"It's been an awesome day," Zuora CEO Tien Tzuo said Thursday afternoon. No wonder he was feeling good: His company went public Thursday, and its stock bounced almost 45 percent above the IPO price, from $14 to about $20. Of course, where the price will settle after a few weeks or months is unknown, but it's an auspicious debut.

Zuora is a 10-year-old enterprise company that sells subscription-management software. "We want our IPO to be a moment in time that people reflect upon and say, this was the inflection point of a shift to an overall subscription economy," Tzuo added. His theory is that buying products outright is an antiquated business model. The future is all about paying for access, according to Tzuo, which is what Zuora exists to enable.

"There's a reason why investors are in love" with software-as-a-service business models, he said. "Those companies have had less swings than the overall stock market," and "the broader story here is this macro secular shift." Gartner published a report on Thursday that backs up Tzuo: "Software as a service (SaaS) remains the largest segment of the cloud market, with revenue expected to grow 22.2 percent to reach $73.6 billion in 2018. Gartner expects SaaS to reach 45 percent of total application software spending by 2021." In January, IDC reached similar conclusions.

Zuora is the latest in a spate of B2B software companies to go public, and more are coming down the line in 2018. Tzuo pointed out that some of them, like Pivotal and DocuSign, are among his customers. He called the lively IPO market "a multiyear trend, not a six-to-nine-month trend."

Tzuo said that Zuora had been planning to go public ever since its last round of fundraising; preparations had been under way for years. "We know that our focus is on the long term," he explained.

 

Published on: Apr 12, 2018