This morning, Bellevue-based Apptio (www.apptio.com) announced it had raised $16.5M in a Series C funding round for the firm, as it looks to expand and grow--despite still sitting on funding from its last rounds. To gain more insight into why the firm is raising funding, as well as to hear about how the firm has already been seeing great growth in the past year, we talked with Sunny Gupta, the firm's CEO.
Sunny, thanks for the time today. For our readers who aren't familiar with Apptio, what does your firm do?
Sunny Gupta: Apptio is delivering business applications for the CIO, via an on-demand delivery model. In its simplest form, what we help CIOs do is number one, help them get deep visibility into the cost and quality of services and the value of IT products and services. Two, we help them produce a bill for IT, communicating the value of IT and the cost of technology, and billing that back to business units; and three, we help CIOs make business decisions on how to run their technology better--whether that's around virtualization, deciding whether to shut down their data center and moving infrastructure into the cloud, or figuring out what's the cost of their infrastructure, relative to an outsourcing provider. Fourth, we help CIOs automate their key business and financial management processes, such as budgeting, forecasting, and so forth. Apptio, as a company, is focusing on managing the business of technology. While CIOs have traditionally deployed lots of products to manage the technology itself, there have been no systems to manage the business of technology itself. That's a new category, andt hat's what Apptio does. We have fifty customers at this stage, and are just seeing phenomenal growth in the marketplace.
What is driving that growth?
Sunny Gupta: There are three things, at the macro level. One is, spend on technology, because the budget of IT customer have gone through the roof. For our Fortune 500/1000 customers, it's very common for them to have a 50 million dollar, to multiple billion dollar spend on IT resources. One of our largest customers, spends 10 billion on technology. Because of that spending on technology, and because business units are ultimately writing checks for that technology, companies are demanding transparency of cost and value of IT products and services that IT groups are delivering. Two, is for a CIO, who has mostly been focused on managing technology, cloud and virtualization has now come into play--and virtualization is pushing that cost structure into the shared service model. Also, because there are now external cloud options available, CIOs are under pressure to understand their own cost structure better. How can you move your infrastructure to the cloud, or your applications to the cloud, if you don't fully understand your own infrastructure and its fully loaded cost? So that's the two big macro level reasons for the growth--big spend on technology, and because of external options like the cloud, virtualization, and the shared services model.
SWhat will you use the funding for?
Sunny Gupta: We will be applying it towards two things. One, is to drastically accelerate our sales and marketing. We think it's a multi-billion dollar opportunity. It's a great time for us to expand sales and marketing footprint. Our product works, and we hae lots of customer traction. On the product side, we plan on launching new modules and new capabilities on top of our platform, so we can provide more value to the CIOs, which will enable them to run the business of technology better.
As you know, it's been a fairly troublesome economy--yet, you mention you have been seeing fairly good growth. What's the dynamic there?
Sunny Gupta: From Apptio's perspective, because we're helping CIOs understand their cost structure, we are helping them figure out how to operate in a new environment, and manage the business of technology better--we consider ourselves counter-cyclical to the economy. We were founded in 2007, which was the worst economic time. At the end of 2007 and 2008, the meltdown happened, but as a result, we were able to deliver lots of value to our early customers. They were making decisions and trying to navigate through the financial cuts CIOs needed to make. Now, what we're finding, even with signs of recovery, is that every CIO is starting to say--in order for me to be effective, I have to do more with less. They have to understand things at a granular level, and the cost structure of what they are doing. That's one of the reasons we've seen the growth rates we've had. This year alone, to date, we're up 300 percent relative to where we were last year this time. We've absolutely been growing, countercyclical to the economy.
What was the decision to take another round now?
Sunny Gupta: First of all, our cash position is really, really strong. We're still sitting on some of the money back from our Series A. We raised $7.0M in our Series A, and $14.0M in our Series B. The company has done extremely well, and the company has been doing well just with the money coming from customers. So, we didn't need money from an operating perspective, but a couple of things happened. One, is there was very, very strong interest from outside venture capitalists in the summer timeframe. They asked us that if Apptio would be open to new money. We thought about that decision, and saw we are sitting on a multi-billion dollar opportunity, and that with more capital, we would grow much faster than we are today. That kind of drove our decision. Lastly, we wanted to make sure the money we got was on great terms, and was not very dilutive to our existing investors or to the team at Apptio. Because the terms were really good, there was lots of strong interest, and it would allow us to accelerate our business faster, we decided those were all good reasons to go take a Series C.
Finally, what are the challenges for your firm in the next year?
Sunny Gupta: Frankly, the biggest challenge for us is not the market opportunity, but that we have to execute like we have in the last three years. We believe in the market opportunity, we've assembled an incredible team, and we've executed like nobody else. We've exceeded and beat every milestone in front of us, so the biggest risk is making sure we continue to execute like we have, continuing to hire, and continuing to deliver value to our customers. If we can continue to do that, we'll be a really, really large business in the next couple of years.