Investors are pouring money into a group of fast-growing cloud computing startups that compete with stodgy enterprise software from companies like SAP, Oracle, and Microsoft.Earlier this month Box.net closed an $81 million round to take on Microsoft in workplace collaboration, and last week data management company Cloudera got $40 million to battle Oracle.
Now it’s Zuora’s turn.
The company, which runs subscription billing programs for other companies, just announced a $36 million Series D round led by European VC Index Partners, Silicon Valley VC giant Greylock, and Dave Duffield, who helps run cloud-based HR provider Workday. Previous investors like Shasta Ventures and Salesforce CEO Marc Benioff also chipped in.
The round will be used to fund a major expansion into Europe. Zuora opened an office in London early this year and is already handling more than 2 billion Euro worth of transactions across the region.
Zuora CEO Tien Tzuo believes we’re in a new “subscription-based economy,” noting that companies as diverse as Netflix, Zipcar, and Salesforce now charge recurring fees.
“It’s a big business model change. The industrial revolution ushered in the product-centered business model, and whole accounting systems are built on this model….Our vision is that Oracle and SAP have no place in the subscription economy. They don’t help you drive these business models, they don’t help you track customer acquisition costs.”
There are a lot of connections between the new crop of enterprise startups, and it sometimes feels like the beginning of a club: Zuora recently announced a product partnership with Workday — Zuora will be built into Workday’s financials suite — which is where the Duffield connection comes in, and Workday’s other co-CEO, Aneel Bhusri, is a partner at Greylock. Box.net is a customer. Tzuo was the chief strategy officer at Benioff’s company Salesforce back in the early days, and both of them got their start at Oracle.
But the fast growth in this sector seems to justify the wave of investor interest.
Zuora has increased its revenue 2.5 times this year and billings by more than 100% in the last 18 months. And they’re not just small deals either — the company has signed 18 deals worth more than $1 million in the last year and a half, including a $4.3 million deal with an unnamed customer.