After a little breather, at least two enterprise software plays–besides Alibaba– have filed to go public. In this post, I’ll cover Upland Software and in the future, I’ll cover Hubspot, yet another marketing automation vendor.
Facts
Upland was “founded in 2010 to deliver cloud-based enterprise work management applications to organizations of all sizes.” (Well, that narrows it down a bit.) Upland has “achieved significant growth since their inception, substantially all of which has been as a result of their acquisition strategy” The prospectus list six acquisitions in 2012 and 2013:
- PowerSteering: cloud-based program and portfolio management
- Tenrox: professional services workforce management
- EPM Live: project management collaboration software
- Filebound: workflow and content management
- ComSci: IT Financial management
- Clickability: Content Management
These products are all loosely joined under the Upland brand, by adding “by Upland” to each product name.
The company has managed to acquire companies fast enough to reach 1200 customers, $32 million in revenue in the first six months of 2014 and a net loss of about $15 million during the same period.
Interpretation
I tried to find something to get really excited about here, but I’m having problems. Admittedly, I am biased against enterprise software companies that grow almost entirely through acquisition, even though I know this can be a quite profitable strategy for the shareholders. So take my comments with a grain of salt:
On the positive side:
- Upland has a really nice website.
- Uplands’s products compete in some broadly applicable, growing, enterprise software markets: project management, IT financial management, time sheets, and content management.
- Upland provides one common enterprise software SaaS metric: on a dollar basis, Upland retained 90% of customers in fiscal 2013.
- 1200 customers in nothing to sneeze at, including a few blue-chip names. Also no customer accounts for more than 3% of revenue.
On the negative side:
1. These are broad, tough markets with multiple buyers from different functions–not easy sells. Upland’s product portfolio manages to compete with everyone in enterprise software from Microsoft to Adobe to Deltek to VMware. How will Upland differentiate itself? By product? By vertical? By market? As a suite (not easy with acquired products)?
2. Upland’s marketing is necessarily generic. Here are some claims from their website:
- From the next 25 years to the next 25 seconds. Strategy meets execution with a new generation of cloud-based enterprise work management software
- Run smoothly. Change quickly. Achieve more. Upland’s family of cloud-based enterprise work management software helps every team in your organization do their best work
- From modernizing healthcare records to personalizing a global web experience and hundreds of ways in between.
- Our family of products helps teams run their operations smoothly, adapt to change quickly and achieve more every day. We do this by automating the flow of work, connecting people through technology and creating visibility across all aspects of the organization
It sounds nice, but is it Dropbox, Sharepoint, Google docs, ERP? Even e-mail makes these claims. Again, what will help Upland stand out from the crowd?
3. 90% client retention on a dollar basis is the only typical SaaS metric datapoint provided and it is fine, but not great for enterprise software, especially on a dollar basis. (To be fair, though, it is a new company with not a lot of time to up sell new products.)
4. For the six months ended June, 2014 R&D expense is more than 50% of revenue. Normally this might bode well for the future. However, in this case, the majority of this expense consists of a large stock grant ($11M) to a non-executive director’s company, with whom the company has a technology service agreement. There are also a couple of other related-party transactions, though the company is instituting a new policy in this regard going forward. Related-party transactions never look good and can be easily avoided, so I always wonder why people engage in them.
Conclusion
I’ve become so immersed in vertical software plays, or point solutions with very hard, specific ROI cases, that these broadly horizontal solutions no longer get my blood pumping. As you can tell, this is one I will be passing on. Upland feels as though it was hastily pulled together to take advantage of the attractiveness of all things enterprise cloud right now. Perhaps because everything worthwhile I’ve ever worked on took a lot longer to come together, I’d like to selfishly believe that Upland cannot pull it off so quickly!
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