Cloud ERP vendor Intacct last week announced that it has secured debt funding by way of a $40 million facility from Silicon Valley Bank. This comes at the same time as Intacct announced year-on-year new bookings increasing by some 34 percent.
Intacct has an interesting job in front of it -- it is a mid-market vendor and therefore fills the space between tools designed for small and mid-sized businesses (QuickBooks and Xero, for example) and more enterprise-focused tools such as NetSuite, SAP, and Oracle. The mid-market space is a difficult one -- customers have a plethora of different requirements and often the complexity, if not the budgets, are similar to those of larger enterprise organizations.
At the same time as market complexity makes it hard for Intacct, so too does the competitive landscape. Despite an ever-increasing focus further up the foodchain, NetSuite still does significant business in the mid-market and has a healthy roster of partners who sell its products into the mid-market. On top of that, FinancialForce, a mid-market ERP built on top of the Salesforce platform, strongly leverages the Salesforce story to punch above its weight in the space. Add to that legacy players such as Sage and you have a fairly complex dynamic.
Still, Intacct has done well to grow in the face of less market awareness and increasing levels of competition, and many commentators were expecting an IPO in the imminent future. Not surprisingly, however, market conditions put a kibosh on those ambitions so Intacct needed to look elsewhere to fuel continued growth.
While it has secured previous venture funding from the likes of Battery Ventures, Bessemer Venture Partners, Costanoa Venture Capital, Emergence Capital, Morgan Creek Capital Management, Sigma Partners and Split Rock Partners, the market was apparently not suitably enamored with Intacct's story to come back for another equity round.
This made debt financing a fairly attractive option given that it isn't dilutive and doesn't impact on future equity financing opportunities -- Intacct's leadership is, understandably, holding this up as an opportunistic move that was wise but not critical. Robert Reid, Intacct's CEO, says:
“Our consistent growth and strong financial results are proof of the outstanding momentum we have in the market. When you are looking at long-term growth, you always have to watch the market and sometimes you take in money before you actually need it to ensure you have the flexibility to take advantage of new opportunities when they arise. This new funding provides us with the latitude to make the best possible business decisions for our company and our customers.”
While I don't completely buy that line, and would be fascinated to see the terms of the funding round, the fact that Intacct was able to secure this cash is a positive sign. I'll be interested to see both external factors and internal moves to capital raising in the months and years ahead.
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