Greylock Partners has gained accolades – and bundles of money — in the past 15 months from early bets on consumer Internet brands Facebook, LinkedIn and Pandora. Now, it’s reaping rewards from investments in the lesser known but still lucrative arena of business software, where Greylock backed some of this year’s biggest winners.
The Menlo Park, California-based venture firm is the top outside investor in Workday, which yesterday filed to raise $400 million in an initial public offering. Workday makes Web-based software that handles tasks such as payroll and human resources. Greylock also owns 19 percent of Palo Alto Networks, a maker of Internet-firewall technology, and 2 percent of ServiceNow, which provides human resources and financial services software. Those companies have gone public in the past two months.
As of yesterday’s stock market close, Greylock’s stake in Palo Alto Networks and ServiceNow was worth a combined $860 million, according to Bloomberg data. While Workday’s valuation isn’t yet set, should the company trade for eight times revenue, the average among software-as-a-service (SaaS) providers tracked by Bloomberg, Greylock’s stake in the $1.6 billion company would be valued at around $180 million. Including its stake in firewall software maker Imperva, which went public in November, the paper value of Greylock’s stake in those four companies is about $1.1 billion.
That adds to the roughly $2.5 billion Greylock made from investments in Facebook, LinkedIn and Pandora, including shares the firm has sold and those it still owns.
“The consumer names are better recognized at a mass market level,” said Asheem Chandna, a partner at Greylock and board member at Palo Alto Networks and Imperva. “But there’s a growing recognition among public market investors that many of these enterprise companies have real businesses. They’re sustainable, high-margin businesses addressing markets that are very large.”
They’re also performing better on the stock market. Palo Alto Networks has jumped 51 percent since going public, and ServiceNow and Imperva have gained more than 65 percent. LinkedIn, which serves the consumer and business markets, has outperformed them all, surging 139 percent since debuting in May 2011.
While Greylock was among the earliest investors in Facebook and LinkedIn, the firm got to Groupon late and is losing money on the daily-deal site. Greylock invested in Groupon at a $4.75 billion valuation. The stock was 42 percent below that price as of yesterday. Pandora, meanwhile, is down 28 percent and Facebook has lost half its value since first selling shares three months ago.
Chandna, who joined Greylock in 2003, said the firm established its focus on business technology a decade ago and was able to find early innovators in SaaS, cloud computing, mobile and big data. Until recently, Chandna was one of two Greylock partners concentrating in those areas, along with Aneel Bhusri, who is also co-founder of Workday. Last month, Greylock hired Joseph Ansanelli, who previously started a company that was acquired by Symantec, and brought in Dev Ittycheria from BMC Software in April.
Greylock has about 30 companies in its enterprise technology portfolio. Chandna said some of the fastest growing are data-mining software maker Cloudera; AppDynamics, whose software helps companies monitor the performance of applications; and Zenprise, a provider of mobile device management technology.
Chandna wouldn’t say which company was poised to file next — only that they’re each chasing multibillion-dollar markets, and “we’re in a wave right now where enterprise IPOs are happening.”