2017 IPO Prospects: Apttus Hedging Exit Options

Quote-to-cash SaaS player Apttus has been toying with the idea of going public for a while. In September 2016, the company made it clear that it will go public in the first half of 2017.

Apttus’ Financials

Founded in 2006 by Kirk Krappe, Neehar Giri, and Nathan Krishnan as a cloud-based contract lifecycle management software company, San Mateo-based Apttus has evolved into a Quote-to-Cash solution since. Its applications integrate with Salesforce’s Cloud to allow users to extend the functionality of the Salesforce CRM platform. Its product solutions range from Quote-to-Cash Intelligence (Analytics), E-commerce, Configure Price Quote, Renewals, Contract Management, X-Author, and Revenue Management.

Apttus does not disclose detailed financials, but analysts estimate that it is trending toward an annual revenue run rate of $150 million this year and has recorded an annual growth rate of over 60%. In 2013, Apttus had recorded revenues of $50 million. Apttus had been profitable initially, but in 2013, it began investing heavily in business expansion and is no longer profitable. It hopes to return to profitability and the management revealed that it just needed a “small top-up” to get there.

Apttus has been venture funded so far with $274 million raised from investors including Gulf Islamic Investments, Kia Motors, Kuwait Investment Authority, Salesforce Ventures, Iconiq Capital, and K1 Capital. Its last round of funding was held in September 2016 when it raised $88 million in a round led by Gulf Islamic Investments at a valuation of more than $1.3 billion. Its last round held a year ago valued it at over $1 billion. Apttus had been prudent with raising funds and bootstrapped its way for the first seven years.

Apttus has always had an IPO on the radar and has now confirmed that it will be going public in the next six months. It claims that it would have gone public last year, but choppy valuations especially of the SaaS players made it delay those plans.

Apttus’ Virtual Agent

Apttus is facing increasing competition from other vendors including big names like 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 now, it is diversifying and its latest innovation is built on Microsoft’s Azure components instead. It is using its recent funding toward improving this virtual agent offering called Max.

Apttus has been focused on machine learning and began using tools including components from Azure along with the bot language used in Microsoft’s Cortana AI and Microsoft’s 3D virtualization technology to build Max. 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.

Will Microsoft Buy Apttus?

While Apttus is gearing up for a 2017 IPO, we need to also consider their strategic move of getting closer to Microsoft. My forecast is that Microsoft is about to become one of the most active acquirers of cloud software companies in the next decade. Apttus is clearly hedging its exit options to include Microsoft as a potential acquirer. The price, however, is high.

Photo Credit: By: Ken Teegardin/Flickr.com

This segment is a part in the series : 2017 IPO Prospects