The app revolution that has changed how consumers interact with online services is being played out among businesses, too. And as a sign of how fast that’s growing, one of the startups at the center of how enterprises are using cloud-based software is getting a major cash injection. AppDirect, which has developed a marketplace and platform for distributing cloud-based apps, is today announcing a $50 million round of funding.
The Series D round is led by existing investor Mithril Capital Management, co-founded and led by Peter Thiel, one of the pioneers of cloud services and online marketplaces and a backer of companies like Facebook and Palantir.
Daniel Saks, co-founder and co-CEO of AppDirect, tells me that this latest round values the startup at $600 million, or double its valuation at Series C stage.
The investment comes less than a year after AppDirect raised $35 million in April 2014 — also led by Mithril.
If the name AppDirect is not that familiar to you, the companies that it works with will be.
Its customers include Samsung, Deutsche Telecom, Staples and Comcast, who all use AppDirect’s platform to host and distribute apps to its own customers. Samsung, for example, bases its whole Knox enterprise security marketplace on AppDirect; Staples, Comcast and DT all use it to distribute apps to enterprise users.
Saks says his company serves “dozens” of customers like this already and is doubling the numbers each year.
AppDirect serves as a kind of middleman in the app economy. It connects these app store providers with a platform that already contains thousands of business apps — from companies like Box, Microsoft and Docusign — which are delivered and updated by way of an API. All told, Saks says there are thousands of apps in its marketplace, and in aggregate there are millions of businesses reached through it.
Saks would not comment on whether the company is profitable right now but notes that it is more focused on “growing rapidly” — which is often code for “no.” Its revenues have been doubling annually, with the startup making $9 million in sales in 2013 and $18 million in 2014, on the back of two main areas of business. The first is revenue shares, or a transaction fee, made on any app sold on an AppDirect-powered marketplace. The second is the monthly license fee that it charges to the companies that repurpose that marketplace with their own brand.
The idea of several app stores essentially powered by the same company might imply that there isn’t much differentiation between all these different app stores. They are, after all, mainly the same selection of apps from AppDirect.
But this is not the whole story: what it means is that business users can get their choice of products wherever they happen to be doing their work. And for those larger companies retailing the app stores, they can use AppDirect’s platform to manage and bill the provisioning of these apps on their behalf. Think of it as the enterprise equivalent of services like Appia, which built its business providing a similar idea for consumer-focused app stores.
“While there are other companies in the cloud service brokerage space, AppDirect is the only player in the cloud service commerce market,” he says. “We offer the only cloud service delivery platform that exceeds the functionality provided by the most established distribution channels for on demand services. We deliver the best omni-channel cloud service experience on the market and can maintain our leadership in cloud service commerce because we are open, agnostic and extensible.”
On the subject of Thiel investing, Saks says AppDirect is attractive because it has “cracked the code on enabling cloud services to businesses of all sizes, to all devices and through all channels and verticals…. Our investors, like Peter Thiel and Ajay Royan of Mithril align with our True North – we want to build a long-lasting brand that empowers the global cloud economy and ultimately gives businesses the tools they need to survive and thrive.”
As for where the new cash injection will go: there are likely a few areas. The first of these will likely be to add more technology and people to build out the service. The company now has around 200 employees and plans to expand that to 300 with more people in sales, marketing and client services, and open a new office in Silicon Valley while also beefing up in Asia, Latin America, North America and Europe.
I also wondered about whether, given the growth of connected devices and apps in general, whether AppDirect had plans to expand the kinds of customers and verticals it targets. Currently the company serves five market segments — telcos/cable providers, system integrators / distributors, retailers, financial institutions, & cloud companies, along with a focus on emerging trends and technologies like the Internet of Things. Saks would not be drawn out on what might be its next target. “As an open and agnostic platform are we are always identifying other markets to expand our offerings,” he says.
You could also consider acquisitions to be another area. So far, AppDirect has made three in its lifetime, all to enhance the kinds of services that it offers to users. They include data visualizations (via Leftronic), billing services (via jBilling), and app management (via Standing Cloud).
With this latest round, AppDirect has raised just under $106 million, with other investors including Starvest, iNovia and Foundry Group.