I recently had the chance to sit down with New Relic Founder and CEO Lew Cirne and New Relic President and COO Chris Cook to ask them what this round of financing represents for them and for the company. Here are their responses in their own words.
– Patrick Moran, VP of Marketing, New Relic.
PM: This round is significantly larger than any other financing New Relic has taken, representing northward of 80% of all your funding. You’ve both characterized it as a ‘mezzanine’ round … why this amount and why now?
LC: That’s right. Until now we have taken very modest financing by any standards. The simplest explanation is that we haven’t needed a lot of cash. Based in no small part on the strength of our product — which we deliver as a service — our revenue model is highly predictable. Because of our disruptive approach to the market, we have been fortunate enough to grow at a significant rate and to be serving over 35,000 customer accounts in just five short years. Now as we look forward, it’s the right time to solidify our position in the market before we make our public offering.
CC: And that’s exactly what this round will allow us to do. Typically, a ‘mezzanine’ round is used to describe a financing round prior to IPO. This significant infusion of cash, coupled with our historical growth and revenue model as Lew described, allows us to authoritatively reaffirm our commitment to becoming the standard in IT shops all over the world for ensuring application success.
PM: And what do you plan to do with the cash?
LC: Continuing Chris’ thread, this round of funding will allow us to more rapidly realize our vision of becoming the only tool you need to manage software, no matter where it runs. What do I mean by that? Whether in the browser, the web infrastructure, or natively on mobile devices, organizations need visibility into how their software is running and how well it’s meeting customer expectations. And we plan to be the first company built from the ground up to do it with one tool, one UI and one technology platform. Millions of dollars will be spent on mobile app development this year and that trend will not slow down anytime soon. However, developers and operations teams have no way to see how these apps are running on a mobile device, which is still a black box.
CC: As Lew mentions, there’s a huge opportunity in the market today to provide monitoring of native apps on mobile devices and to correlate that with data about the web infrastructure and the browser. As we work toward that goal, and toward our IPO, you’ll see several very concrete milestones along the way this year. You may have seen us announce an iPhone app recently. We were thrilled with the positive response from our customers (more than 6,000 of whom downloaded it and logged in on the first day it was available), but this was just the very first step in our mobile strategy. Very shortly, you will see New Relic announce native mobile app management capabilities. We are very excited about it and it’s very difficult not to share more details, but for now let’s just say that we are poised to make a significant impact in the market. Other milestones include expanding our enterprise footprint and opening offices in Europe. As the democratization of IT spreads, more global companies large and small are choosing to standardize on New Relic, and we want to make sure that we are adequately meeting the demand for world-class software management.
PM: Sounds like New Relic is planning to take over the software world …
LC: Its funny you should say that because by our reckoning, software has already taken over the world in that it’s running virtually everything. Think how many apps — either on our phones or on the web — that we use or that others use to serve our needs on an average day. It’s astounding when you think about it. Now more than ever, software is everywhere.
CC: And as we said, no matter where that software is running, it’s New Relic’s mission to provide management capabilities that allow organizations to ensure superior service delivery. So, let’s just say that we’re not ready to take over the software world, but we are ready to take on the task of helping organizations around the world make their software run better.
PM: For each of you, on a personal level, what does this pre-IPO round of financing represent to you?
LC: (Chuckling) If this was the Oprah show, this would undoubtedly be the segment where I break down and cry as I explain how New Relic has been a dream come true for me. In all seriousness, for the people who are part of this company — the developers, marketers, sales folks and the administrators who have dedicated themselves to achieving the company’s vision — this round of funding is in many ways a validation that we have created more than just a product company. We’ve created something special and we all feel it. New Relic is a family, my extended family, and I am blessed to be able to rely on such an outstanding team of friends and colleagues who are more than willing to go above and beyond. The same goes for our community of customers and our unparalleled ecosystem of partners. All these forces have combined in many different, meaningful ways to get us to where we are today and I couldn’t be more proud.
CC: Certainly, one of the key reasons I joined this company was because of the incredible business opportunity, which to me represents the chance to make a lasting impact on the lives of the people who develop, deploy and maintain software, as well as their customers. But I also have to admit that New Relic, unlike any other organization that I’ve worked for, is special in a unique way. Each and every member of the New Relic team is wholly committed to the success of our customers by making and delivering a revolutionary product. I couldn’t think of a better team to pursue this opportunity with and I’m proud to be part of the family.
PM: When’s the IPO and what does the future hold?
LC: I’d love to be able to put a date on the IPO … but as a responsible CEO, I think it’s unwise to put a time limit on success. Suffice it to say that this year will be spent working towards that goal and when the time is right for New Relic, our customers and ours investors, we will make that move. As far as future directions I can only say this — there are always ways to improve software management — with combined approaches, new technologies, deeper visibility — and you will see us at the forefront of innovation. But I also think there are some additional problems to solve that speak to more than managing software, but rather also managing the information that software yields. What interests me here is not lack of visibility — the average enterprise licenses hundreds of data generating tools — it’s the lack of context when this data is taken as a whole. But more on that later …