Subscription platform Zuora is today announcing a whopping $115 million in funding so it can help make this more of an “-as-a-service” world.
The new funding brings the total raised so far to $250 million, a clear vote of confidence that investors have in the company’s servicing of subscription business models.
“We’re creating something new,” CEO and cofounder Tien Tzuo told me. “Business models are no longer based on [selling] widgets,” but are focused on services.
“What’s interesting about the new funding is that Wall Street [now] sees the future is in the subscription economy.”
It’s about “recurring relationships” that deliver “value, a service, subscriptions,” he said.
Even a maker of scientific instruments and data analysis software like Thermo Fisher Scientific found itself moving toward a subscription revenue model, its CTO Mark Field told me via email.
“It’s more convenient for our customers and more flexible for digital product pricing,” he said, adding that it also allows “more customer insights and [the ability] to offer other services as subscription.”
After reviewing other solutions, Field said Zuora’s functionality was “a good fit,” since it “easily” integrated into the company’s large customer relationship management, enterprise resource planning, and supply chain management systems, plus “the implementation would cost less and [could] be delivered quickly.”
“A couple of weeks ago we wanted to change/tweak our pricing and were impressed that we could modify our prices in just a few minutes” using Zuora, he said.
The new round tops off a boffo year for the Foster City, California-based firm, with a 109 percent increase in invoice volume in calendar 2014 year-over-year to $42 billion, as well as the opening of eight new offices worldwide and a workforce expansion to about 500 employees.
Tzuo said the new funding will be used to hire more engineers and staff in sales and marketing, plus it will support platform development in analytics and other areas.
Founded in 2007, the company prefers to describe its category as relationship business management. The platform is designed to manage subscriptions across customer acquisition, recurring billing and payments, incoming revenue, and tracking.
“Companies have been [managing products] on ERP systems,” Tzuo said, “and trying to run their businesses on Oracle and SAP, [but] it takes too long and too much effort.”
But a subscription business has a variety of unique challenges, he pointed out.
There are the kinds of services offered, for instance, as well as whether there are prepaid plans, how to handle pricing for consumption-based models, managing a subscriber lifecycle, automated invoices at specific milestones, new kinds of metrics, and integration with existing systems.
“There isn’t [another] general public platform” for subscriptions, he said.
Participants in this Series F round were existing investors Benchmark Capital, Greylock, Redpoint, Index, Shasta, Vulcan, Next World Capital, Workday cofounder Dave Duffield, and Salesforce CEO Marc Benioff. New investors included Wellington Management Company LLP, Blackrock Inc., Premji, and Passport Capital