MuleSoft

MuleSoft raises $50 million, preps for IPO

March 13, 2014: 7:05 AM ET

The company's technology is used to integrate business applications and software.

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FORTUNE -- MuleSoft, the San Francisco enterprise technology company that specializes in the integration of business applications, has raised $50 million in a new funding round.

The round was co-led by New Enterprise Associates, Lightspeed Venture Partners, and Meritech Capital. Cisco, Salesforce.com, SAP Ventures, Morgenthaler, Hummer Winblad, and Bay Partners also participated. It brings the company's total raised to $131 million; its previous round last year pulled in $37 million.

"It was tremendously oversubscribed," chief executive Greg Schott told Fortune. "Probably one of the tightest rounds I've ever been associated with. What it comes down to is, if we can crack this nut it is potentially the biggest IT opportunity ever. Ten times bigger than the database market. We're trying to solve a $500 billion problem."

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The eight-year-old company specializes in connecting the many applications, software, services, data, and devices found in a modern company so that they can work with each other. It's not an easy job -- historically the task has required a custom fix that doesn't grow with the company. With access to thousands of public application programming interfaces, or APIs, MuleSoft aims to "turn the whole thing into a product," Schott said.

"Almost every VP and C-level person will have seen that, out of their IT budget, they will spend $1 for software and then between $5 and $7 getting it implemented and making it work," Schott said. "That is usually trying to get the systems and data talking to each other; that's where the bulk of the cost comes in. The way you assemble most products -- cars, anything else -- is bolts and nuts and standard components. Everything's standardized. The way people have assembled computer systems is by welding it together -- that is, doing it custom every time you do it. And once you weld it together, you can't break it apart again. That's what it's like."

MuleSoft primarily competes with legacy vendors like Tibco, IBM (WebSphere), and Oracle (Fusion), as well as newer companies like Informatica. "We think that writing custom point-to-point code is the worst thing ever, and it locks your enterprise down and ties you in knots," Schott said. "We call it evil."

He added: "All of your apps are spread to the wind. If I'm a CIO, I want all of them to talk to each other. That's the way I'm competing in the next decade -- beating them by making it coordinate better than they do. I don't think any CEO would ever tell you that they're competing on integration. But what a CEO would tell you is that they're competing on business agility and their ability to use their systems to be connected to their customers, supply chain, partners. When people talk about how software is eating the world, the way companies are competing is about how their software is competing to give them a competitive advantage."

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The company plans to use the money to hire 250 more employees -- doubling the company's headcount -- in a number of areas, from sales to marketing to engineering. It also plans further international growth, with a special focus on the Asia-Pacific market. "We're at the scale now as a company where we can invest in APAC and see a return," Schott said.

And what of an initial public offering? Schott said it's certainly in the cards, though he wouldn't make a promise. "We've been doing doubles from a revenue standpoint so we think the right place for us at this point is to be a big category-defining company," he said. "We're at a place right now where at the end of the year we'll be at the right scale for an IPO. I'm not saying we will, but we'll be at the right scale. You get to a point in the valuation of a company where you're on a path to be an independent company. We think it's the right thing to be."

After all, the integration challenge that large businesses face will only get more complex as more applications work their way into the enterprise.

"It's not whether you're a big shark anymore," Schott said. "It's about how all your little fish are together swimming in a school."

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