House with a letters on it that says, "Giants Beware"
Does Huddle Software have enough bite left to compete with EFSS giants after its private equity acquisition? PHOTO: woepies

Huddle Software got clobbered by the giants of enterprise file sync and share (EFSS) and collaboration, leading to this month's sale to a private equity firm for far less than its peak valuation.

That's the take some analysts shared with CMSWire after news broke earlier this month that Turn/River acquired London-based Huddle for $89 million. 

Huddle's reported peak valuation was $300 million when it snagged a $51 million Series D funding round in 2014

"This is a very competitive space with huge gorillas like Microsoft with OneDrive where it’s basically baked in for free for a lot of customers," said Cheryl McKinnon, principal analyst for Cambridge, Mass.-based Forrester who covers enterprise architecture. "And you have basically very aggressive marketers like Box and big vendors like Dropbox and Google with Google Drive and G Suite coming on hard in the last year."

Cracking a Giant Market

Headshot of Forrester analyst Cheryl McKinnon
Cheryl McKinnon

Small to midsize vendors will find it "increasingly tough," McKinnon said, if they "don't really have a strong point of view where they're not focusing on specific verticals or have a very specific capability or angle where they can double down on their strength."

In the all-purpose file-sharing, document-collaboration and lightweight document management capabilities in the cloud, the "Microsofts and Googles of the world have such a competitive advantage."

Huddle offers a broad set of capabilities, including collaboration, content library services and some lightweight document management use cases. It also has a nice focus in the UK government public sector, McKinnon said.

But it wasn't easy to keep up. 

Box's IPO in January of 2015 featured a market cap of $2.8 billion. Dropbox is closing in on an IPO and has had a valuation of $10 billion.

"Dropbox is growing more quietly than a lot of people realize," McKinnon said. "They’ve made a decent pivot into the enterprise the last couple of years, adding more administrative capabilities to keep pace with what Box has done in the last two to three years and what Google has done most recently. Winning deals in media companies and their large files — that’s where Dropbox excels."

Cloud Security Focus

So where does/did Huddle excel? 

Huddle earned McKinnon's best rating in the area of usability in her Forrester Wave for Enterprise File Sync and Share Platforms, Q1 2016. It also scored well in collaboration and file sharing and security capabilities but did poorly in market traction, revenues and partners.

It was named a strong performer along with Thru and Workshare while Box, Microsoft, Google, Dropbox, IBM and Intralinks were named leaders by Forrester.

Huddle had a sharp focus in its early days and was wildly popular in the UK, according to analyst Alan Pelz-Sharpe, founder of Deep Analysis. Initially, he said, Huddle focused on the opportunity to sell through the UK Government G-Cloud and landed some early deals with government.

In its early days, Huddle also focused on cloud security, which Pelz-Sharpe called a novelty at the time. It gained certifications like FedRAMP in the US selling to the likes of the Department of Homeland Security.

"When they started the cloud was considered insecure, and Huddle was saying, 'You're right, the cloud is a leaky place. Look, we fixed that,'" Pelz-Sharpe told CMSWire in an interview. "That’s why I was really impressed with them early on. In those specific deals, they could stand shoulder to shoulder with anybody."

'Over Ambitious'

Alan Pelz-Sharpe
Alan Pelz-Sharpe

But not any more.

While cloud security is still a strong selling point, Box does a "very good job with security and now Dropbox does a better job." Intralinks, Box and Microsoft each beat Huddle in security, according to Forrester's EFSS Wave report.

Huddle tried to compete with fellow EFSS leaders, even once trolling a Box user conference in San Francisco when, Pelz-Sharpe recalled, Huddle representatives took to the streets of San Francisco to offer Box users something better than a "Box Lunch."

"They were over ambitious," Pelz-Sharpe said. "The market was against them. This is a tough space to be in. They're going head-on with Office 365, a juggernaught."

Huddle also "fell off the radar" marketing-wise three or four years ago, he added. 

"You just have to sort of assume — and this is an assumption — that everthing was priced way too low in the first place, so it’s the typical cloud problem," Pelz-Sharpe said of Huddle's struggles. "You give it away for free then hope to convert or you give it away at a low price and hope to get them involved and then you up the price. It seems they haven't been successful in doing that."

'Grow Even Faster'

Does this so-called small fish in a big EFSS pond have any bite left?

Huddle's not saying too much about its new direction. 

New Huddle CEO Martin Brøgger had plenty to say about the acquisition earlier this month — only to delete his blog post later.

Business Insider obtained the deleted blog post from Brøgger and first reported the news that San Francisco-based Turn/River would be Huddle's majority shareholder. Brøgger is based in San Francisco.

This turn of events for Huddle may not come as a shock since Huddle said just four months ago it needed $5 million in equity or would have to find a buyer immediately.

Huddle came out publicly again in a Brøgger blog post published Monday, in which the CEO said Huddle selected Turn/River "because of their strong track record in accelerating growth in companies like Huddle." 

He said Huddle will "grow even faster within our core UK and US government and professional services markets as well as initiating growth in new industries, with many new and exciting use cases."

Huddle's founders, Alastair Mitchell and Andy McLoughlin, left after its 2014 funding round. Both went into venture capital.   

What's Next for Huddle?

Jim Lundy
Jim Lundy

Forrester's McKinnon said it makes sense for Huddle to focus on where it has "critical mass" and where it has differentiation, such as the UK public sector.

The industry's seen a "rising importance around ownership of data," she said, adding companies want assurances that cloud data and applications be located in their countries or regions.

Huddle "certainly has an advantage there if they wanted to play that card more aggressively."

Jim Lundy, founder and CEO of Morgan Hill, Calif.-based Aragon Research, said Huddle could compete in the emerging Digital Work Hubs market. 

Focusing only on government leaves a broader market for others, he added. 

"Huddle offers better collaboration features than many of the traditional cloud content management providers, but they don't talk about those features enough," Lundy said. "All best of breed cloud content management providers that don't pivot aggressively away from just file storage will face extreme pressure from Box, Microsoft (One Drive for Business) and Google."