Jive Software hosted a dinner for customers and journalists this past Wednesday night, to discuss the “social business” space. I was honored to receive an invite, but getting to Spruce would have taken at least seven hours from Boston (depending on flight times), so I instead opted to do a phoner today with Ted Schlein, a Jive board member at partner at venture firm Kleiner Perkins Caufield & Byers.
Here’s an edited transcript of our conversation, including discussion of a possible IPO. For context, Kleiner recently led a $30 million Series C round for Jive:
Term Sheet: Your partner Matt Murphy first saw Jive a couple of years ago, but passed the deal onto Sequoia Capital because, in your words, “it wasn’t right” for Kleiner Perkins at the time. What was wrong then, and right now?
Schlein: “Right” is a weird word to use, although I’m sure I used it. At that point in time, we weren’t doing a whole lot of open-source companies. We had done a few and looked at a few more, but it wasn’t our main thrust. Jim Goetz at Sequoia was doing a bunch of them, though, so it made sense for him.
Remember, at the time Jive really was an open-source project looking for a business. Jim did a great job with the team and helping shape the company to where it is today. We could look back and say, “Shame on us for not having that vision.” Or just saw that it wasn’t an opportunity for us then and later became on. Either way, we feel fortunate today to be involved.
Jive CEO Tony Zingale said after the funding as saying that the company hopes to IPO within the next year. What does is need to accomplish between now and a public offering?
Our goal is to help these companies grow and put in place all of the proper operational procedures. If a public offering happens it’s great. If it’s not ready, that’s okay too.
To be ready, Jive or any other company needs a full management team operating well together, predictable operational metrics, happy customers and a stable technology base. Basically, a company operating on all cylinders.
You can never remove all risk from these companies – that’s why S-1 filings have 50 pages of risks listed – but the goal is to remove as much of it as you can.
Jive is a great company with one of the best enterprise software management teams around. They’ve done it before, the company is growing at a rapid pace and it’s clearly the leader in its space. The question people have is: “How big is that space?” You never know until ten years into an emerging market.
What we do know qualitatively, however, is that social networking is here to stay as part of everyday life on the consumer side. LinkedIn has shown that it can also work on the business side with individuals, so why not bring social networking into business systems? It just seems to make sense.
You call social enterprise an emerging space. Does that mean you’re seeing lots of Jive-killing startups out there?
Whenever there’s a new hot space, there are lots of people chasing it.
You could try building one of those second-tier companies that are hoping to be a Jive-killer, or you could just hitch your wagon to Jive. Obviously we get to speak with our money and our time, which is what we did.
There are two to three winners in any new market, but only one big winner. If you look at Jive in terms of market share, maturity of product or those metrics, it’s the winner.
Let’s go back to the IPO. Do you believe “social enterprise” will be a story that Wall Street understands?
I actually think it’s going to be a great story to tell. What Wall Street understands is the growth of Facebook. The growth of Zynga. The growth of LinkedIn, which is rumored to be close to a public offering (even though I don’t have any inside information).
And then you can say: Hey, customers have taught us that social networks are a big deal outside of the office, and knowledge workers are going to demand that same kind of interaction and ability and insight within the office.
Would it help Jive if a company like LinkedIn did go first, to clear a path?
My gut would tell me sure, it would be good for Jive if someone else was willing to spend money educating the market. But it’s not a necessity.
Silicon Valley is great at creating the next wave of buzzwords, like social networking. Now we’re moving into the next stage of consumerization of enterprise software. I think the first people who taught us about that was RIM. And there are other examples that can be used to show that the individual has power within enterprises to generate broad adoption. Jive is part of that next wave.