Today we (SOASTA) announced that we have raised an additional $30M in capital for the acceleration of the global expansion that we began last year. The past few years in the Silicon Valley have become the era of “mega-financing” ($50M to $150M rounds) in venture capital. So, at $30M, this financing may appear to some to be a bit modest.
But here is our perspective. Twenty seven years ago I was a senior executive at Knowledgeware, a company that, at the time of its IPO had raised a total of $28M in venture capital over five years. Then, just 15 years ago, I was an executive and co-founder of another company, Sagent, which went public having raised a total of $32M in capital over a four year period. That brings us to today. My newest company, SOASTA, raised $30M in a single round, bringing our total of venture capital raised to $63M over a six-year period. Indeed these “times they are a changing”. For Ken Gardner and I, this is not just a big deal, it is a BFD.
Tech markets evolve, and so do the people that lead them.
The Software Market of 2013 is a far cry from the one I saw back in 1987 or even in 1999. Today it takes a private software company an average of nine years to become a public company (IPO) if they even make it at all. Compare this to the 4-5 years it took in 1987 or the short 3-4 years in 1999. Simply stated, the more time needed to grow a company, the more capital required. My great friend and mentor, John Carrington, explains it this way, “Software companies are like airplanes. The bigger the airplane, the longer the runway required to take off. Cash, to software companies, is runway.” Never has this been truer then in today’s Software-as-a-Service world.
We live in a time-sensitive, revenue recognition world that records on a basis of either annual contract value (ACV) or monthly recurring revenue (MRR). Gone are the days of perpetual licensing that allowed vendors to book huge software contracts with accelerated revenue recognition that cleared many IPOs for early takeoffs. While this shift in accounting is a very good thing, advocated by investors around the globe, for greater levels of visibility and control, it also means that more money will be required to be placed into risk by investors, a circumstance that has been having a dramatic impact on the venture community over the past couple of years. That’s another story for another time.
So, in this brave new world, only the strong will survive. Software companies like SOASTA that become category leaders defined by technology are able to raise enough funds that will eventually lead them to an IPO. We are lucky enough to be one of those companies, a recognized category leader in Quality as a Service, with hundreds of amazing customers and thousands of users worldwide using three ground breaking test and monitoring products: CloudTest, TouchTest and mPulse. But SOASTA is no overnight success – nobody is these days – it has taken an epic effort by 120 amazing people to get to this point. With our tanks now fueled with cash to build on the candle has been lit. This rocket is prepared for take off. And so it begins…Phase Two!
About the Author
As CEO of SOASTA, Tom brings more than 30 years of experience building early stage software companies, leading two companies to successful IPOs. Tom is a regular speaker at both cloud and testing events, and has become a leading advocate in using the cloud to empower individuals and accelerate changes in how applications are built, tested and deployed. Most recently, Tom served as President and CEO of Kenamea. Prior to Kenamea, he was CEO of Dorado Corp., a financial services software provider. Previous to Dorado, he was EVP of Sagent Technology through its 1999 IPO, entrepreneur-in-residence at Crosspoint Venture Partners, and held executive positions at Digitalk Corp., Knowledgeware (KWI) and Encore Financial Services. Tom also serves on several boards in the Silicon Valley.