« Previous post
Next post »

December 19, 2006

NetSuite’s Going Public, Looking for $1 Billion Valuation

Michael Arrington

59 comments »

NetSuite, the fraternal twin of SalesForce (both companies CEOs came out of Oracle and have similar business models), is preparing to go public next year based on 2006 revenues of about $70 million. The good news is that this could crack open the IPO window for startups again, which was firmly shut in the wake of GoDaddy’s abrupt withdrawl of its registration statement in August.

Investment bankers are desperate for deals right now as very few companies are going public (and tech IPOs are nonexistent). A source close to the IPO selection process has told us that NetSuite chose Credit Suisse as their banker. And in a surprise move, NetSuite has decided not to syndicate the deal. Usually, IPOs have 2-3 investment banks involved, but NetSuite is going just with Credit Suisse. Our understanding is that the company may have negotiated a lower fee for the IPO than the standard 7%, which is extremey rare.

Oracle’s Larry Ellison owns a majority of the company, and stands to make a significant amount of money in the IPO. But this could also be very good for Silicon Valley, as a number of profitable tech companies grow to the point where an IPO is feasible.

NetSuite has raised over $100 million to date, and is looking to raise another $100 million in the IPO in exchange for 10% of the company.

  • Sphere It

This entry was posted on Tuesday, December 19th, 2006 at 11:15 am and is filed under Company & Product Profiles. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Trackbacks/Pings (Trackback URL)

  1. Venture Midwest » Snowmen and IPOs

    December 19th, 2006 at 1:35 pm

  2. TechCrunch Japanese アーカイブ » NetSuite、株式公開準備中。バリュエーションは$1Bを目指す

    December 19th, 2006 at 1:58 pm

  3. Nitin Badjatia » Blog Archive » NetSuite looks to go public

    December 19th, 2006 at 3:15 pm

  4. The Ponderings of Woodrow

    December 19th, 2006 at 6:40 pm

  5. GigaOM » Return of the Tech IPO

    December 20th, 2006 at 9:12 am

  6. Rod Drury > NetSuite going for IPO

    December 20th, 2006 at 6:28 pm

  7. rinkusu » Blog Archive » 2006-12-25

    December 24th, 2006 at 10:20 pm

  8. Techcrunch » Blog Archive » Bubble, Bubble, Bubble

    January 7th, 2007 at 2:40 am

  9. web live :: Bubble, Bubble, Bubble :: January :: 2007

    January 7th, 2007 at 6:59 pm

  10. Bubble, Bubble, Bubble

    January 9th, 2007 at 5:01 am

  11. iMicro.mobi » Bubble, Bubble, Bubble

    January 13th, 2007 at 2:22 pm

  12. 37Signals Launches HighRise Contact Manager

    March 20th, 2007 at 3:55 pm

  13. SaaS Blogs

    April 27th, 2007 at 10:50 am

  14. Postini IPO Coming

    June 8th, 2007 at 2:15 am

  15. Betting on the NetSuite IPO| Zoli’s Blog

    August 2nd, 2007 at 12:50 pm

  16. Question of the Day: Wanna go Dutch? « FoundRead

    December 26th, 2007 at 9:04 am

Comments

RSS feed for comments on this post.

  1. David

    December 19th, 2006 at 11:44 am

    Do people really get that excited over companies that trade at 15 times sales?

  2. SD_Chris

    December 19th, 2006 at 11:45 am

    Sweet! I can’t wait to buy stocks in all these startups so I can be part of the second bubble! I missed out on the first one.

    When is Facebook going public again?

    cheers,
    Chris

    http://www.SwitchDiscs.com

  3. JAR

    December 19th, 2006 at 11:51 am

    Good product. The challenge for NetSuite is that implementation takes a very long time for their customers and this could be painful for customers that are looking for On Demand models. They also need a VoIP component to differentiate from other players such as Salesforce. It’s nice to see Larry still has the “midas touch”. He just knows how to make money!!!!! Lastly the valuation seems to be very rich at 14X. It I remember correctly Salesforce hit the street at 8.5X and they are the on deamnd King.

  4. Zoli Erdos

    December 19th, 2006 at 12:17 pm

    JAR,

    NetSuite is an integrated All-In-One system (well, basically ERP+CRM), that’s quite a bit more than Salesforce, which is just CRM, don’t you think? :-)

    SD_Chris,

    This isn’t exactly a consumer web 2.0 company, but I doubt you bothered to look it up….

  5. will

    December 19th, 2006 at 12:26 pm

    isilon went out at $1B last week . . . the market is definitely open again. . .

