If you’re targeting small business customers, there’s hardly a better name to team up with than Intuit. That was the attitude that Docstoc founder Jason Nazar held when first engaging in business development talks with the company behind Quickbooks, TurboTax, and one of the largest payroll platforms on the planet. But those talks quickly grew into something larger, as Nazar revealed today that Intuit has agreed to acquire his six-year-old startup and make it the foundation of its new division focusing on solo-preneurs, self-employed professionals, and independent contractors.
The companies did not reveal the terms of the acquisition, which is expected to close before the end of Intuit’s fiscal second quarter (ending January 31). Often this indicates a soft landing or an otherwise unimpressive outcome for the selling company, but with Docstoc that doesn’t appear to be the case. The company has been profitable for several years and has millions of dollars in the bank, Nazar says, not to mention 50 percent revenue growth over the past year.
“This is a very, very good deal for all our shareholders and employees,” Nazar says. “We weren’t looking for a buyer. It happened very organically. But we’re thrilled with the opportunity to continue building this in conjunction with a world class brand .”
Both Docstoc and Intuit have described themselves as the “operating system for small businesses,” indicating that there may be true synergies in the vision and culture of the two companies. Docstoc has been more focused on the long-tail of this market, namely earliest stage companies or those with just a handful of employees. It’s a market segment that Intuit has yet to reach.
“We’ve been asking ourselves, how do we start working with smallest of small businesses?” says Intuit VP and GM Alex Chriss. “We think there’s about 22 million of the 28 million small businesses in the US that have one or two employees. In many cases, they have a ton of questions and needs that they’re ill-equipped to answer on their own.”
Docstoc, which operates a portfolio of Web properties including, Docstoc.com, License123.com, and newly-acquired BestVendor.com, offers these small businesses more than 20 million documents and 20,000 pieces of premium original content aimed at answering all manner of business questions. On its own, the company had grown its audience to 40 million registered users and nearly 16 million monthly unique visitors, numbers that it should be able to extend and further leverage given Intuit’s brand and product portfolio. The company had recently restructured its offering into a single, all-you-can eat subscription product in October of this year.
Chriss explains Intuit’s decision to buy versus build in this case, saying, “They’ve been around for a long time and building out communities and network effects takes a long time. These network effects are very strategic to us and one of the things we love about Docstoc is that its model is not just premium content, but also includes a user-contribution model.”
Intuit will look retain the entirety of the 55 person Docstoc team as part of this acquisition, according to both Nazar and Chriss, and the company will continue to operate out of its Santa Monica offices. Intuit’s nearest office is its Woodland Hills payment services office 20 miles north. The companies have yet to decide on a going-forward branding strategy, but Nazar expects the Docstoc brand to live on.
Nazar revealed news of the acquisition to his staff less than an hour ago at 10am this morning, meaning it will be some time before we learn whether the move to a giant company and some measure of newfound liquidity gives anyone ideas of greener pastures. The challenge for those that stay, and for Intuit, will be to maintain the familial culture and fast-moving startup attitude that has gotten Docstoc to this point. Historically, 30-year-old public companies have been less than conducive to innovation and disruption.
Nazar has become one of the elder statesman of the LA tech scene. He founded the company in 2007 and is backed by a local crew of prominant angels and VCs including Rustic Canyon Ventures, Crosscut Ventures, Matt Coffin (LowerMyBills), Kamran Ppourzanjani (PriceGrabber), Brett Brewer (Intermix Media), and Mike Jones (MySpace). In the ensuing six years, Nazar has founded a successful monthly event series called Startups Uncensored and become an active advisor to a number of up-and-coming entrepreneurs.
Given this standing within the community, there are likely to be mixed feelings about the exit. The majority of people here will undoubtedly be happy for Nazar and his team, who have been working longer than most at building a venture-backed success story. And “putting wins on the board” is generally a good thing for an up and coming startup ecosystem. It’s certainly better than the alternative of flaming out.
But what LA really needs are tentpole companies – those that grow large enough to become acquirers themselves and which train and shed talent back into the local startup ecosystem. By that measure, Docstoc’s decision to sell to Intuit is somewhat disappointing. It’s unclear whether the company had juggernaut potential, and in recent years it appeared to be approaching stability more so than escape velocity.
“I think this should be viewed as another really meaningful win in the column for LA companies,” Nazar says. “We’re a real LA story. I think of us as part of the class of 2007, meaning we got started when things were just starting to ramp up again down here.”
There’s no doubt that it’s been a long, hard fought road to this point. Nazar founded Docstoc on the precipice of the 2008 financial meltdown and grew to a seemingly positive exit in an era where most startups withered on the vine due to lack of capital or the inability to attract technical talent away from the stability of traditional careers.
For those reasons, today’s news should be received positively. An acquisition doesn’t necessarily represent an end. Nazar is taking it as the opening whistle to a whole new game, one being played on the biggest stage imaginable.