Personal blog of Yzmir Ramirez

Earlier today, spend management startup Ramp said it has raised a $300 million Series C that valued it $3.9 billion. It also said it was acquiring Buyer, a “negotiation-as-a-service” platform that it believes will help customers save money on purchases and SaaS products.

The round and deal were announced just a week after competitor Brex shared news of its own acquisition — the $50 million purchase of Israeli fintech startup Weav. That deal was made after Brex’s founders invested in Weav, which offers a “universal API for commerce platforms”.

From a high level, all of the recent deal-making in corporate cards and spend management shows that it’s not enough to just help companies track what employees are expensing these days. As the market matures and feature sets begin to converge, the players are seeking to differentiate themselves from the competition.

But the point of interest here is these deals can tell us where both companies think they can provide and extract the most value from the market.

Earning more by spending less

Let’s start with Ramp. Launched in 2019, the company is a relative newcomer in the spend management category. But by all accounts, it’s producing some impressive growth numbers. As our colleague Mary Ann Azevedo wrote this morning:

Since the beginning of 2021, the company says it has seen its number of cardholders on its platform increase by 5x, with more than 2,000 businesses currently using Ramp as their “primary spend management solution.” The transaction volume on its corporate cards has tripled since April, when its last raise was announced. And, impressively, Ramp has seen its transaction volume increase year over year by 1,000%, according to CEO and co-founder Eric Glyman.

Ramp’s focus has always been on helping its customers save money: It touts a 1.5% cashback reward for all purchases made through its cards, and says its dashboard helps businesses identify duplicitous subscriptions and license redundancies. Ramp also alerts customers when they can save money on annual vs. monthly subscriptions, which it says has led many customers to do away with established T&E platforms like Concur or Expensify.

All told, the company claims that the average customer saves 3.3% per year on expenses after switching to its platform — and all that is before it brings Buyer into the fold.

When Salesforce announced its new business video streaming service called Salesforce+ this week, everyone had a reaction. While not all of it was positive, some company watchers also wondered if there was more to this announcement than meets the eye.

If you look closely, the new initiative suggests that Salesforce wants to take a bite out of LinkedIn and other SaaS content platforms and publishers. The video streaming service could be a launch point for a broader content platform, where its partners are producing their own content and using Salesforce+ infrastructure to help them advertise to and cultivate their own customers.

The company has, after all, done exactly this sort of thing with its online marketplaces and industry events to great success. Salesforce generated almost $6 billion in its most recent quarterly earnings report. That mostly comes from selling its sales, marketing and service software, not any kind of content production, but it has lots of experience putting on Dreamforce, its massive annual customer event, as well as smaller events throughout the year around the world.

On its face, Salesforce+ is a giant, ambitious and quite expensive content marketing play. The company reportedly has hired a large professional staff to produce and manage the content, and built a broadcasting and production studio designed to produce quality shows in-house. It believes that by launching with content from Dreamforce, its highly successful customer conference, attended by tens of thousands people every year pre-pandemic, it can prime the viewing pump and build audience momentum that way, perhaps even using celebrities as it often does at its events to drive audience. It is less clear about the long-term business goals.

ServiceMax, a company that builds software for the field-service industry, announced yesterday that it will go public via a special purpose acquisition company, or SPAC, in a deal valued at $1.4 billion. The transaction comes after ServiceMax was sold to GE for $915 million in 2016, before being spun out in late 2018. The company most recently raised $80 million from Salesforce Ventures, a key partner.

ServiceMax competes in the growing field-service industry primarily with ServiceNow, and interestingly enough given Salesforce Ventures’ recent investment, Salesforce Service Cloud. Other large enterprise vendors like Microsoft, SAP and Oracle also have similar products. The market looks at helping digitize traditional field service, but also touches on in-house service like IT and HR giving it a broader market in which to play.

GE originally bought the company as part of a growing industrial Internet of Things (IoT) strategy at the time, hoping to have a software service that could work hand in glove with the automated machine maintenance it was looking to implement. When that strategy failed to materialize, the company spun out ServiceMax and until now it remained part of Silver Lake Partners thanks to a deal that was finalized in 2019.

TechCrunch was curious why that was the case, so we dug into the company’s investor presentation for more hints about its financial performance. Broadly, ServiceMax’s business has a history of modest growth and cash consumption. It promises a big change to that storyline, though. Here’s how.

