Earlier this week Lithium Technologies announced completion of its D round of financing valued at $53.4 million. You can read the press release to get the details but the big question I have is what’s going on in the industry?
Lithium is not the only company in the last six months to pull in sizable sums from the investment community. Without doing much research I can name several others that have raised tens of millions of dollars in later rounds including Zuora, Marketo and Aria and there are others out there.
Not long ago it was common knowledge that SaaS or cloud companies needed less cash to get moving. Gone were the days when a company like Salesforce.com had to spend upwards of $100 million to get people thinking about the cloud as a suitable alternative to business as usual. But the latest news seems to be taking us back because today’s companies seem to be raising as much money as ever.
It’s true you don’t need to spend lots of moolah to define the cloud market these days but something else is demanding cash. Companies are staying independent longer and the idea of going public is again on the minds of investors. Over the last few years of recession and retrenchment, the IPO market was practically frozen and the only way to have a liquidity event was to sell your company to a bigger and more established company.
But also, earlier IPOs happened in relatively frothy environments in which categories and markets were still rather fluid and the companies that went public back then were less mature. Today companies like Lithium, Marketo and Zuora are raising tens of millions of dollars to support activities like opening foreign markets with offices and staff and to flesh out product lines. They may even be in the hunt for less mature companies that they can purchase—and all this before taking a nickel from the general public.
All this suggests that the IPOs, when they happen will be at much higher valuations and the shareholders will have reasonable expectations of profits from the newly minted public companies.
All of this may be a sign that investors, i.e. venture capitalists, are still somewhat gun shy of putting money into green startups preferring to invest in late stage companies with compelling stories and IPO event horizons that can be measured in months rather than years. Many have investments on the books that go back to the Bush administration’s first term and their investors are understandably interested in liquidity also.
So Lithium’s news is as interesting for what it says about that company and its social CRM marketplace as it is for what it tells us about the investment market and where we are in it.