Posted on Wednesday, Jan 7th 2015
Last year, we began tracking some Unicorn companies – essentially organizations with billion dollar plus valuations – inspired by a TechCrunch article by Aileen Lee of Cowboy Ventures. Some of these Unicorn companies went public last year and have reasserted their high valuations. One such company on my radar is digital marketing solutions provider Marketo (Nasdaq:MKTO). The case study of the company’s founding and entrepreneurial journey is featured in my new book, Billion Dollar Unicorns.
Marketo began in 2006 with the intentions of becoming a high-velocity SaaS company focused on Lead Nurturing. Their founder and CEO Phil Fernandez began his professional life as a computer programmer. He worked at several organizations that went from being venture funded startups to becoming publicly listed organizations. By 1996, he had narrowed down on the idea of creating a digital company that would democratize the CRM process and be able to make an organization’s sales team at least five times more effective and help drive 40% revenue growth through Lead Nurturing. As Phil puts it, Lead Nurturing is a scaleable way of managing a lead from the date the marketer meets a potential customer until the date the customer is ready to buy.
They began attracting customers by offering high quality content including blog posts, whitepapers and research notes. In my discussions with Phil in 2011, he mentioned how they attracted customers.
“We did not have anything to sell, but we had resources for people to register and give us their contact information. As the product got closer, we started doing our own webinars and gave people some sneak previews of what was coming. We became our own beta user. We adopted content drive and social driven marketing strategies, and we did for ourselves what we do for our customers now. The day our product was ready for launch he was able to give our sales people 50 names of potential buyers.”
Through his initial associations, Marketo was able to raise $108.4 million in venture funding from investors including InterWest Partners, Institutional Venture Partners, Storm Ventures, Mayfield Fund, and Battery Ventures before it went public in 2013 by raising $75 million. Today the company is trading at a valuation of $1.4 billion. Marketo’s valuation has been hovering around the $1 billion mark ever since they went public.
Marketo has recently ended their fourth fiscal quarter, but the results are still awaited. Last October they announced third quarter results and the quarter’s revenues grew 54% over the year to $39.3 million, significantly ahead of the Street’s target of $37.5 million. Adjusted losses of $0.14 per share were also significantly better than the market’s forecast loss of $0.25 per share.
By segment, subscription and support revenues came in at $34.2 million compared with $31.2 million reported a quarter ago and $22.5 million reported a year ago. Professional services revenues increased 36% over the year to $5.08 million.
For the December ended quarter, Marketo projected losses of $0.26-$0.24 per share on revenues of $40.3 million-$40.8 million. The Street was projecting revenues of $39.6 million. Marketo expects to end fiscal 2014 with a loss of $0.76-$0.74 per share and revenues of $147.9 million-$148.4 million.
Marketo’s Growing Customer Base
Marketo’s success lies in their ability to attract customers efficiently while delivering high growth. Even when their product was in the Beta stage, Marketo had signed up 15 customers. Today, they continue to display similar zeal in attracting new customers. For the reported third quarter, Marketo had grown that number to nearly 3,500 customers worldwide. Recently they announced that Panasonic Systems Communications Company Europe deployed Marketo across 25 countries to help improve market penetration.
Last month, Marketo was also selected by VIF International Education, a leading provider of global education programs for K-12 schools, as their marketing tool to help build brand awareness. Some of the other recent customer additions include Rocky Brands and rFactr.
Marketo’s Expanding Products
Marketo continues to attract customers by improving their product offerings. Recently they released the upgraded Engagement Marketing Platform that successfully integrates the best practices of B2B and B2C marketing. The Platform features a single system of record that helps track customer marketing data, enables marketing automation by simplifying execution of marketing programs, providing real-time personalization, fully integrating the social networks, and providing real-time metrics on marketing performance.
The digital marketing space has seen consolidation in the recent past. Oracle acquired Eloqua and analysts expected Marketo to be the next possible take-over. Possible list of potential suitors included SAP and NetSuite. For now though, Marketo has managed to stay independent. Their stock is trading at $33.23 with a market capitalization of $1.4 billion. It touched a year high of $45.00 earlier last year.
While Marketo continues to expand their existing offerings, I am convinced that its next level of growth will come from inorganic moves. One potential target appears to be ON24, a leading provider of webcasting services. I believe the move will help Marketo grow adjacent capabilities and gain a strong foothold in the global webcasting and virtual events market. ON24 holds almost 28% of this market and was estimated to be operating a profitable business with annual revenue run rate north of $75 million. They generate leads, Marketo nurtures them. What could be a more logical fit?
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.