  6. Jason Wood

    December 19th, 2006 at 12:28 pm

    Zoli,

    It’s unfair to NetSuite to compare it to salesforce, and frankly it’s a comparison the company should hope doesn’t bear close scrutiny if/when the IPO does happen.

    Furthermore, it’s not an ERP suite…it’s a general ledger/financial suite with some SFA and customer service functionality built in. Big difference.

    Nevertheless, there are a dearth of SaaS plays in the public markets and the growth Zach and his team have delivered has been terrific. This will be an interesting company to watch.

    Hat tip to Jason Maynard and his team, who have really paid much tighter attention to SaaS than most of the sell-side analysts.

    J

  7. Nathan Kaiser

    December 19th, 2006 at 12:40 pm

    Good luck to Evan and his team.

    I had the opportunity to speak with him a while ago for my site:
    http://www.npost.com/interview.jsp?intID=INT00083

  8. Drama 2.0

    December 19th, 2006 at 12:40 pm

    Well if Facebook is doing $50 million in revenues and is worth $8 billion, then NetSuite, with $70 million in revenues, should be valued at over $11 billion. Ha.

  9. Joke 2.0

    December 19th, 2006 at 1:19 pm

    Exactly how is NetSuite going public going to ,,open the IPO window for startups”?

    1) NetSuite is hardly a typical startup ($100 million raised to date).
    2) Their product hardly works out-of-the box without further customization.
    3) You cannot buy a product on their site, you have to click ,,contact me”
    4) NetSuite is targetting medium-size companies, where they are cheaper than SAP/Siebel

    They are as removed from a ,,typical” Web 2.0 startup as possible.

    I can’t wait until Salesforce & SugarCRM start biting them from underneath with same features with less complexity and for less $$$.

  10. SD_Chris

    December 19th, 2006 at 1:27 pm

    Zoli,

    I looked them up and I’m familiar with their service as I’ve used SalesForce in the past and have checked out NetSuite as well.

    I was just poking fun at the thought of OTHER startups looking to go IPO especially if Facebook follows through with their vision of possibly going there.

    cheers,
    Chris

    http://www.SwitchDiscs.com

  11. Sharad

    December 19th, 2006 at 1:39 pm

    Sounds like the second bubble is just round the corner !
    Btw, isnt the article biased to make users feel that they should jump the gun and invest heavily in the company? The flip side of the coin was never argued about - wat to go Michael.

    Already a gazillion comments on how it is not a typical web 2.0 startup. ROTFL !

  12. Colin Strummer

    December 19th, 2006 at 1:54 pm

    no offence, but it’s really good when you write the reviews, it’s got the old feel back…less corporate…not just google reviews, like mashable…but more general…

    keep writing…

  13. Fashion Industry Ceo

    December 19th, 2006 at 2:18 pm

    never even heard of the company….im going to check it out and come back and post my opinion!

  14. Jose

    December 19th, 2006 at 2:18 pm

    Mike,
    What happened to Natali? We need her back.

  15. JHSA

    December 19th, 2006 at 3:14 pm

    dotcom bubble 2.0 anyone?

  16. No way!

    December 19th, 2006 at 3:38 pm

    No way they get $1bil valuation. Typical lead bank over-inflating value to get lead role. Highly doubt that Credit Suisse will sole manage. If so, I would argue that NetSuite is ignorant because given the lack of tech IPOs it is likely NS could negotiate the gross spread down to 6% and still round out the cover with 2-3 other bulge firms.

  17. No way!

    December 19th, 2006 at 3:39 pm

    No way they get $1bil valuation. Typical lead bank over-inflating value to get lead role. Highly doubt that Credit Suisse will sole manage. If so, I would argue that NetSuite is ignorant because given the lack of tech IPOs it is likely NS could negotiate the gross spread down to 6% and still round out the cover with 2-3 other bulge firms.

    Oh and one last thought. Can you say for sale sign?

  18. Adrian Keys

    December 19th, 2006 at 4:17 pm

    Can someone let me in on the details of that business model…seems to be a sure thing.

    http://www.jollyjo.org

  19. Jason M. Lemkin

    December 19th, 2006 at 5:29 pm

    $1b seems aggressive given that SFDC has mkt cap of $4b on lower implied multiples (did $130m last quarter), and SFDC is clearly the segment leader and should command a material premium, notwithstanding that the products aren’t really the same.

    But given the tear SFDC is on, going public on some discounted multipled would seem a no-brainer. Hardly a bubble deal.

