WSO2 Founder Dr. Sanjiva Weerawarana’s note to staff over planned acquisition by private equity firm EQT

• Following is the note sent by WSO2 CEO and Founder Dr. Sanjiva Weerawarana to his staff following the announcement of its acquisition by private equity firm EQT

I’m thrilled to announce that we have just signed a definitive agreement to be acquired by EQT Partners, the world’s 6th largest private equity firm. EQT is based out of Sweden and its India arm (part of EQT Private Capital Asia) is the one executing this transaction.

What this means is that EQT is buying ALL outstanding shares of WSO2 and will become its 100% owner. That means they are buying our investor shares (Toba Capital, Cisco, Goldman Sachs, Redstart Labs and others), all common stock owned by current and former employees and all vested options. Portions of unvested options will get cancelled (details later).

Before going further, I want to first thank our angel investors James Clark and the late Adam Fremantle (our co-founder Paul Fremantle’s father) for giving WSO2 the opportunity to be born in the first place. They bet on the company when it was nothing but a crappy looking open office slide deck with made up numbers in an accompanying open office spreadsheet! And if Pradeep Tagare from Intel Capital hadn’t wanted to follow in betting on us because he wanted to see an enterprise tech company from the Asian side be successful, we would not have made it past 2006. Every investor saved our skin and gave us wings!

Toba has been a special partner. They came in as Quest Software in 2011, saved us from an acquisition in 2013 and went on to support us including with tough love (“time to stop burning cash: become profitable!”) at times. Vinny, Brinkley, Tyler (who was also our CEO for a couple of years) and various others from Toba all made this possible.

We all succeed in any endeavor by standing on the shoulders of giants. WSO2 got this far because of amazing people who gave us their shoulders to stand on and solidly held our feet while we wobbled, settled and stood on our own.

What does “signed definitive agreement” mean in simple terms? We have agreed to be acquired but we’re not acquired yet. That requires legal approvals from several countries and that can take a few months. We expect that it will take at least until July to “close” this transaction. It is at that time that shares will be liquidated (i.e. actual money will be given out) and EQT takes over.

The “definitive” part means there’s no backing off on either side.

What does this mean for each of us? One fundamental tenet of WSO2 has been that every employee is a shareholder of WSO2. I’m very proud that nearly 30% of the total proceeds are going to current and former employees of the company!

Please watch the company update meeting recording in case you missed it but here in a nutshell of how it will work for each of us:

If you have any unvested options, 25% of them will “accelerate” and automatically vest at the point of closing.

Any unvested options will get cancelled (i.e. they will disappear) at that time

All your vested options will get cancelled and cashed out by EQT at a price of $xx/share minus the strike price. The price is variable because it depends on a set of numbers at time of closing.

Any common stock you own will be liquidated at the above share price.

You will receive funds only after closing.

In other words, you each (have the right to) own a piece of WSO2 and you will get paid for selling that right to EQT at the point of closing.

What does this mean for our customers? Our incredible 700+ customers in 93 countries is who we do what we do for and what makes everything possible. They make us profitable!

Our customers will only see a bigger, better, stronger WSO2 from this and NOTHING else. We have always been committed to helping our customers be exuberantly successful and will continue to do that. We never said “the customer is always right” but rather that we will collectively do what’s right for the customer. We are just going to keep on doing that and helping them create awesome digital experiences at lightning speed and with ultimate security.

What does this mean for WSO2? Upon closing, I see it as the end of WSO2 version 1 and the start of a much bigger and stronger WSO2 version 2.

WSO2 v1 is where we got our footing and “made it”: We are on the cusp of $100M ARR and we will get there in Q3. Just for reference, one of the reasons we were attractive to EQT is that we are so unique in that .. there simply aren’t any enterprise technology companies in Asia that are at this scale.

EQT buying v1 gives everyone a chance to get a fair return on their investment — the incredible hard work that went into getting v1 to “make it”.

EQT is buying v1 to build an incredible v2! They want to get us to $300–500M ARR in the next 5 years and build WSO2 to become a global powerhouse. They are going to enable the company to buy other companies via M&A to accelerate that growth via inorganic channels. They are going to bring in a strong industry veteran board to help the company. They want me to stay on as CEO and the same goes for the leadership team and all employees. They are VERY serious about building an incredible company, starting from the incredible company we already are!

When we started WSO2 our vision was to build an enterprise middleware company. Not just “an ..” but the world’s #1 enterprise middleware company! Unfortunately we have not quite gotten that far :). But we did it our way: When Mule, Apigee etc. had raised like $300m in capital to get to our size, we did it with like $70m primary capital. We retained the Sri Lankan foundation and proved to the world that bloody hell it IS possible to build a global tech company from the “wrong” side of the world. We did it by never giving up on 100% open source. We did it by never doing FUD style marketing and selling. We did it our way.

Yet we had limits to what we could do.

I see v2 powered by EQT as giving us an incredible foundation to deliver on our vision (suitably modified .. it ain’t 2005 anymore!). We are off to the races to make WSO2 an institution in the enterprise technology space!

The first three months of our new marriage will be about working out the future plans, the future strategies and future everything. EQT has committed to introducing a new employee stock option plan so that employees can benefit from the new value we create from here onwards. The details of that will be developed along with the go-forward plan and shared with everyone.

It’s going to be a fun ride — strap on and get excited because it’s not going to be a relaxing ride! BUT it will be fun, challenging and rewarding for all of us.

I have repeated this many times: Life is a journey, not a destination. Today marks another milestone in our journey, but the journey continues. What deeply thrills me most about our new partnership with EQT is that they are joining us on a journey to go beyond stars to further galaxies. We pulled off many “impossibles” to get here. We will do more in the next iteration as WSO2, version 2.0.

What we have achieved is a collective team effort. I am not going to name anyone as that would not do justice to the many others who are equally a part of this journey and today’s milestone.

I will instead just say: Thank you