This segment is a part in the series : Billion Dollar Unicorns
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FireEye Struggling To Keep Up . Forescout Finally Lists . Indian Small Town Marketplace ShopClues Looks Shaky . Profitable Qualys Hits a New High . Microvast Charges into the Club . HelloFresh Lists Successfully . Zscaler Getting Ready for IPO . New Relic at a 52-Week High . Rong360 Goes Public on NYSE as Jianpu . 23andMe in High Gear . Kabbage Mulling Over an IPO . Reddit is in No Rush to Go Public . Grab Becomes the Most Valuable Startup in Southeast Asia . Talend Going Strong Since Listing . Stitch Fix Is Worth Celebrating . No Stable Revenue Model in Sight, but Quora Usage Still Growing Rapidly . Splunk Outpaces Market Expectations . Razer IPO - Yet Another Story of a Non-Profit Stock . Roku Streams a Successful IPO, for Now . CarGurus Bootstraps its Way to an IPO . Competition Heats up for Slack . SoFi Delays IPO Plans . Improbable Joins the Club . Why Cloudera Continues to Stumble . Can MongoDB Sustain Unicorn Status? . Can Okta Sustain its Valuation? . Is Stitch Fix the Next Blue Apron? . Atlassian is Doing Everything Right, But is it Too Expensive? . How Does Domo's Valuation Compare with Tableau's? . Is the Duopoly Keeping AppNexus from Listing? . Why Doesn't Adyen Want to Go Public? . Will Zuora be able to Compete with Oracle? . Will DocuSign Cave in to Potential Buyers? . Should Xiaomi List at a $50B+ IPO Valuation? . What is Marketo's Roll-up Strategy? . Will Apptio Expand Internationally? . What is Anaplan's Product Strategy? . Will Apttus Take the Plunge? . How Will Nutanix Control Dell? . Does New Relic Plan to Consolidate the APM Market? . What is Coupa's Next Acquisition? . Will Medallia Help Consolidate? . How Will Ellie Mae Handle Looming Mortgage Worries? . Will Zoom Go Public or Get Acquired? . Is GoodData Ready to Go Public? . Will a Sales Strategy Change Help Cloudera? . Can Splunk Sustain its Price Point? . Can Fortinet Get to $10 Billion in Revenue? . What Other MarTech Startups Will HubSpot Acquire Next? . What is Okta's Inorganic Growth Narrative? . What Will Atlassian Acquire Next? . Will C3 IoT Look to Acquire a few Indian Startups? . Is Microsoft Planning to Buy InsideSales? . BlackLine Striking Powerful Partnerships . How Will GitHub Reach Its Billion Dollar Revenue Target? . Fitbit Struggles to Stay Relevant . Squarespace is Willing to Wait Patiently For an IPO . Adyen Ready for an IPO . Pinterest Revenues Jump 58% . Airbnb Delays IPO Plans, Again . Box Continues to Grow, But Profits Still Absent . Zscaler is the Top US Tech IPO of 2018 . How Will Dropbox Position in Collaboration? . Smartsheet Goes Public but Profits Appear Distant . Everbridge Continues to Soar . Pluralsight Goes Public . Cornerstone OnDemand Faces Intense Competition . SurveyMonkey Finally Files to Go Public . Is Affirm Overvalued? . Five9 Predicts its Acquisition in the Future . DocuSign Impressive Post IPO . AppNexus Found An Exit . Avalara Delivers a Strong IPO . MongoDB Post IPO Review . Nutanix Focuses on Software . What Should RingCentral Acquire? . Okta Delivering Decisive Growth Post IPO . Is Palantir Losing Valuation? . New Relic's Enterprise Focus Pays Off . Will Coupa Remain Independent? . Elastic Files to go Public . Atlassian Teams up with Slack to go Lean . Discord Going Strong . Is Stripe Ready to List? . BlackLine Looks at International Markets . Yitu Cashes in on China's Growing Surveillance Market . Nubank is Latest LatAm Unicorn . Revolut Looks to Expand in the US . Circle Soars With New Products . NuCom Banking on Omni-Channel . Babytree Prepares to Go Public . Talend Strengthens Ties with Microsoft . Twilio Shatters all Market Expectations . HubSpot on a Growth Trajectory . Rapid7 to Focus on Profits in Fiscal 2019 . Cloudflare Targets Enterprises . Byju's is India's First EdTech Unicorn . FireEye Targets a Profitable Year . Sonos Stock Does Not Like the Sound of its Earnings . DoorDash Enters the Club Mired in Controversy . Swiggy Enters the Club with Massive Funding . Should Oracle Buy MongoDB? . Okta Faces Tougher Competition from Cisco . Upwork Finally Goes Public . Profitable PolicyBazaar Focuses on Health, Delays IPO . Smartsheet Delivers High Growth, But No Profits . Grab Gives Uber a Ride out of Southeast Asia . Gusto Gets Fresh Round of Funding for Growth . How will Paytm Navigate Rising Competition? . DocuSign Growing Through Acquisitions . WalkMe's Enterprise Focus Pays Off . Indian B2B Marketplace Udaan Flies In . Atlassian Prepares to Take on ServiceNow . Dataminr Joins the Club . Rapid7 Acquires tCell for Growth . Palo Alto Networks Continues to Consolidate in Cyber Security . RingCentral Counting on Acquisitions and AI Upgrades . Cohesity is on the Rise . MediaMath Joins the Club . Luckin Coffee Getting Hot in China . India's OYO Rooms Checks In . Automation Anywhere Bootstrapped First and Raised Money Later . OutSystems Finally Joins the Club . Gett Driving to Profits . Tradeshift Gathers Funds To go Public . Celonis Bootstrapped First, Raised Money Later . About You Becomes the First Unicorn from Hamburg . Bitmain Lists to Go Public . Lime Rides its way into the Club . Ola at Crossroads . Bird Delivers Meteoric Growth . Will Hello TransTech Survive in the Chinese Bike Sharing Market? . Will Atlas Help Keep Competitors Away from MongoDB?