it's more the fact that you know you're going to be doing it and you know that that's what we all care about. And that's what it would sort of change is the upfront.

57:19I love that as a way to wrap it too. Culture is what's going to drive. It's interesting to think about back to this analogy with Venture. The happiest day of the next two years of your company is going to be when you close that round. Then the real hard work starts.

57:45It's the entrepreneurial drive that's going to keep founders engaged when life is quite challenging. I'm sure that's the same after an acquisition inside the company and it gets back to, if it's not the right culture fit, you're not going to have that drive to keep going. 100%. It can be sad, too, because you see it where entrepreneurs who sell something and it doesn't fit and it ends up withering on the vine or being killed or dies inside a big company. You meet those guys later, or women, and it's like they can't be more bitter. Something they poured their life into, they feel wasn't respected and honored and whatnot. And sometimes the marketplace out differently and they get that and that's that. But if a big company through bureaucracy or missteps or lack of culture fit or whatever,

58:43destroys the labor of love that every startup is. That's just such a tragedy, right? And yet in turn, the legacy that accrues to the founder when something is phenomenally successful post-acquisition.

59:04is enormous and you see that, right? And so that's why I think this fit and people being aligned and going about things the same way just matters so much. Because what you said about that kind of moment in time, hey, celebrate it, you got the money in the bank. And when you do us selling the company, it's literally, it's not just the money in the company's bank, it's usually the money in the entrepreneurs bank account.

59:30So it's worth celebrating. It's awesome. It's amazing. We always love to celebrate with it with them. But it's like, that's why we test so much. Yeah, it's day literally. It's day one. It's the beginning, not the end. And if you aren't fired up about that, by the way, it's okay. If you're not, you just got to be honest about it early on because if you try to pretend like, yeah, I'm in it for the long haul. I'm so excited. This vision is like, we'll figure that out. And then you piece like that's when you're going to be better, right? You can't fake passion. Yeah.

1:00:00Totally. So true and so many walks of life. Let's move a real quick. We do have a follow up. We want to make sure we cover this week that I will just mention briefly, but Instagram. So Taylor, one of the things we do is if something new happens on one of the deals we've covered in the past, we call it out on the show. And in this case, relevant to two episodes we've had in the past Instagram watch stories so we covered Instagram as one of our early shows and then we covered Facebook's failed acquisition of Snapchat and super interesting to watch what's happening with Instagram stories yeah I don't want to dive too much into this because it's not not the dedicated episode for it but you know Facebook is very scared of Snapchat Snapchat doesn't have the global penetration that Facebook does so there's you know plenty of

1:00:52of opportunity to defend international turf there but they very well should be afraid of Snapchat because of the engagement that they're getting and the kind of it's the first place that people check and we're a lot more activity happens in Instagram and it's really interesting to see Facebook after having some failed attempts to launch Facebook branded platforms to disrupt Snapchat instead saying you know what All these kids are already on Instagram. Even though Instagram is about that one perfectly curated crafted photo, let's see if we can throw this completely other paradigm into this and see if Instagram can be the one hub for that generation. I feel like this might even, this might merit a future episode. If you want to hear that, let us know on email or Slack. But let's move on quickly to Carvouts. Taylor, did you want to go first?

1:01:45Yeah, absolutely. So my three most recent reads, by the way I read. constantly. I'm sort of at my family. My wife is definitely much more of a perger. And I think if I moved entirely to a Kindle, she'd be happy. But I tend to not only like to read books, but then sort of see them around the house that just kind of makes me happy. I grew up in one of those households. And so it's part of life and part of embracing everything that's out there to be learned. And you can feel like you can never have enough time to get through them all. But the three most recent ones I've read and I actually loved all three.

1:02:18One was mindset by Carol Dweck, which talks about the growth versus fixed mindset. And just phenomenal. And like, look, the basic concept you can embrace and understand in 30 seconds, you know, is the concept of are you approaching life, you know, with this feeling that everything is fixed and you just got whatever talents you were given in life. And that is what it is. And you have to sort of...

1:02:43expose those but not you know you don't have a chance to grow or do you believe that actually you know you have what you have but it's basically irrelevant and the question is you know what are you you know what are you gonna going to grow towards through through hard work and effort and what was fascinating by reading the book is when you describe it the way you just did anyone who's sort of in you know ambitious type A entrepreneur or You know, like those of us on this podcast are, I'm sure thinking, well, I'm a growth person, I'm always trying to get better and it's great. And I read this book and was very humbling to sort of realize that in some parts of your life, you were completely growth oriented. And other ways you had intrinsically and sort of had this concept of a fixed mindset that, oh, well, I just, I have talent in that or I don't. And so thinking deeply about that for yourself, for your kids, if you're a parent, for your team, if you're a leader, I thought was

1:03:36incredibly powerful. Yeah, wow. I was having drinks with a friend the other night and he asked me, so are you more of a routine person or are you like flexible to do whatever? And it was so interesting that in the work that we do at Pioneer Square Labs, we're super flexible. If it's like, hey, you got to fly down to LA in two days because the opportunity for this company is to meet with someone there.

