Subscription Startup Zuora Files for IPO for $100 Million

Ten-year-old company was last valued at $738 million in 2015.

Subscription News: Subscription Startup Zuora Files for IPO for $100 Million

Source: Zuora

Last Friday subscription startup Zuora, Inc. filed for an initial public offering with the U.S. Securities and Exchange Commission. Zuora is a cloud-based SaaS platform that helps companies successfully launch and manage their subscription businesses from a central hub. The company will list on the New York Stock Exchange under the ticker symbol ZUO.

Zuora has more than 950 customers in 30 countries spanning various industries. Its customers include Ford, HBO, SurveyMonkey, NCR, Symantec, Financial Times, DocuSign, Caterpillar, The Guardian and Delta Airlines. Business Insider said Zuora was last valued in 2015 at $738 million by Pitchbook.

In its S-1 filing with the SEC, Zuora said it coined the term subscription economy 10 years ago to describe a changing world in which traditional product and service companies would shift their business models toward the subscription model.

‘Our vision redefines subscriptions in a broader context than a simple monthly fee. Our vision reflects the wide range of business models in the subscription economy, where products and services can be priced based on usage, consumption and outcomes, and the value of a company’s relationships with its customers is critical,’ said Zuora. ‘We believe the global, multi-decade shift across industries toward the subscription economy is creating a significant opportunity for subscription management systems.’

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Subscription News: Subscription Startup Zuora Files for IPO for $100 Million

Source: Zuora

‘To be successful in the subscription economy, businesses need to change their mindsets from one-time product sales to earning and maintaining long-term customer relationships. To deliver on the promise of the subscription economy, businesses need freedom from old technologies and business models of the product-centric era,’ Zuora added.

To back this up, Zuora offered data from its Subscription Economy Index, the company’s study of long-term Zuora customers that looks at total amounts invoice for subscription products and services. From January 1, 2012 through September 30, 2017, customers invoicing totals grew at an average annual rate of 17.6 percent. This study included 300 customers who had been invoicing through the Zuora Central Platform for at least 10 quarters.

The company reported the following financials for the last three years:

 

Fiscal 2016

Fiscal 2017

Fiscal 2018

Total Revenue

$92.2 million

$113.0 million

$167.9 million

   Subscription Revenue

$68.2 million

$89.8 million

$120.4 million

   Professional Services Revenue

$24.0 million

$23.2 million

$47.6 million

Net Losses

$48.2 million

$39.1 million

$47.2 million

Zuora attributes the net losses to significant investments made in sales and marketing, infrastructure, operations and staff for the purpose of growing the business. It anticipates incurring net losses for the foreseeable future as it invests in:

  • New customer acquisition
  • Expanding relationships with current customers
  • Entering new vertical markets
  • Expanding the company’s global footprint
  • Leveraging global systems integrators to accelerate growth
  • Launching new products and extending technology lead

Based in San Mateo, California, Zuora was founded by K.V. Rao, Cheng Zou and Tien Tzuo. The company now has more than 850 employees in offices throughout North America, Europe, China, India, Japan and Australia. Nearly 30 percent of its customers have more than $100 million in annual revenue. To date, Zuora has had 100 product releases.

Insider Take:

This has been a busy year for tech companies to file for IPOs. Dropbox and Spotify have also recently filed for initial public offerings. Zuora has been a strong player in the subscription management market for some time, so the timing is right for the company to take advantage of growth opportunities. They have a solid history of revenue growth and a strong board including directors from Index Ventures, Benchmark Capital, Redpoint Ventures and Broadway Angels to support and guide their work. An IPO will give Zuora solid capital with which to fuel their plans for growth as outlined in the S-1 filing.