Lewis Cirne sold his first company for $375 million in 2006, eight years after getting it off the ground. His second company has reached a value of twice that amount in just over half the time.
New Relic, which provides software that helps businesses monitor the performance of their Web applications and quickly address problems, said today it raised $80 million from investors including Insight Venture Partners and T. Rowe Price at a valuation of $750 million. Unlike his previous startup, Wily Technology, Cirne expects New Relic to reach the public markets and is focused on funding the research and development to get there.
While he wouldn’t provide a timeframe for an initial public offering, Cirne, 42, said the fresh capital will enable the San Francisco-based company to build a team overseas and unveil mobile monitoring software, fulfilling its two biggest needs.
“We’re going to invest heavily in R&D, expanding into new businesses and preparing for an IPO and life as a public company,” Cirne said. “We have a deep pipeline of product initiatives.”
That starts with mobile software, which New Relic expects to roll out this quarter. To date, the company has served 35,000 customers with technology that lets them locate bugs in their applications using a web-based dashboard. For a site that’s slow or not responding, the client can drill down to see if it’s a problem with the network, a failed server or a spike in traffic. Customers range from long-established businesses such as Nike and Sears to emerging web companies including Airbnb and Github. New Relic is taking on tech giants such as IBM, Hewlett-Packard and CA (which acquired Wily) by offering subscription software for $24 or $149 per month per server and a free product with fewer features.
To handle the flood of e-commerce and banking transactions now taking place on smartphones, New Relic is looking to do the same type of monitoring for mobile apps. The mobile product is in private beta with about a dozen companies, said Cirne, who wouldn’t identify them. Other startups are already concentrating on monitoring mobile apps. Crittercism, founded in 2010, is backed by Google Ventures and Kleiner Perkins Caufield & Byers, and BugSense, started a year later, has received seed funding.
Cirne also plans to hire a team in Europe and someone to run it. Almost all of the company’s 200 employees are in San Francisco and Portland, even though 5,000 of its customers are outside the U.S., Cirne said. In total, New Relic will come close to doubling its staff this year and is expecting to more than double revenue after tripling in 2012, he said. The company said in July that annual revenue will top $100 million this year.
New Relic’s existing investors, Benchmark Capital, Trinity Ventures, Tenaya Capital and Allen & Co., participated in the financing, as did newcomers Dragoneer Investment Group and Passport Ventures. The company has raised a total of $116 million.
Insight Venture’s Jeff Horing said his interest in New Relic was piqued after finding that about a half dozen companies in his portfolio were using the software. When he started doing due diligence on the investment, he said he found two or three more. For the most part, these startups weren’t replacing an older system with New Relic, they simply weren’t using anything at all.
“The alternatives are more complicated and more expensive,” Horing said. “New Relic takes hours to get up and running, and some of the enterprise alternatives can take months.”
That explains why Cirne sees more potential in his second company than he did in his first.