AppDirect, app marketplace and #unicorn

~ Tom Spargo

What is AppDirect?
Founded in 2009, San Francisco-based AppDirect runs white-labeled cloud SaaS marketplaces for customers like Comcast, Staples and Deutsche Telekom. The business model is similar that of “app stores” like iTunes: they make money from apps listing on the marketplace and from subscriptions from end users. AppDirect’s value-add is their handling of all the billing and distribution. The company has raised $245 million in venture funding from Stingray Digital, iNovia Capital , the Foundry Group and Peter Thiel’s investment arm Mithril Capital Management.

How much are they worth and why?
$1.04 billion as of October, 2015. The company claims to have sold subscriptions used by 20 million users in 150+ countries. In 2014, Revenue was $18 Million. But company CEO Daniel Saks said in an October 2015 interview that revenue has been growing recently at 300% YOY. So assuming revenue was $54 Million in 2015, the company is valued at 19.25X Sales. As a benchmark, average revenue multiples in Internet software for public companies are around 7.

Strengths

  • Robust Catalog: not just Box, Microsoft, and Google but 250 other key apps. The larger the catalog grows, the harder it is to replicate.
  • Peter Thiel: his deep pockets and connections can only help.
  • Corporate culture: AppDirect ranked #10 on Business Insider’s list of best Unicorn places to work. The ranking is based on employee reviews on Glassdoor.

Weaknesses

  • Inexperienced Management: Founders are both Millenials with no prior startup experience. Only time will tell if they have the Management chops to take the company to $1 B in Revenue, not valuation.
  • Technology not necessarily Proprietary: they have a Patent Pending but Marketplace technology is so common that it may not be that hard to get around their IP.

Opportunities

  • International: half of AppDirect’s revenue is already international and it is clear that International Telcos and big B2B players are a sweet spot. The company plans to use its latest funding to further expand its international footprint.
  • Vertical Apps: the company could expand by adding support for vertical and industry-specific software applications and services. Some of the industry specific Partners like Deutsche Telekom would welcome that initiative.
  • Acquisitions: AppDirect has already made three buys to enhance its services. They include data visualization provider Leftronic, billing service provider jBilling, and app management startup Standing Cloud. Other acquisitions could help AppDirect further differentiate itself.

Threats

  • Salesforce: and other SaaS ERPs could easily enter the business albeit with a clear bias towards affiliated companies.
  • Competitors: trying to eat App Direct’s lunch include Jamcracker and Parallels both of which have been around a decade longer than App Direct. Other companies that broker software to the enterprise are also threats. These include Accenture, HP, NEC, and CapGemini.

Note for our customers in Japan: App Direct recently established an office in Japan but no local partners have been announced.

 

 

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