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Billion Dollar Unicorns: New Relic Getting Ready to Battle with Microsoft

Posted on Tuesday, May 26th 2015

Earlier this month, Microsoft announced the release of Application Insights, a solution to help organizations monitor and track their application performance. The move marks Microsoft’s entry into the application performance monitoring (APM) market. Among its competitors, Microsoft will also have to count Billion Dollar Unicorn club member New Relic.

New Relic’s Offerings
San Francisco-based New Relic was founded by entrepreneur Lew Cirne in 2008. Prior to founding New Relic, Lew had set up and sold Wily Technology to CA Inc. Wily Technology provided capabilities of enterprise class application performance management (APM) and brought them to the Java platform. After selling off Wily, Lew focused his attention on the SaaS segment and soon founded New Relic.

Today, New Relic offers a cloud-based suite of products to help organizations collect, store, and analyze software data in real-time. Their application monitoring platform enables a more efficient technology department that is able to find, fix, and forecast performance problems in applications. Their products include an APM suite that provides code level visibility for production apps; a mobile offering to monitor network and app performance for mobile devices; Insights which is an analytic engine where data is collected, stored, and presented in a meaningful way; and a server management service. Developers can also use their products for browser monitoring capabilities and access free plugins from over 90 partners to test on their apps.

Given the increasing adoption of mobile devices, New Relic has increased their focus in the segment. During the recent quarter, they had announced plans to expand the Insight offering to include mobile devices. The upgraded Insights will provide companies with the ability to unlock app performance, user engagement data from their mobile apps, and seek real-time answers to questions about their mobile business. The platform will also allow organizations to analyze custom events to support individual business needs.

In 2014, they acquired Barcelona-based data analytics platform Ducksboard. Ducksboard is another SaaS company that helps customers visualize and monitor data in real time from multiple data sources in a single dashboard. Ducksboard had built integrations with over 65 applications including Google Analytics, Twitter, MailChimp, Stripe, WordPress, salesforce.com, and Zendesk.

The expansion into mobile and advanced analytics will help New Relic make a bigger push into the larger enterprise segment. Traditionally, the company has focused on the SMB segment. Of late though, they are reaching out to larger organizations through their offerings. New Relic will begin to face tougher competition in the industry because of the recent entry of Microsoft.

Last month, Microsoft released Application Insights that works with Microsoft .NET, Windows-based applications, Android, iOS, Linux, and enterprise Java applications. It also supports ASP.NET, C++, PHP, Ruby, JavaScript, and Python among others. The service is currently available as a public preview, and the commercial release is expected soon. Microsoft is planning to sell the service for a fee, based on the amount of telemetry data collected.

New Relic’s Financials
New Relic operates on a freemium model. Their basic product is available for free and comes with 24-hour data retention capabilities along with providing access to online support. Premium options are available at prices starting from $149 per month per host and offer features such as unlimited data retention capability, transaction traces, and cross-application traces.

For the recently reported quarter, revenues grew 68% over the year to $33.4 million, ahead of the Street’s forecast of $30 million. Loss of $0.22 per share was also better than the market’s projected loss of $0.25 per share.

New Relic ended their fiscal year with revenues growing 75% to $110.4 million and a non-GAAP net loss per share of $0.85.

For the current quarter, New Relic forecast revenues of $34.5 million-$35.5 million with a net loss of $0.23-$0.26 per share. They expect to end the year with revenues of $155 million-$159 million and a net loss of $0.95-$1.03 per share. The Street was looking for revenues of $32.5 million for the quarter with a loss of $0.24 per share. Analysts had modelled the year at revenues of $147 million and a loss of a dollar per share.

Their stock is trading at $32.71 with a market capitalization of $1.5 billion. In December 2014, New Relic had raised $115 million by selling 5 million shares at a price of $23 each. Prior to the listing, they had raised $214.5 million in venture fund from investors including Fidelity Investments, Wellington Management, T. Rowe Price, Passport Capital, BlackRock, Dragoneer Investment Group, Benchmark, Passport Ventures, Tenaya Capital, Trinity Ventures, DAG Ventures, Allen & Company, and Four Rivers Group. Their valuation has grown steadily from $750 million in 2013 to $1 billion as of April 2014.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


. How Marketo Is Faring In The Public Market
. Workday's Ramp to Multi-Billion Valuation
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 1)
. ServiceNow's Expanding Market Opportunity
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 2)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 3)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 4)
. Tableau's Valuation Increases to $6 Billion
. A Rare Media Venture Called Vice
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 5)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 6)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 7)
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. Reconsider Your Aspirations
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