A look at the data

The company’s pitch to investors is that with new capital it can accelerate its growth rate and begin to generate free cash flow. To get there, the company will pursue organic (in-house) and inorganic (acquisition-based) growth. The company’s blank-check combination will provide what the company described as “$335 million of gross proceeds,” a hefty sum for the company compared to its most recent funding round.

The IPO rush of 2021 continued this week with a fresh filing from NoSQL provider Couchbase. The company raised hundreds of millions while private, making its impending debut an important moment for a number of private investors, including venture capitalists.

According to PitchBook data, Couchbase was last valued at a post-money valuation of $580 million when it raised $105 million in May 2020. The company — despite its expansive fundraising history — is not a unicorn heading into its debut to the best of our knowledge.

We’d like to uncover whether it will be one when it prices and starts to trade, so we dug into Couchbase’s business model and its financial performance, hoping to better understand the company and its market comps.

The Couchbase S-1

The Couchbase S-1 filing details a company that sells database tech. More specifically, Couchbase offers customers database technology that includes what NoSQL can offer (“schema flexibility,” in the company’s phrasing), as well as the ability to ask questions of their data with SQL queries.

Couchbase’s software can be deployed on clouds, including public clouds, in hybrid environments, and even on-prem setups. The company sells to large companies, attracting 541 customers by the end of its fiscal 2021 that generated $107.8 million in annual recurring revenue, or ARR, by the close of last year.

Couchbase breaks its revenue into two main buckets. The first, subscription, includes software license income and what the company calls “support and other” revenues, which it defines as “post-contract support,” or PCS, which is a package of offerings, including “support, bug fixes and the right to receive unspecified software updates and upgrades” for the length of the contract.

The company’s second revenue bucket is services, which is self-explanatory and lower-margin than its subscription products.

Xometry, a Maryland-based service that connects companies with manufacturers with excess production capacity around the world, filed an S-1 form with the U.S. Securities and Exchange Commission announcing its intent to become a public company.

As the global supply chain tightened during the pandemic in 2020, a company that helped find excess manufacturing capacity was likely in high demand. CEO and co-founder Randy Altschuler described his company to TechCrunch this way last September upon the announcement of a $75 million Series E investment:

“We’ve created a marketplace using artificial intelligence to power it, and provide an e-commerce experience for buyers of custom manufacturing and for suppliers to deliver that manufacturing,” Altschuler said at the time. Xometry raised nearly $200 million while private, per Crunchbase data.

With Xometry, companies looking to build custom parts now have the ability to do so in a digital way. Rather than working the phones or starting an email chain, they can go into the Xometery marketplace, define parameters for their project and find a qualified manufacturer who can handle the job at the best price.

As of last September, the company had built relationships with 5,000 manufacturers around the world and had 30,000 customers using the platform.

At the time of that funding round, perhaps it wasn’t a coincidence that the company’s lead investor was T. Rowe Price. When an institutional investor is involved in a late-stage round, it’s usually a sign that the company is ready to start thinking about an IPO. Altschuler said it was definitely something the company was considering and had brought on a CFO, too, another sign that a company is ready to take that next step.

So what do Xometry’s financials look like as it heads to the public markets? We took a look at the S-1 to find out.

The numbers

Xometry makes money in two ways. The first comes from one part of its marketplace, with the company generating “substantially all of [its] revenue” from charging “buyers on its platform.” The other way that Xometry engenders top line is seller-related services, including financial work. The company notes that seller-generated revenues were just 5% of its 2020 total, though it does expect that figure to rise.

After an upward revision, UiPath priced its IPO last night at $56 per share, a few dollars above its raised target range. The above-range price meant that the unicorn put more capital into its books through its public offering.

For a company in a market as competitive as robotic process automation (RPA), the funds are welcome. In fact, RPA has been top of mind for startups and established companies alike over the last year or so. In that time frame, enterprise stalwarts like SAP, Microsoft, IBM and ServiceNow have been buying smaller RPA startups and building their own, all in an effort to muscle into an increasingly lucrative market.

In June 2019, Gartner reported that RPA was the fastest-growing area in enterprise software, and while the growth has slowed down since, the sector is still attracting attention. UIPath, which Gartner found was the market leader, has been riding that wave, and today’s capital influx should help the company maintain its market position.

It’s worth noting that when the company had its last private funding round in February, it brought home $750 million at an impressive valuation of $35 billion. But as TechCrunch noted over the course of its pivot to the public markets, that round valued the company above its final IPO price. As a result, this week’s $56-per-share public offer wound up being something of a modest down-round IPO to UiPath’s final private valuation.