  20. Geoff

    December 19th, 2006 at 5:53 pm

    My business switched from Salesforce.com to NetSuite about 18 months ago. It worked just fine for us “out of the box.” We started with around 5 licenses and now have about 15. We’ve also customized it a good bit.

    The accounting side of things is great (the main reason we switched) and these guys will give SF some very real competition.

    Despite my positive feelings about NetSuite, I am not wedding my company to them for the long term. They have to earn our business every day, and I am hopeful that some “true startups” will give them a run for their money. Competition will be very good for this market.

  21. David

    December 19th, 2006 at 5:54 pm

    I was a user of NetSuite and switched to Salesforce.com two years ago. Salesforce is far more innovative, responsive to customer feedback and is truly dedicated to their customers success. Salesforce is first-class all the way.

  22. Mike

    December 19th, 2006 at 6:42 pm

    Though Salesforce is No.1, NetSuite’s going to Nasdaq is very good for enterprise end users. I hope we could get better and better service from NetSuite.

    Tech Tutorials: http://www.hotcoding.com

  23. The Alpha Project

    December 19th, 2006 at 8:53 pm

    @David - I tend to agree with you on the UI. But competition pushes the best to get better. And I hope that NetSuite can pull off getting their evaluation because that would put them in a better position to put Salesfore.com in check.

  24. The Web Conferencing Blog

    December 19th, 2006 at 9:46 pm

    I have heard that NetSuite is somewhat cumbersome and difficult to use. Most users prefer Salesforce.com or SugarCRM because they both fall into the Software as a Service business model which absorbs much of the implementation, setup, maintenance, and product upgrades and costs for the customers via a monthly subscription.

    This value proposition is very attractive and low risk for small to mid-size companies.

    http://davidchao.typepad.com

  25. The Web Conferencing Blog

    December 19th, 2006 at 9:47 pm

    Forgot to mention that a $1B valuation…I’ll be impressed if they can achieve half of that.

  26. David

    December 19th, 2006 at 10:02 pm

    I had tried to implement Netsuite for my start-up company, but the task proved to be much too difficult, and I gave it up. Without IT experts and the deep know-how of ERP specialists, I see no chance for a successful implementation of Netsuite. This is the reason why I switched to Salesforce, which I had been successfully using for another company before. After having experienced both systems first hand, I can now understand why people are raving about Salesforce - it is really, really easy too use, and it works just fine. And with all the additional features out there for Salesforce, I can customize Salesforce for additional functionality. I think many other companies will make the same experience that my company had. In the long run, I would bet the stock of Salesforce to outperform Netsuite.

  27. js

    December 20th, 2006 at 12:34 am

    NetSuite was a good idea but it has morphed into a Siebel-type company with extermely long development cycles and significant complexity. Like many companies, it started out after Small/Medium businesses but could restarin itself to try to appeal to larger, bigger spending businesses.

  28. Sean

    December 20th, 2006 at 6:50 am

    What no one seems to question is how profitable are they? $70 MM in revenue is great, but what about EBITDA? How fast is revenue growing. Basic valuation comes from a projection of future growth and cash flow, not just current revenue. Hence Facebook thinking they’re so valuable. If they really achieve the growth and profitability indicated in the Yahoo memo that was featured on tech crunch then they might justify a value of $1-4B.

  29. Jesse

    December 20th, 2006 at 10:39 am

    The space is bound to explod once they go IPO. The interesting thing will be the ramifications on some of their growth strategies, like their platform play to counter Salesforce’s AppExchange. Oddly, the growth arena is very new for both, and like another commenter mentioned, it’ll be interesting to see if any innovative startups like Apprenda orEtelos give them a run for their money in the future.

  30. Windeye

    December 20th, 2006 at 2:46 pm

    24SevenOffice (http://www.24sevenoffice.com/) has a true SaaS ERP+CRM service for SMB’s although they are only in Norway and Sweden so far. About to enter the UK and German markets, and perhaps the US after that.

  31. Sleepyhead

    December 21st, 2006 at 12:19 am

    Winedye,

    Most probably we are launching in the US soon, we are in the process of looking for a suitable partner.

    Cheers,
    Espen Antonsen
    24SevenOffice

  32. Sleepyhead

    December 21st, 2006 at 4:47 am

    Winedye,

    Just a quick update..the full US launch might come very soon. See http://sleepyhead81.blogspot.c.....eover.html

    Espen Antonsen
    System Developer
    24SevenOffice

  33. Convictus

    December 22nd, 2006 at 9:24 am

    Do you guys need a copy editor? Grammar and spelling in most posts should have been checked.

