TeamViewer: an unlikely unicorn
In September 2019, TeamViewer remote device management service conducted one of the largest IPOs in the history of German startups. Company went public with an estimated €5.3 billion.
TeamViewer believes that its potential is yet to be seen. The service makes it possible to not only remotely repair computers, but also manage any device with internet connection, from wind farms, snow cannons in Alps to thermometers on African fish farms and solar panels in South Korea.
Team Viewer was used by Stephen Hawking, a world-renowned scientist, to control the telescope and with its help Parisian medical center receives data from ultrasonic sensors on the bodies of ISS astronauts.
Surprisingly, the service came around by chance.
Team viewer creation
TeamViewer was launched in 2005 by accident, at least that's what the official version states. Company's employees had to travel a lot around Ehingen to train customers to use their products and to present new ones.
TeamViewer founder, Tilo Rossmanith, realised that this routine was expensive and exhausting. He started to search for other ways to connect with customers and remote communication was on the table.
After considering and declining product offers from other IT firms, Tilo wrote his own application. With its help, it was possible to not only present new products, but manage clients' computers.
The remote access function was in such a great demand, that it became the main product. TeamViewer was born.
Being a big fan of Google and Apple, Tim tried to make his application as easy to use as possible. One of the main challenges was to make application work smoothly on any type of device with any level of internet connection.
TeamViewer did not require configuring a VPN or firewall - it was enough to install the client and register.
It worked. TeamViewer representatives say that the number of clients at the beginning grew due to virality and simplicity of service rather than advertising or promotion. Users gave feedback that was used as the base for TeamViewer improvement.
Initially, TeamViewer was focusing on small and medium size businesses. The full version price was starting at €298, while free version limited sessions to 30 minutes.
Product price did not scare customers. By July 26th, 2006, TeamViewer had been installed more than 350,000 times in 50 countries around the world. Representatives of the company noted that from the very beginning of sales, TeamViewer earned more than spent.
In 2007, TeamViewer allowed 25 hours monthly usage for free package subscribers. This stimulated rapid growth of popularity. In June 2008, the number of users exceeded 10 million, and by April 2009 15 million people became regular customers.
Sales and value estimates
Sales and value estimates
Until 2008, Rossmanith hardly commented on the company's operations. While being interviewed and asked a question regarding 10 million installations, Tilo gave very short answers and stated, that the company is not afraid of competition with VPN services, will continue to grow and his creation is mainly intended for small and medium business owners. That was all.
In 2009, Rossmanith received the German Business Innovation award and sold TeamViewer to GFI Software for an undisclosed amount. From that point on, Tilo disappeared from the media scope and does not reply to journalists’ enquiries.
Between 2010 and 2014, GFI Software team was developing the service in a complete secrecy. Company decided not to attract external investment and refused to openly communicate with media. Instead, they were publishing press releases describing new features.
In 2010, TeamViewer QuickSupport application was introduced. QuickSupport was able to provide urgent technical assistance without the need of client installation. User could quickly connect to another computer via ID and personal code. Application was a great success and the total number of TeamViewer installations exceeded 100 million.
In 2011, company released TeamViewer Host, another version of the remote help application. It could automatically launch in the background and only allowed incoming connections.
In 2012, TeamViewer received support for Windows 8, Windows touch control via iOS and group viewing. In 2013, Windows Phone 8 version was introduced.
Coming out of the shadows and sale
In May 2014, TeamViewer became a "unicorn", a billion dollar corporation. British investment group Permira, known for the sale of Hugo Boss in 2012 and the purchase of Dr. Martens in 2013, bought the company for €870 million ($1.1 billion). The German IT community learned about the management changes a few weeks later.
Capital magazine notes, that its staff was astonished when they learned that a small company from German province became the third largest in the country in terms of value.
After purchase, company chose a hidden location for new headquarters in Göppingen, tiny German town with a population of 57 thousand people.
Andreas König, who became CEO of TeamViewer never heard of TeamViewer before his appointment. His friends were sure that König would only lead the German branch, as no one could ever believe that the unicorn could be hiding in the province.
Search for new partners and development
In 2015, TeamViewer hired a Silicon Valley specialist Alfredo Patron, a former Microsoft and Skype employee with 16 years of experience, who became Vice President of Business Development department.