Then, a broader set of public traders got hold of its stock and bid its shares higher. The former unicorn’s shares closed their first day’s trading at precisely $69, above the per-share price at which the company closed its final private round.

So despite a somewhat circuitous route, UiPath closed its first day as a public company worth more than it was in its Series F round — when it sold 12,043,202 shares at $62.27576 apiece, per SEC filings. More simply, UiPath closed today worth more per-share than it was in February.

How you might value the company, whether you prefer a simple or fully diluted share count, is somewhat immaterial at this juncture. UiPath had a good day.

While it’s hard to know what the company might do with the proceeds, chances are it will continue to try to expand its platform beyond pure RPA, which could become market-limited over time as companies look at other, more modern approaches to automation. By adding additional automation capabilities — organically or via acquisitions — the company can begin covering broader parts of its market.

TechCrunch spoke with UiPath CFO Ashim Gupta today, curious about the company’s choice of a traditional IPO, its general avoidance of adjusted metrics in its SEC filings, and the IPO market’s current temperature. The final question was on our minds, as some companies have pulled their public listings in the wake of a market described as “challenging.”

Why did UiPath not direct list after its huge February raise?

The tidal wave of growth is upon us — an unprecedented economic boom that will manifest later this year, bringing significant investments, acquisitions and customer growth. But most tech companies and startups are not adequately prepared to capitalize on the opportunity that lies ahead.

Here’s how marketing in tech will shift — and what you need to know to reach more customers and accelerate growth in 2021.

First and foremost, differentiation is going to be imperative. It’s already hard enough to stand out and get noticed, and it’s about to get much more difficult as new companies emerge and investments and budgets balloon in the latter half of the year. Virtually all major companies are increasing budgets to pre-pandemic levels, but will delay those investments until the second half of the year. This will result in an increased intensity of competition that will drown out any undifferentiated players.

Additionally, tech companies need to be mindful not to ignore the most important part of the ecosystem: people. Technology will only take you so far, and it’s not going to be enough to survive the competition. Marketing is about people, including your customers, team, partners, investors and the broader community.

Understanding who your people are and how you can use their help to build a strong foundation and drive exponential growth is essential.

Tactically, the most successful tech companies will embrace video and experimentation in their marketing — two components that will catapult them ahead of the competition.

Ignoring these predictions, backed by empirical evidence, will be detrimental and devastating. Fasten your seatbelts: 2021 is going to be a turbocharged year of growth opportunities for marketing in tech.

Differentiation is crucial

The explosion of tech companies and startups seeking to be the next big thing isn’t over yet. However, many of them are indistinguishable from each other and lack a compelling value proposition. Just one look at the websites of new and existing tech companies will reveal a proliferation of buzzwords and conceptual illustrations, leaving them all looking and sounding alike.

The tech companies that succeed are those that embrace one of the fundamentals of effective marketing — positioning.

In the ’80s, Al Ries and Jack Trout published “Positioning: The Battle For Your Mind” and coined the term, which documented the best-known approach to standing out in a noisy marketplace. As the market heats up, companies will realize the need to sharpen their positioning and dial in their focus to break through the noise.

To get attention and build traction, companies need to establish a position they can own. The mashup method — “Netflix but for coding lessons” — is not real positioning; it’s simply a lazy gimmick.

It is imperative to identify who your ideal customer is and not just who could use your product. Focusing on a segment of the market rather than the whole is, perhaps counterintuitively, the most effective approach to capturing the larger market.

TechCrunch has spilled much digital ink tracking the fate of VMware since it was brought to Dell’s orbit thanks to the latter company’s epic purchase of EMC in 2016 for $58 billion. That transaction saddled the well-known Texas tech company with heavy debts. Because the deal left VMware a public company, albeit one controlled by Dell, how it might be used to pay down some of its parent company’s arrears was a constant question.

Dell made its move earlier this week, agreeing to spin out VMware in exchange for a huge one-time dividend, a five-year commercial partnership agreement, lots of stock for existing Dell shareholders and Michael Dell retaining his role as chairman of its board.

So, where does the deal leave VMware in terms of independence, and in terms of Dell influence? Dell no longer will hold formal control over VMware as part of the deal, though its shareholders will retain a large stake in the virtualization giant. And with Michael Dell staying on VMware’s board, it will retain influence.

