Posted on Tuesday, Oct 17th 2017
According to Gartner, the Configure Price Quote (CPQ) application suites market is expected to grow 20% annually through 2015 to 2020, driven by the growth in cloud-based solutions. Billion Dollar Unicorn Apttus is a leading player in the space that is toying with the idea of going public yet again.
Apttus was founded in 2006 by Kirk Krappe, Neehar Giri, and Nathan Krishnan as a cloud-based contract lifecycle management software company, which later evolved into a configure price quote solution to help companies manage and personalize their sales contracts. Apttus was bootstrapped initially and was built on Salesforce.com’s Force.com platform, which kept the development costs low. It was particularly successful with overseas users and within a couple of years, shot to $5 million in revenue.
Today, Apttus’ solutions help improve revenues for organizations through its Quote-to-Cash (QTC), CPQ, Contract Management, E-Commerce, and Revenue Management software solutions. It leverages its Intelligent Cloud platform that maximizes the revenue operation by streamlining and improving business processes, aligning and driving revenue winning behaviors, and recommending relevant, intelligent actions. It integrates process-based applications with modern and innovative behavioral applications including promotions, sales compensation, and rebates to align and drive revenue winning behaviors across all sales channels.
Apttus has amassed a strong following in the market. It claims to have over 600 customers and 1 million users worldwide who are supported by its 1,200 employees, 25 certified consulting partners, and 1000 professional resources.
While Apttus is a leader in the space, it faces increasing competition from Oracle and Salesforce, which have added quote-to-cash capabilities to their platforms through acquisitions. Oracle acquired BigMachines back in 2013 for an estimated $400 million. At the time of the acquisition, BigMachines was trending at annual revenue rate of just under $60 million. Salesforce is a more recent entrant: it acquired SteelBrick in December 2015 for an estimated $360 million. At the time of the acquisition, SteelBrick was earning annual revenues of $10 million-$25 million.
The Salesforce acquisition was a blow to Apttus as it had been building its offerings on the Salesforce cloud. But Apttus diversified and has built its virtual agent Max on Microsoft’s Azure components instead. Max allows sales teams to log Apttus activities hands-free through speech and then automates processes that would have taken manual and repetitive data entry during a contract’s closing. It also logs into Apttus’s machine learning capabilities to help set accurate quotes and suggest optimal discounts. Some of its features include voice-controlled capabilities, chat-based features, including Slack, Skype, and Facebook Messenger along with its own chat capability called Apttus Max Chat and an augmented reality functionality.
For its first seven years, Apttus was bootstrapped and produced multi-million dollars in revenues. It has not disclosed detailed financials so far but analysts estimate that the company earned $150 million in revenues in 2016. Though it is not profitable yet, it hopes to break even this year.
It first raised venture funding in 2013 and since then has raised $329 million from investors including Gulf Islamic Investments, Kuwait Investment Authority, Salesforce Ventures, Iconiq Capital, and K1 Capital. Last month, it raised $55 million at an estimated valuation of $1.75 billion. In an earlier round in September 2016, it had raised $88 million at a valuation of over $1.3 billion.
The latest round, which has Salesforce Ventures back as an investor, is presumably its final round before its IPO. It is reportedly working with Goldman Sachs on its IPO plans. Apttus has had to delay its IPO plans due to deteriorating market valuations and stock market conditions. It remains to be seen if it finally takes the plunge. On the potential acquirer front, SAP still hasn’t bought anything in this space, and could yet swoop in. The valuation, however, is substantial at this point for an acquirer to want to pay, and for SAP to want to bet on the Force.com platform is a somewhat cumbersome path forward.
This segment is a part in the series : Billion Dollar Unicorns
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