1:03:57doing that or if it's your marketing today or your product today like all over the place and schedule changes all the time but in my personal life like I need to wake up at the same time and have the exact same morning routine every morning or also not myself and it's amazing how How different we can be in different aspects of our lives when we think of ourselves as either routine person or growth person or whatever it is and it's not necessarily unilateral across the board Yeah, no totally that actually I mean that makes me think of another one which You know, if you're exploring all the podcasts and this one is, I think, literally you're near the top of the charts, but I've definitely been a joy in Tim Ferriss's one and his focus on routines and the questions around morning routines and stuff just fascinates me because I'm probably, there's things where I'm somewhat routine oriented, but there's a lot of things where I rebel against it and don't wanna.

1:04:49commit to an absolute strict routine. And because I kind of like the dynamic that you described of like being ready for the most important thing and hop on the plane and, you know, go do that. And it's fascinating to sort of think about how important routines and systems are to success. That's another one out of five. Before I turn it over, I'll just flag the other two. The second would be a shoe dog about Phil Knight from Nike.

1:05:17unbelievable entrepreneurial journey and just an incredibly revealing memoir that I've really just found illuminating, inspiring, and awesome, but it also, to me, for you David, on the venture side, it will give you, you will come away reading this book, you'll feel like you're doing God's work.

1:05:39I think we underestimate how this concept that capital is almost available from anywhere, and that you guys in the venture community, and actually I have Adobe Ventures under me as well, so we do this here and there, where it's like we're competing to be the ones who provide capital to the right businesses or whatever. And it's like, there was this point in time where businesses that are now changing the world, Literally couldn't get capital is just insane like reading the story and I'm not talking about a short period of time like for like I can't remember like seven eight almost ten years He was like on a shoe string and like trying to get these bank loans. It was just crazy It just it was it blew your mind. So it was that was that one was phenomenal David is doing God's work. Let's be clear. Yeah. Yeah, exactly exactly And then the last would be originals by Adam Grant

1:06:33And that was just sort of focusing on creativity and sort of what are the hallmarks of people, and how do they go about that? And how do you be original? And who are the originals and stuff? And so, as I said, I think one of the fun things about software internet is it gives a lot of clay for all of us to play with. And you can absolutely be an original if you want to go be.

1:07:01Those three have been a lot of fun. The last, probably even two or three weeks, I've kind of churned through all of them. That's awesome. The originals hadn't heard of that. I have to add it to my list.

1:07:11Maybe I'll go next real quick because it picks up on a couple of those themes from a from a disparate angle. We we started the episode on a sports topic. So I can't ended on one. I can't not ended on one given that it's the Olympics right now and my carve out is if you haven't seen everybody's got to go watch Simone Biles the women's gymnast and she is this girl is like the most dominant athlete in her sport. I think I've ever seen and she's like She makes Michael Jordan look like he's in the D league. You know, it would be the the the comparison and she just just now just won the individual around gold medal in the Olympics by an enormous margin. Yeah, I've never seen the person who was best in their sport be so far ahead of the entire pack. Yeah, incredible. And one of the I was watching an interview with her reading an interview with her and one of the things that

1:08:08was said in it reminds me of the mindset Taylor of your car about when she was a little younger when she's still only 19 but when she was a little younger she didn't really have a lot of confidence in herself and would say oh well I just I'm not as good as the other girls you know and like and now that she is like the most dominant athlete that's ever lived in the sport pretty inspiring so that's mine for the week yeah love it mine's a quickie I for those of you who listen to the Alaska Airlines episode know that I have a thing for airplanes and There's this incredible video on Vox. It's only 10 minutes long on the history of the Concorde, how it came to be, how that was funded, what the other supersonic airplane undertakings were, and why we don't have supersonic flight today. So if that's for airplane nerds out there, you probably know it all, but it's just a really well put together a little 10 minute video and it's thrilling. So I highly recommend going and checking it out. All right, listeners. Now is a great time to talk about one of our

1:09:11favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale. Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now.

1:09:30It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers, and how fast you can use that signal to guide what you shipped next. This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

1:09:56So if you want to make learning your competitive advantage, whether you're building new AI experiences, or just evolving your existing core product, go to statsig.com slash acquired to get started. That's all we've got. Awesome. That's a wrap. Thanks everybody for listening. And most importantly, huge thank you to Taylor for joining us. Yeah, Taylor, where can our audience find you? Yeah, no. I'm here at Adobe, so feel free to drop me a line at baritadeobe.com if you have something you think we should be looking at.

1:10:25I'm also on Twitter, just Taylor Barredo, and LinkedIn as well, so feel free to reach out and, you know, happy to chat. Awesome, and listeners, if you like the show, rate us on iTunes, tweet this episode to your friends, share it wherever you see fit, and thanks so much for listening. We'll see you next time.