Here’s how VMware described it to shareholders in a presentation this week. The graphic shows that under the new agreement, VMware is no longer a subsidiary of Dell and will now be an independent company.

Image Credits: VMware

But with VMware tipped to become independent once again, it could become something of a takeover target. When Dell controlled VMware thanks to majority ownership, a hostile takeover felt out of the question. Now, VMware is a more possible target to the right company with the right offer — provided that the Dell spinout works as planned.

Buying VMware would be an expensive effort, however. It’s worth around $67 billion today. Presuming a large premium would be needed to take this particular technology chess piece off the competitive board, it could cost $100 billion or more to snag VMware from the public markets.

So VMware will soon be more free to pursue a transaction that might be favorable to its shareholders — which will still include every Dell shareholder, because they are receiving stock in VMware as part of its spinout — without worrying about its parent company simply saying no.

When Dell announced it was spinning out VMware yesterday, the move itself wasn’t surprising: there had been public speculation for some time. But Dell could have gone a number of ways in this deal, despite its choice to spin VMware out as a separate company with a constituent dividend instead of an outright sale.

The dividend route, which involves a payment to shareholders between $11.5 and $12 billion, has the advantage of being tax-free (or at least that’s what Dell hopes as it petitions the IRS). For Dell, which owns 81% of VMware, the dividend translates to somewhere between $9.3 and $9.7 billion in cash, which the company plans to use to pay down a portion of the huge debt it still holds from its $58 billion EMC purchase in 2016.

VMware was the crown jewel in that transaction, giving Dell an inroad to the cloud it had lacked prior to the deal. For context, VMware popularized the notion of the virtual machine, a concept that led to the development of cloud computing as we know it today. It has since expanded much more broadly beyond that, giving Dell a solid foothold in cloud native computing.

Dell hopes to have its cake and eat it too with this deal: it generates a large slug of cash to use for personal debt relief while securing a five-year commercial deal that should keep the two companies closely aligned. Dell CEO Michael Dell will remain chairman of the VMware board, which should help smooth the post-spinout relationship.

But could Dell have extracted more cash out of the deal?

Doing what’s best for everyone

Patrick Moorhead, principal analyst at Moor Insights and Strategies, says that beyond the cash transaction, the deal provides a way for the companies to continue working closely together with the least amount of disruption.

“In the end, this move is more about maximizing the Dell and VMware stock price [in a way that] doesn’t impact customers, ISVs or the channel. Wall Street wasn’t valuing the two companies together nearly as [strongly] as I believe it will as separate entities,” Moorhead said.

When UIPath filed its S-1 last week, it was a watershed moment for the robotic process automation (RPA) market. The company, which first appeared on our radar for a $30 million Series A in 2017, has so far raised an astonishing $2 billion while still private. In February, it was valued at $35 billion when it raised $750 million in its latest round.

RPA and process automation came to the fore during the pandemic as companies took steps to digitally transform. When employees couldn’t be in the same office together, it became crucial to cobble together more automated workflows that required fewer people in the loop.

When UIPath raised money in 2017, RPA was not well known in enterprise software circles even though it had already been around for several years. The category was gaining in popularity by that point because it addressed automation in a legacy context. That meant companies with deep legacy technology — practically everyone not born in the cloud — could automate across older platforms without ripping and replacing, an expensive and risky undertaking that most CEOs would rather not take.

RPA has enabled executives to provide a level of workflow automation, a taste of the modern. It essentially buys them time to update systems to more modern approaches while reducing the large number of mundane manual tasks that are part of just about every industry’s workflow.

While some people point to RPA as job-elimination software, it also provides a way to liberate people from some of the most mind-numbing and mundane chores in the organization. The argument goes that this frees up employees for higher level tasks.

As an example, RPA could take advantage of older workflow technologies like OCR (optical character recognition) to read a number from a form, enter the data in a spreadsheet, generate an invoice, send it for printing and mailing, and generate a Slack message to the accounting department that the task has been completed.

We’re going to take a deep dive into RPA and the larger process automation space — explore the market size and dynamics, look at the key players and the biggest investors, and finally, try to chart out where this market might go in the future.

Meet the vendors

UIPath is clearly an RPA star with a significant market share lead of 27.1%, according to IDC. Automation Anywhere is in second place with 19.4%, and Blue Prism is third with 10.3%, based on data from IDC’s July 2020 report, the last time the firm reported on the market.

Two other players with significant market share worth mentioning are WorkFusion with 6.8%, and NTT with 5%.