Competitor SugarCRM May Shoot for IPO in 2013

Photograph courtesy of SugarCRM

SugarCRM Chief Executive Officer Larry Augustin took another open-source company, VA Linux, public in 1999.

SugarCRM, which provides customer management software that competes with and Oracle, may try to ride the wave of enterprise computing IPOs and go public as soon as next year, Chief Executive Officer Larry Augustin said.

“Our goal is to be a public company,” Augustin said in an interview at Bloomberg News’s San Francisco bureau yesterday. “There’s a chance we can get there in 2013.”

Before testing the IPO waters, Augustin did say he wants to make sure the company gets to the right size and “metrics.” After a cash-flow positive 2011, “we’ll burn some cash this year,” he said.

Cupertino, California-based SugarCRM is growing quickly. Billings, or the amount invoiced to customers, rose 23 percent for the third quarter ending in September compared with a year ago, and are up 54 percent over the first nine months of this year, according to the company. It plans to announce those results next week.

SugarCRM has raised a total of $79 million from New Enterprise Associates, Silicon Valley Bank, Draper Fisher Jurvetson and others, including a $33 million round in April.

The company has an unorthodox business model for CRM software, which lets companies’ sales teams track leads and deals. About 800,000 users run a free, open-source version of the product and nearly 200,000 pay for versions that cost $30 to $100 per user each month, Augustin said.

In addition, customers can pick from versions that run on their own computers, in a “private cloud” managed through a partnership with IBM, or an online version hosted by SugarCRM. The arrangement gives customers flexibility, but costs SugarCRM more to support than a pure software-as-a-service model, said Augustin. The company has about 6,000 paying customers, including paint maker Sherwin-Williams and clothier Men’s Wearhouse.

Augustin has been through an IPO run-up before. He took another open-source company, VA Linux, public in 1999. In one of the biggest examples of dot-com froth, the stock soared nearly 700 percent on the first day of trading.

“There are lots of lessons from that,” Augustin told Bloomberg West in a TV interview slated to air this month. VA’s market cap was $12 billion to $15 billion on quarterly sales of $12 million $15 million, he said. “You saw that valuation come down very quickly.” Underlying performance is more important now, he said.

Today’s crop of business computing IPOs — including online software maker Workday, Splunk, ServiceNow and Palo Alto Networks — is setting the stage for Augustin’s second act as a public company CEO.

“What the Workday IPO does is just reinforce that the market is good for enterprise software companies,” he said.

Shares of Workday have soared 75 percent since their Oct. 12 debut and closed at $48.92 in New York yesterday. Splunk, whose software helps manage IT system performance, has surged 68 percent since trading started April 19.

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