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Adaptive Insights CEO on raising $75m as CPM market heats up

Den Howlett Profile picture for user gonzodaddy June 29, 2015
Adaptive Insights raises $75 million to further expansion. What's the plan? CEO Tom Bogan explains but questions remain.

Tom Bogan - CEO Adaptive Insights
Tom Bogan - CEO Adaptive Insights

Corporate Performance Management (CPM) is heating up as a market segment. CPM broadly embraces budgeting, planning and forecasting, something of a Cinderella market in the past but increasingly seen as a driver for operational performance. Long standing vendor Adaptive Insights claims year-over-year growth at 50 percent so why raise a late stage round of $75 million now? CEO Tom Bogan explains.

Raising this round was one of my key initiatives when I joined the company five months ago. We see a strong opportunity for both co-existing and replacing Hyperion, Cognos and Business Objects in larger customers so this makes sense in a market that rewards growth over profit. Upselling for instance is well into triple digits.

So far so good. But then last October, the company claimed 2,300 customers. Now it claims 2,700. On that basis, does that mean it will add another 700 customers (roughly) in the next three to four months? Not so fast it would seem. Bogan went on to explain that growth is not so much a customer count issue but one of deal size. That kinda makes sense.

IPO or acquisition?

While the company does not talk numbers, my back of cigarette packet calculations suggest that current revenue run rate is in the $100 million range, a number the company will neither confirm nor deny. But then soundings elsewhere suggest that average deal size is definitely increasing and much higher than the $40,000 per customer I have been consistently hearing in the last year or so. That is all to the good given this has been a notoriously difficult market in which to make significant headway and especially among mid-market customers.

The latest round brings total funding to $176 million and signals that the next move will possibly be an IPO. Bogan insists that Adaptive is in for the long haul and so an IPO makes sense at some point.

However, in a conversation with my diginomica colleague Brian Sommer, he asserts that statement assumes Adaptive Insights remains as an independent business. At a current valuation that has to be well north of $1 billion in current conditions. Adaptive could be an attractive proposition for a larger vendor looking to expand their cloud footprint in this important area as a way of reaching more people inside the business.

I'm on the fence. This is what Bogan had to say in canned comments:

CFOs are increasingly taking center stage in the strategy and direction of their organizations and looking for the right technology to provide real-time data and powerful insights to gain a 360-degree view of their business.

I get that. And I also get the fact that Adaptive has plenty of runway ahead of it just displacing the spreadsheet as a the de facto CPM tool So while CPM is absolutely important in the context of the CFO seeking to push out CPM functionality into the business, we see much greater emphasis in the large enterprise on the new kinds of predictive modeling and analysis that is more closely associated with tactical operational planning.

Product roadmap

My question therefore has much more to do with how a company like Adaptive adapts (sic) to these needs. Sommer told me that one of the most sophisticated examples he has seen relates to a large Australian mining company that uses Adaptive to parse all manner of sensor data. That's interesting but those use cases don't crop up in the clutch of case studies and I would like to see more of that before I am convinced that the company is able to straddle those two worlds. To that extent Bogan argues:

We think customers want a more robust set of integrations, particularly as we’re integrating outside core financials. We have announced the important partnership with Salesforce for example.

Hmm. That's still very much in the back office.

On what this means for the product roadmap, Bogan says the Adaptive suite is pretty much complete. That in term implies a focus on vertical markets.

We have a longstanding and fruitful relationship with NetSuite and you can see where they are going in vertical markets. We have more than 500 customers in the technology sector and an important nonprofit group so there's plenty of opportunity to build on that success,

says Bogan. Again, this is more back office related but directionally, I certainly understand where Bogan wants to lead the company.

My take

What can we conclude?

As a former finance professional it's good to see Adaptive accelerating growth, hardening its product portfolio and offering useful customer stories that support its claims. I'm less clear how it carves out a position that also makes it attractive to the line of business professional rather than simply focusing on the office of the CFO. While that latter intent makes all the sense in the world, the fact is that operational analytics is a much broader conversation topic these days so while it is logical for the company to continue on its current path, I am waiting to see which vendor morphs to a more broad based solution portfolio.

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