After last week's announcement of a $75 million VC funding round raised by Workday, I thought it would be a while before I heard of another SaaS company raising a similar sum. In the event, it took just a week. On Wednesday, on-demand email marketing provider ExactTarget announced a $70 million round.
ExactTarget is something of a special case in that it filed for an IPO in December 2007, but found its plans thwarted by the bleak IPO climate prevailing since then. The new round of funding brings in roughly the same level of cash as the company was seeking from the IPO, and coincides with the company finally withdrawing its S-1 filing. In a VentureWire interview, Rory O’Driscoll of new investor Scale Venture Partners explained its motives:
"We can't control when the IPO window opens, but frankly we can take advantage of the conditions ... This is an opportunity to own this company for the next couple years while it continues to grow."
O'Driscoll, who is joining ExactTarget board, knows quite a bit about SaaS growth having invested in SaaS web analytics provider Omniture prior to its IPO and still serves on its board. Regular readers will know that I often refer to the cash demands of the SaaS model at high growth rates as outlined by Omniture's CEO Josh James, and indeed did so when discussing Workday's funding round last week. Interestingly, though, Dorsey told me that ExactTarget doesn't see itself facing the same degree of funding need, pointing out that the company is sustaining year-on-year growth rates above fifty percent while reporting a profit for the last thirteen consecutive quarters. On 2007 revenues of $70 million, profits were $2.5 million, reports VentureWire.
Although some of the cash will go on infrastructure spending, Dorsey told me that ExactTarget will also be funding more product development to bring on new services, in particular around taking advantage of social media. There will be some big-ticket spending on international expansion too, which he said the company will pursue with a mix of operational growth and acquisition.