Investors Pile Into Cloud Apps Vendors

The drive to bankroll some of the fastest-growing Cloud applications vendors has reached a milestone with at least $21 billion being raised so far. That includes recent investments from private-equity firms, venture capitalists, and sovereign funds as well as measures by these entities to place some vendors under their control often by going private.

One of the largest investments was the $2.3-billion purchase of Skillsoft in March 2014 by UK private-equity firm Charterhouse Capital Partners from Berkshire Partners LLC, Advent International Corp and Bain Capital LLC. That followed the $1.8-billion purchase of Applied Systems in November 2013 by PE firm Hellman & Friedman from Bain Capital LLC. There were similar purchases such as UNIT4, Active Network and Vocus as shown in the following table.

The majority of the transactions involved follow-on financing by new investors that are increasingly drawn to the Cloud applications space. Dropbox and Box Inc. were the shiny examples of over-the-top investments that VCs and PE firms have piled onto these collaboration vendors without blinking their eyes. Between them, investors have put in at least $1.6 billion in debt financing, direct and indirect ownerships. Box’s valuation has reached more than $2 billion, while Dropbox’s hovers around $10 billion.

The table shows 32 transactions with each Cloud applications vendor raising at least $100 million in recent funding rounds – mostly within the past three years. Not shown are more than 200 deals that other Cloud applications vendors have raised through the same period. The total amount of funding raised so far for these 230 vendors reaches more than $21 billion, or about $91 million for each vendor.

The outsized investment comes at a time when many of these Cloud applications vendors have begun to gain wide acceptance, albeit at a steep cost. Box, for example, has secured over 27 million registered users including 39,000 paying customers for its storage and collaboration offerings in the Cloud. Over the past three years, Box has secured about $207 million in aggregated revenues, but its sales and marketing expenses have exceeded $310 million during the same period.

It’s difficult to draw the conclusion that these vendors have been prodded by investors to spend lavishly on sales and marketing in order to succeed in the Cloud or if they have been emboldened to invest heavily in order to get the attention of customers and investors.

In either case, the piggybank of these Cloud applications vendors appears to show no sign of shrinking. Check back this space often since we are going to track and update the status of these big money grabbers in order to show the flow of money coming in and changing hands among investors in the coming quarters.

Cloud Applications Vendors With At Least $100M In Private Funding and/or Private-led Acquisitions

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