By Lucinda Shen
February 24, 2021
Diligent CEO Brian Stafford is making a big bet that corporate responsibility is the next business software play, akin to Oracle’s technology in the 2000s or Salesforce’s in the 2010s.
In fact, he’s just staked upwards of $1 billion on it, sources say.
Today, corporate governance software maker Diligent announced that it had acquired Galvanize, a Canadian developer of risk and compliance software. While Stafford did not disclose a price, sources pin the figure at $1 billion. That comes after Diligent acquired another business in the space, Steele Compliance, for about $325 million earlier this month, according to those sources.
The deals create a company privately valued north of $7 billion, and one that is expected to reach $550 million in revenue this year.
In an interview, Stafford says he believes the combination of the businesses will create software that gives board members more insight into any potential risks—whether in cybersecurity, human resources, its supply chain, or elsewhere—within a company.
“It will create more transparency within the organization,” Stafford says in an interview. “Anytime there is an issue, someone already knows within the organization. So whenever you read a story about a financial services firm being hacked, or any time you hear about issues of fraternization or inappropriate behavior—it existed in an employee survey or a help desk phone call. That data exists in some system… but it never made it up to the right people.”
Backed by Insight Partners, Diligent makes software that lets executives and board members share documents and analyze their company’s metrics on one dashboard. By integrating Diligent with Galvanize and Steele, Stafford says its roster of 19,000 or so customers will be able to use a combination of human reporting and automation to generate reports on risk and compliance for the business rather than, say, solely relying on the chief security officer, internal audit, or head of risk to float the report to the top.
Of course, Stafford acknowledges it’s not a perfect system. Much still relies on human reporting.
“Organizations that have the best controls and best transparency tend to miss fewer of those [risk and compliance] issues. If true corruption exists within an organization, that’s a difficult thing to immediately solve,” he says. But the hope is that the needle overall moves in the right direction.
Diligent’s deal comes as subscription-based businesses—its customers pay annually—attract investors with the allure of steady, predictable revenue. In August, investors including Blackstone and existing investor Clearlake Capital poured some $500 million into Diligent, valuing the company upward of $4 billion. Insight Partners, which remains Diligent’s largest shareholder, took the business private for about $624 million in 2016.
Galvanize, meanwhile, has raised some $50 million in total from investors led by Norwest Venture Partners.
For his part, Stafford has even higher ambitions. He sees the past two decades of enterprise software in two tranches: In the 2000s, it was the software that helped companies manage their day-to-day operations that gave rise to the Oracles and SAPs of the world. The 2010’s meanwhile heralded marketing software makers like the Adobes and Salesforces.
“We believe that the 2020s plus will all be around the ethical business and stakeholder capital and making sure that companies have the right systems to make sure that they don’t make mistakes,” Stafford says. “Organizations are moving more toward stakeholder capitalism with BlackRock CEO Larry Fink’s view on the purpose of an organization or the Business Roundtable on caring more about stakeholders.”