Operator Switchboard

Want a recipe for startup success? Identify a category defining trend early – like mobile or the cloud – and then anticipate and solve one of the new problems that trend will create. For bonus points, build a business at the intersection of two or more trends. It sounds simple enough but such timing takes an almost otherworldly combination of foresight, skill, and luck. It’s little surprise so few companies pull it off, but those who do, typically become once-in-a-generation businesses.

MuleSoft, the enterprise integration platform that connects software, data, and devices, appears on the path toward becoming that kind of company. It’s a business that capitalizes on the parallel trends of cloud, SaaS, big data, and mobile (as well as the internet of things, which is in its infancy). The company offers integration solutions that are applicable to all technology-powered businesses – which today is really all businesses. Better yet, it’s the only game in town.

“All of these trends require a new-generation connective platform to sit at the center of them,” says Lightspeed Venture Partners partner and MuleSoft investor Ravi Mhatre.

Companies are drowning in software and hardware endpoints today, and as a result regularly miss out on potential insights and business opportunities available through deeper integration. Perhaps unsurprisingly, given its market position, MuleSoft grew its subscription revenue 91 percent last year and now counts as clients five of the global Top 10 largest banks, and one third of the Global 500 largest enterprises.

Today, MuleSoft announced a $50 million Series F funding round which, according to CEO Greg Schott, closed at a valuation of “nearly $800 million.” This represents more than a twice the value placed on the company during its $37 million Series E round closed less than a year ago, in April 2013. Schott calls the valuation “rarified air,” adding that it’s a reflection of the size of the market opportunity and the effectiveness of the company’s execution to date.

The new round was co-led by existing investors NEA and Lightspeed, along with new investor Meritech, and also includes participation from new investor Cisco as well as returning investors Salesforce.com, SAP Ventures, Hummer Winblad Venture Partners, Morgenthaler Ventures, and Bay Partners. Mulesfort has now raised $131 million to date.

“Software integration is a half-trillion dollar industry that mostly consists of homegrown, point-to-point solutions,” Schott says. “People would never wake up in the morning and decide to code a custom financial system, but writing custom integration code somehow seems reasonable. It’s ridiculous.”

Rather than the costly and time-consuming process of developing custom integrations – something that can take from six to 18 months – MuleSoft allows enterprises to get new integrations up and running in days or weeks.

“We did an internal audit and realized that we’re using 75 different SaaS applications – that’s typical in a mid-size company today,” Schott says. “Everything’s off the shelf today. We’re in the BYO-SaaS era where individual departments are swiping credit cards and spinning up SaaS apps. But to get value out of these apps, they need to connect them to other systems and other data.”

MuleSoft sits between these disparate systems, offering its customers solutions for automating the integrations between on-premise and cloud software, as well as public and private APIs.

“We’re kind of like the house in Vegas – we feel like no matter what SaaS app wins, we win,” Schott says.

Competition in this category is divided among legacy middleware and backend players like IBM, Oracle, and Tibco and more modern point-to point solutions like those from Informatica and Boomi (Dell). Legacy on-premise systems are rarely being installed today, but are just as infrequently replaced once installed inside an enterprise. The point-to-point solutions typically handle a single integration effectively, but require that enterprises cobble together multiple pieces of software in order to manage all their integration needs. As unlikely as it seems, MuleSoft is effectively the only comprehensive integration solution in the market.

“We’re not the only solution, but we’re the only one that can handle complex integrations from anything to anything,” Schott says.

Mhatre adds, “I think the reason for this lack of competition is that it’s hard for legacy players to evolve their technology stack and it’s proven difficult for the new guys to pull off the whole platform strategy – it really is non-trivial. Great architecture, plus being in the market early, and having the management to ride the wave has helped these guys distance themselves.”

MuleSoft is no doubt building toward an eventual public offering according to both Schott and Mhatre, one that could realistically come within the next one to two years.

“The notion of an acquisition is not something that the management team and investors have entertained,” Mhatre says. “MuleSoft is the market leader and the market is both sizeable and wide open. Also, Greg is an executive that’s capable of running a multi-billion dollar public company at every level. The intention all along has been to build a company that could, regardless of market conditions, be a successful public company.”

While MuleSoft appears to be humming along today, there remain executional challenges ahead. The company plans to double its headcount from 250 to 500 employees this year, including building out a direct sales team. This latest funding will also see Schott to ramp up marketing spending with the goal of raising awareness. Both initiatives will take deft execution to deliver the desired impact.

“I can’t tell you how often I interview a potential engineering hire and have them tell me, ‘I wish I knew this existed when I was building X,’” Schott says. “A lot of times they’ve never heard of us. Our solution works behind the scenes. It’s a good problem to have because there’s still a massive untapped market, but its frustrating nonetheless.”

MuleSoft’s product roadmap calls for an increased emphasis on API integration, including investing heavily in tools for creating, deploying, integrating, and documenting APIs.

“When the Internet took off, it was because of the emergence of the browser and the proliferation of websites,” Schott says. “We see APIs as the same sort of enabler in the SaaS space.

MuleSoft’s path to this point has been anything but typical. Unlike most high-growth enterprise startups, the company has raised capital in bite-sized chunks and on an as needed basis, rather than going for the flashy mega-round that signals to the market “we’ve arrived.” This latest round is simply a reflection of the fact that changes in the external market, like SaaS adoption, occurred faster than the company anticipated and thus increased the size of the opportunity, according to Schott..

“We’re well ahead of plan, but we see this as the biggest IT market ever and want to make sure we have the latitude go after it as hard as possible,” Schott says.

Mhatre echoed similar thoughts, saying, “This is a seasoned management team, so there was no desire to overcapitalize the company if it can’t use the cash. This current round is a reflection of attractive operating metrics within the company. There is actually an opportunity to put the money to work and create value with it.”

Sometimes a company is in the right place at the right time. But unlike real estate, in software, location and timing aren’t everything. MuleSoft has built a strong product and executed its go-to-market strategy deftly. Today, the company topped up its bank account and is preparing to continue its assault on the integrations market. If Wall Street wasn’t already watching, it’s sure to be now.