Currently, he works on expanding TeamViewer in the U.S. market and aims to partner with companies in the Valley.
Not only he established contacts in California, but also made Gartner and IDC company's partners. After the transition of TeamViewer to Permira, company was expanding rapidly . If it took 10 years for unicorn to reach 1 billion installations, the next 500 million were achieved in just over a year and a half (from October 27, 2015 to August 22, 2017).
TeamViewer was looking for new directions and König was convinced that the development of “Internet of Things” (IoT) positively correlated with growth rate of TeamViewer.
Gartner analysts believed that by 2020 the total number of devices connected to the internet will reach 20.4 million, and the total cost of IoT will grow from $725 billion to $2.92 trillion. Given that, even 800 thousand new installations of TeamViewer a day in 2016 was not enough for König.
Gradually TeamViewer began supporting not only PCs, tablets, smartphones and laptops, but also more specialised devices, such as "smart" glasses, fitness bracelets, snow guns, washing machines, refrigerators and milling machines.
The rise of Oliver Steel
Company became international and additional offices have been established in Stuttgart and Berlin, with representative offices in the USA, Australia, Great Britain, Japan, Singapore, India, China and Armenia.
At the end of 2017, König resigned. He moved to Munich and a year later launched the ProGlove startup, which produces smart working gloves.
In January 1st 2018, Oliver Steel, who headed the Permira portfolio group, became TeamViewer CEO. In the first several months of his work employees were leaving dissatisfied comments on websites and complained about new rules. Steel prohibited people from having sick leaves stating his mission was to make TeamViewer a market leader and absence of employees will “strictly controlled”.
Adoption of subscription model
Until 2017, TeamViewer sold companies a lifetime software license at a discounted rate, but then completely changed its business model and switched to a monthly subscription.
It allowed the company to have a constant income flow, even if customers didn’t not migrate to new versions. However, the drawback of this model is the possible temporary decrease in revenue, as the cost of subscription is less than the cost of a full license.
This is exactly what happened. In 2017, TeamViewer's revenue fell by 8% amount at €157 million, and its operating profit experienced a fall of 30% from €90 million to €60 million in 2016. Costs related to company’s preparation for further growth increased as the number of employees have risen to 700.
However, the decline was temporary. TeamViewer sales in 2018 rose to €230 and reached €142 million in the first half of 2019.
In 2019, TeamViewer was used at least once a year on 340 million devices. On June 29, 2019 company surpassed 2 billion downloads. According to TeamViewer, more than half of the companies on the Fortune 500 list used the application, and the number of subscribers exceeds 360,000.
Due to its nature, TeamViewer has become an object of hacker attacks. In 2019, TeamViewer in stated that in 2016 their application was infiltrated by Chinese hackers.
Suspicious actions were noticed only a few months later, but no serious damage, computer infection or theft of personal data were detected.
Financial results and stock exchange listing
In 2017, Gruenderszene reported that investors Hellman & Friedman and Vista planned to acquire about 50% of TeamViewer for €850 million, thus estimating the TeamViewer at €1.7 billion (US$1.87 billion).
But Permira, the main owner of TeamViewer, rejected proposal. Top management believed in potential of TeamViewer and were certain its value was much higher.
In June 2019, CEO Oliver Steele launched an IPO with partial sale of shares. According to him, IPO for TeamViewer is "a very attractive option that will help company’s development”.
On September 25, 2019, TeamViewer was listed on the Frankfurt Stock Exchange with initial value of €5.3 billion and initial share price of €26.25. Ernst & Young analysts named TeamViewer the largest IPO in Europe and the fifth largest in the world in 2019.
Permira, which bought TeamViewer for €870 million, listed 42% of the company's shares for €2.21 billion. It continues to own a majority stake. By October 11th, the share price had fallen to €23.5 and total capitalisation amounted at €4.7 billion.
TeamViewer is a great example of a successful but hidden German startup, wrote The Wall Street Journal in 2014 after the deal with Permira. Some believe that it is a trait of German countryside. In other words, if the startup world of Berlin is rich and consumer-oriented, companies in southern Germany prefer not to talk about their operations.
Most of the owners of those companies are very modest and refuse to disclose their achievements or openly speak about investments. They would rather ignore the media, noted WSJ. They prefer to focus on the corporate market and work in silence, develop products and make a profit.