Cloud-based communication and collaboration platforms are the name of the game today in enterprise software, and nowone of the still-independent leadersin that space is announcing a significant round at a hefty priceto ride the wave of growth. Smartsheet, the Bellevue, Washington-based startup that has built spreadsheet software that lets people set and manage tasks and work across teams of people, has picked up $52 million, in what CEO Mark Mader tells me was a pre-money valuation of $800 million ($852 million post-money).
The valuation, notably, is a massive, tenfold leap for Smartsheet. When it last raised money in 2014, the company was valued only around $75-80 million. This Series F, which brings the total raised by the company to $120 million, was led by previous investor Insight Venture Partners, with Madrona Venture Group and Sutter Hill Ventures, and new investor Summit Partners also participating.
Why the bigjump in valuation? Part of it has to do with growth of the company itself, and partly with the current climate for socially-minded enterprise software.
Smartsheet, Mader said in an interview, has beengrowing at a rate of about 60 percent a year for the past five years, with a $100 million annual run rate, and intentionally run not for profit as it continues to grow. The company currently has about 70,000 businesses paying to use the product, ranging from SMBs through to large enterprises. This works out to around 550,000 licensed customers, and a few million people who use it free of charge, he said.
Smartsheets business model is, as with many cloud-based services, freemium. Everyone can access documents for free, and you only pay if you want access to edit or update a Smartsheet document. This low barrier to entry, where Smartsheet monetises only those who are initiating and creating work on the platform, as Mader puts it, essentially lures in many users, some of whom eventually convert to paying customers. (Tiers range from $14 to $25 per user based on your business size, or at a custom rate for large organisations.)
The drive to use Smartsheet is coming from a bigger trend in the market: there has been a large shift from usingsoftware hosted by a company itself, or installed directly on your device, to products that are sold, distributed and accessed in the cloud.
Smartsheet was an early mover in that space, opening up for business in 2006 as an alternative to the likes of Excel and other spreadsheet packages on the market, with a firm focus on offering a way for multiple people to collaborate in those documents to use them more dynamically.
In other words, if Excel found a purpose as a place where multiple people could dip in to monitor the progress of something, Smartsheet was created from the start with that in mind.
Fast forwarding several years, the cloud architecture thatSmartsheet focused on early has become something of the norm in the business world, with companies like Slack focused more on communication across teams and apps and Dropbox and Box looking at the storage component now leading the charge and forcing the hand ofmuch larger players like Microsoft to followalong.
There are documents and communication tools and file synchronization and sharing in the cloud, Madersaid, and we see automation and work tracking as the final domino in that space.
Today, Smartsheet integrates with several but not all of these: part of the funding will be used to expand that list from a current roster that includes the likes of Box, Dropbox and Teams from Microsoft, but not, for example, Slack. That integration is coming later this year, Mader said.
Many investors are racing to figure out what the next great breakaway enterprise collaboration business opportunity might be there are a lot of contenders. And, by definition, that also means that there are apretty widerange of competitors to Smartsheet, including Asana, Basecamp, Wrike, Teamwork, Workfront and many others.
Mader says that one of Smartsheetsunique selling points amongst all these is itsautomation layer, which essentially incorporates AI to help lead people through tasks and the sheets themselves, rather than relying on people to be able to work everything out for themselves.
We knew it was only a matter of time before Google and Microsoft would take the spreadsheet into the cloud, and that is what they have done, so we had to do something else, Mader said. Interestingly, that too may soon become table stakes, with the theory (and evidence) that AI elements will soon be a part of all of our connected services.
So far, the growth, product and market fit have been a strongcombination for investors.
Collaborative work management is now recognized as a key component of modern enterprise strategy, as companies look to move beyond the limitations of legacy tools, said Ryan Hinkle, Managing Director at Insight Venture Partners, in a statement. Since our initial investment with Smartsheet, we have seen an incredible amount of development and growth behind their capabilities. We are committed to continuing this acceleration so that more companies can benefit from the unique value of Smartsheet.