EDITORS CHOICE 14.01.16

Lifesize and Logitech part ways

Craig Malloy, Lifesize
Craig Malloy, CEO of Lifesize

After 18 months of restructuring, Lifesize has spun off from Logitech to pursue the web audio and video conferencing market as a separate entity. Craig Malloy, CEO of Lifesize, talks to InAVate.

A product revamp – that has seen Lifesize shift to a cloud delivery model – and restructuring that streamlined a company of 550 people to just 250 personnel has culminated in the spinout backed by three venture capital firms.
 
“In about 2013 the video communications market started to change pretty dramatically, moving from on premise infrastructure in company data centres to a cloud service delivery model,” said Malloy. “Lifesize was not set up to participate in that new fast growing market. We realised if we wanted to be successful in the future we needed to completely reinvent the company.”

In July 2014 Lifesize launched its cloud service platform which Malloy described as a “great success” but said that both Lifesize and Logitech realised that the companies’ business models were diverging. 

Malloy said: “As a cloud service company we're selling subscriptions. We're going to have an increasingly large deferred revenue component which means our gap P&L (even though we're cash flow positive) would show losses.”

He added that Logitech and Lifesize mutually felt that, with the differing business models of the two companies, it would make sense for part ways.

“The more successful we are and the faster we grow, the more we would detract from Logitiech earnings every quarter,” he added. “It's hard to square and you would have to explain that to the public company analysts at Logitech. Lifesize is a b2b video collaboration service provider - it's not really a strategic fit in Logitech, a consumer hardware peripherals business. 

“Also we see an opportunity to invest faster for growth and maybe even become unprofitable for a little while to invest for growth,” he added, noting that it would be easier to do that as a small, venture  backed, private company.

As a separate entity Lifesize is backed by Redpoint Ventures, Sutter Hill Ventures and Meritech Capital Partners who have injected $17.5 million into the new venture. Logitech remains a major shareholder. 

“No other company in the industry has Lifesize’s global distribution, channel relationships and unrivalled product differentiation,” said Jeff Brody, partner at Redpoint Ventures. “It is obvious to us that the enterprise-grade reliability coupled with its unique hardware advantage will keep fuelling the company’s remarkable growth. Redpoint has backed Craig in each of his last three ventures where he has pioneered every new and disruptive innovation in video collaboration. We are excited to support him once again in leading this next wave of cloud-based collaboration.”

 “Together with our three co-investors, we determined that the capital, SaaS industry expertise and growth-focused approach would be key ingredients to realising tremendous long-term value,” said Guerrino De Luca, Logitech chairman. “Logitech looks forward to participating in the journey."