San Mateo, California-based enterprise software company Zuora Inc. (ZUO) hit the public market Thursday on the New York Stock Exchange (NYSE), the latest tech unicorn to soar on its initial public offering (IPO) this year. The platform, which designs and sells applications to automate billing, commerce and finance operations, ended the day up 43%.
Zuora was founded in 2006 and is headed by well-known Silicon Valley executive Tien Tzuo, who was formerly No. 11 in charge at cloud giant Salesforce.com Inc. (CRM), where he most recently held the role of chief strategist. Tzuo saw his stake in the cloud accounting software company surge to $200 million on Thursday. Zuora set an IPO price of $14 a share on Wednesday night, up from an initial range between $9 and $11. The firm raised $154 million to give it a $1.4 billion valuation, representing a jump over its most recent private valuation of $737 million after a Series F round in March 2015, according to PitchBook. (See also: 'Occupy Silicon Valley' Trend Could Hurt Tech Stocks.)
SaaS Provider Thinks It Can Beat ORCL, SAP in ERP Space
Zuora's software, which runs in cloud computing facilities of the company, replaces functions of enterprise software known as Enterprise Resource Planning (ERP). ERP offers functions such as billing and the code for how cloud companies and other enterprises recognize revenue sold on a subscription basis.
Zuora lists Oracle Corp. (ORCL) and European SaaS giant SAP (SAP) as rivals, as well as "other niche systems, such as Amdocs (DOX) Limited." In an interview with CNBC on Thursday, Tzuo indicated that Zuora's platform is easy to explain and defend amid a larger transition across industries to subscription-based business models. While Netflix Inc. (NFLX), Spotify SA (SPOT) and Dropbox Inc. (DBX) are some of the most well-known tech and media names that run off of this recurring revenue base, companies across industries such as guitar maker Fender, a big Zuora client, as well as other manufacturers, industrial companies, traditional retailers and utilities firms, have made the transition.
Tzuo explained to Barron's in an interview that traditional ERP is not fit for this next-gen of business, as fundaments objects in a subscription-based business are not properly represented and tracked using older software.
"When you see how different a business model this is, you realize you need a different set of systems, something very different from the inventory and logistics systems you used in the product economy, the stuff you bought from Oracle and SAP," said Zuora's CEO. (See also: How Spotify CEO Daniel Ek Got Rich.)