Back in August, Austin privacy startup Osano had a tough decision to make.
The early-stage company, which helps businesses manage digital privacy and comply with emerging laws, had three term sheets in hand for its series B fundraise. It also had an offer to sell a majority stake to a private equity firm.
At the time, startup funding was at one of its lowest points in several years, and for many companies, a clean exit might have looked appealing.
But Osano passed on the deal, accepted a $25 million investment and kept building.
"When you're building an early stage company, it's always true that there will be exit opportunities along the way," Osano co-founder and CEO Arlo Gilbert said. "And the job of the CEO and the board is to figure out whether those exit opportunities are better than what we have in the future – or equal or worse. And we just believe so firmly that the data privacy category itself is just in the early innings. It's just getting started... If we sold too early, I think we would spend a lot of time regretting it."
Now, it's Osano doing the acquiring.
The startup said Dec. 5 that it has acquired one of its primary competitors, Washington, D.C.-based WireWheel, for an undisclosed amount.
Gilbert said a majority of WireWheel's employees are joining Osano, although some employees weren't offered new roles because of the redundancy between the businesses. Osano now has about 90 employees, up from about 45 a year ago. And it plans to continue hiring for new roles, especially in engineering and sales, based on growing revenue.
On paper, the new deal looks almost like a merger of equals, given that WireWheel had raised about $44 million since its founding in 2016 compared to the $44 million Osano had raised since its founding in 2017.
"I'm kind of coming in and getting to buy a company that, at one point in time, I saw as somebody to aspire to emulate," Gilbert said. "And so that's really exciting. I think it's a little bit like getting to meet your favorite musician – or, better yet, more like getting to play on stage with your favorite musician. Or, maybe even better than that. It's getting to have your favorite musician open for you."
And, while they offer similar data privacy tools, they have slightly different audiences.
Osano has largely targeted and become popular with mid-sized businesses, although it counts a few big global players among customers. WireWheel, meanwhile, had become a go-to privacy platform for enterprise-scale businesses including several of the largest companies in the world.
Gilbert said he had tried to convince WireWheel's leaders to consider being acquired months before.
"They were doing well and they had a good company," Gilbert said. "They had great investors like NEA, and so he kind of told me to pound sand."
But months down the road, the economy continued to falter, startups were having more trouble extending their runways and many of their boards were beginning to eye the exits. That's when a mutual friend reconnected the Osano and WireWheel founders. Quickly, they discovered they'd be a good match for each other.
This is Osano's second acquisition, following its 2019 acquisition of Cookie Consent. And Osano might just be getting started.
Gilbert said Osano has grown very meticulously and reserves most of the capital on its balance sheets for growth. It has cash on hand to potentially acquire one of the several early-stage companies it has been in talks with in recent months, among other options.
"We also have been talking to a number of debt facility providers and PE funds about the possibility of doing something even larger," Gilbert said. "We're thinking like maybe $100 million in acquisitions over the next 18 months. But that is still TBD."
The ambitious vision comes as data privacy continues to pop up in the headlines as new privacy laws take effect and the European Union begins to levy big fines following the rollout of its wide-reaching General Data Protection Regulation, or GDPR rules.
Gilbert said Osano often sees a new wave of customers roll in when new laws first emerge, then another wave when those laws take effect and yet another wave when companies begin to get fined as government begin enforcing new rules.
"Our vision is really to be the one-stop shop for all data privacy compliance, and that may very well expand out into other areas of governance and risk over the next 18 months," he said. "So we think that we are uniquely positioned to make acquisitions and have them succeed."
