AppDirect’s $140M Series E Follows Closely on $50M Round
App marketplace maker AppDirect, which raised $50 million early this year and recently announced its fourth acquisition, announced today that it has added another $140 million to its coffers and signed up J.P. Morgan as its newest investor.
The San Francisco-based company creates online storefronts where Web-based software makers like Microsoft and software re-sellers like Staples can market their wares to businesses, along with services like unified billing for multiple app subscriptions.
AppDirect has been expanding to Europe and the Asia-Pacific region, and its goal is to drive a big percentage of the global traffic in business apps through its white-label marketplaces, which software vendors can customize for their own needs. AppDirect’s international business now yields more than half the company’s revenues, which reached $18 million in 2014. The company’s staff has grown to 350 employees in San Francisco and 10 other cities from Montreal to Paris to Tokyo.
AppDirect receives recurring revenues from two sources, co-CEO Daniel Saks says. For supplying the technology infrastructure that makes the online app marketplaces work, AppDirect gets a monthly fee from software sellers that ranges from thousands of dollars to multiples of $100,000. The vendors also pay AppDirect a transaction fee for all apps sold through its channels, Saks says.
More than one million businesses are now paid software subscribers who made their purchases through online marketplaces operated by AppDirect customers, the company says.
After AppDirect raised its $50 million Series D financing, which was announced in February, J.P. Morgan invested $30 million in what was originally a sort of annex to that round, Saks says.
But then the investment bank decided to write another $100 million check, leading the Series E financing that added up to $140 million, he says. The other $10 million came from AppDirect’s existing institutional investors Foundry Group, iNovia Capital, Mithril Capital Management, StarVest Partners, and Stingray Digital, Saks says. The company’s total fundraising now stands at $245 million.
Saks says some family experiences were fresh in his mind when he and his co-CEO Nicolas Desmarais launched AppDirect in a San Francisco apartment in 2009. The family furniture store that had been run by both Saks’s father and his grandfather had to shut down in 2008 because it was struggling to compete. But while it was still open, Saks’s father told him how much a software salesperson had helped him to choose business programs and get them running.
In 2009, Saks and Desmarais (pictured above, Saks at right) saw a proliferation of useful apps such as Box, and looked at them from the point of view of small business owners who weren’t necessarily in technology fields. The swarms of new Web-based programs and services held the potential to increase productivity and collaboration for businesses—important goals in the middle of the Great Recession. But those customers would need help to find the right apps for their own purposes, the two entrepreneurs concluded.
“What we identified was a massively complex ecosystem,” Saks says. He and Desmarais set out to organize the e-commerce environment so business owners could go to “trusted, local vendors.”
That strategy—understanding regional conditions and market participants—is paying off in AppDirect’s international markets, Saks says. For example, businesses in Germany must store their data within the country, which affects their choice of Web-based providers, he says. The walk-in trade is important in Japan, AppDirect has found.
“Most businesses internationally need that trusted advisor,” Saks says. “We have cracked the code.”