  34. Kostyantyn Zuzik

    December 22nd, 2006 at 10:32 am

    Hope everyone will forgive me for a kind of advertisement here (it’s up to the topic).

    We also operate a similar to NetSuite company - MagSuite.com. You can see our features at the web-site (being honest at the moment NetSuite offers much more functions than we do). However, currently we are working on big update which will make our offering more attactive - we’ll offer open source code (.net 2.0, asp.net, c#, ms sql server) for unlimited customization & creating industry-specific solutions. License agreement will allow only hosting of modified project on our web-site. We are also much cheaper then NetSuite - just 30 usd/month/user. We are looking for investors, so feel free to contact us on this.

    P.S. According to my research there are only 3 companies which offer on demand ERP+CRM for the U.S. market - NetSuite.com, MagSuite.com & profitcenter.com.

    Good Luck !

    CEO
    Kostyantyn Zuzik
    info@magsuite.com

  35. David Mackey

    December 23rd, 2006 at 3:12 pm

    Anything that offers a full solution I am interested in. Needing to remember multiple websites is somewhat of a nuisance, especially when it is a partial suite of tools. For example, many sites are offering one part of an Office Suite rather than the entire suite - meaning you would need five or so different websites to create a single office suite

  36. NetSuite and Salesforce user

    December 25th, 2006 at 4:21 pm

    Owning a company that has used both Salesforce and NetSuite (replaced Salesforce with NetSuite), I can tell everybody that NetSuite is a much better product. People say SF.com is much easier to use, but NetSuite can be customized to have the same UI and ease of use as SF.com. The big added value of NetSuite is the fact that you can go above and beyond a rolodex online if you see fit. I think the company will be a hit once it gets capital to beef up it’s services and support group.

  37. Kevin Closson

    January 3rd, 2007 at 1:05 pm

    Profitable startups? Isilon went IPO underwater:

    http://kevinclosson.wordpress......this-blog/

  38. Charles

    January 4th, 2007 at 3:03 pm

    Why buy 10% when you can get the lot for less..

    netsuite has focused on the “integrated suite” but a company cannot pay their employees, manage HR activities or participate in EDI supply chains?

    After 7 years of developing solutions for this market, we have found the typical SME customer requires more functionality than Netsuite and must be an out-of-the-box experience, and for far less than Netsuite currently charge..

    For a complete Small Business solution for 1 -> 300 employee companies, which can also compete on ease of use, with the likes of Quicken etc.. In fact a full featured accounting solution is available for FREE.. How will Netsuite compete with FREE..

    On-demand is a different beast to traditional software..

    Have a look at http://www.weboffice.com.au

    Just my two cents worth…

  39. Jonathan Cuyno

    January 19th, 2007 at 11:06 pm

    What happens to Netsuite & Friends when the next software company comes out with the most “forward” thinking fully integrated Internet based business application? What will happen to the billion dollars of investment money?

    “Good is only good as what you know to be good, if you don’t know any better you won’t know how “good” really can be.” There are over 20 million small businesses in America today with 80-90 percent family owned. How many can afford the high cost of technology that Netsuite & Friends charge?

    It’s only a matter of time. Stay tuned…

  40. Glen Colson

    January 19th, 2007 at 11:06 pm

    I heard the IPO is delayed because the rumor revenue of 70M is significantly less, and the company have over 500 employees…with little profit on the table, much less growth.

    However, it is an interesting company. But who is Zach Nelson? I have never heard of him.

  41. Nesta

    January 20th, 2007 at 3:06 pm

    Have they anounced when they will go public? Does any one know? Thanx.

  42. CBrown

    February 6th, 2007 at 10:05 am

    I’m an (unhappy) Netsuite customer. They lured my company in with “teaser” rates, encouraged us to customize the solution and then raised the monthly fees 250+% in four years. To add insult to injury, they still advertise the “teaser” rates but when I asked why I was charged so much more they claimed that the advertised rate was for a “core” package that has no functionality. Needless to say, we’re looking at dropping Netsuite before our next renewal date.

    I don’t hold out much hope for a company that treats it’s customers with this much contempt.

  43. Kman

    March 4th, 2007 at 4:21 am

    I have implemented Salesforce and Netsuite at our company 70+users 300+ employees. Salesforce is well documented and is not “buggy” Netsuite is shockingly documented and very “buggy”. Netsuite is very hard to implement and oversells, overpromises what it will do, Salesforce is easy and does what they say it will. Yes Netsuite has GL and webshop, without those 2 things I don’t think they would have any customers…

« Previous post
Next post »