Over the past couple years, I've met with Zach Nelson several times. He's a veteran of the software world and is currently the CEO of NetSuite (which starts trading tomorrow as NYSE: N). The company develops on-demand software for the small-to-mid size business (SMB) segment, essentially allowing for sophisticated enterprise resource planning (ERP) functionality at affordable pricing.
Despite the success of NetSuite, it has been in the shadows of mega player, Salesforce.com (NYSE: CRM).
But this may change; that is, today NetSuite had a successful IPO, raising $161 million. At first, the company had a $13-$16 price range on the offering, but was able to price the deal at $26. NetSuite used an online Dutch auction system for its IPO, which allows any investor to participate.
The ERP market for large businesses is mostly dominated by SAP (NYSE: SAP) and Oracle (Nasdaq: ORCL). However, the SMB market is fairly under penetrated (Nelson calls it the "Fortune Five Million").
Why? Well, these customers can't afford traditional software offerings -- yet, there is still a need for sophisticated solutions.
But, in the case of NetSuite, its on-demand approach makes things much easier. The company charges a subscription fee; the technology is easy to implment and use; and there is no need to bolt-on other applications (it's a suite, right?)
For the first nine months of 2007, NetSuite's revenues have spiked 63% to $76.8 million. There are roughly 5,400 customers.
Interestingly enough, the cofounder of NetSuite is Larry Ellison, who is the CEO of Oracle. He has invested over $100 million into the company and owns a 54.5% stake, which is worth about about $820 million or so.
The underwriters on the deal included Credit Suisse (NYSE: CS) and WR Hambrecht.
You can find the prospectus at the SEC website. Also, if you want to check out other recent IPO activity, visit DealProfiles.com.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
12-21-2007 @ 3:31PM
Josh Whiting said...
The SMB market is still extremly fresh, it's true that there is much growth to be had as a CRM Software vendor. It has been seen first with Salesforce and now Netsuite, I wouldn't be surprised to see the other major vendors, ones like Salesboom, make similar moves, each of these companies experience large growth each and every year. The future can only be expected to bring the same growth with technology advancing so rapidly. The possiblies with hosted CRM Software continue to grow as well, making the gap between traditional on premise software and hosted CRM Software even smaller.