While the hit parade of small biotech IPOs continues, the number of cloud software IPOs has slowed to a trickle. Perhaps everyone is just waiting for the mother of all B2B IPOs, Alibaba?
In the meantime Yodlee, a company whose name has been around since 1999,–and which nearly disappeared a couple of times–filed for a $75 million IPO. If you know Yodlee at all, you probably know about their data aggregation capability. This functionality allows consumers and small businesses to pull together in one place otherwise disparate accounts across many financial institutions–a la Mint. With this product, Yodlee is the “plumbing” that underlies many personal/SMB financial applications like Learnvest, Xero, and tools that banks/brokers give you to manage your whole portfolio.
Yodlee wisely positions themselves as “the Financial Cloud”:
Or the slightly more detailed version:
It’s a nice story, with many of the elements necessary for a good business:
- Blue-chip client base
- Great position in the large, but presumably commoditized, data aggregation business
- Silicon-valley based technology developer, with large workforce in India
- API layer for platform-building and limiting competition with their customers
- Possible network effects in the data analytics and security areas, as well as economies in building direct connections to financial institutions
The prospectus also highlights several possible concerns:
- Yodlee is not the same growth story as many of the cloud software IPOs. The CAGR for 2009-2013 is 20%. (Though growth for the latest quarter is 28%.)
- BofA accounts for 13% of revenue and the top three customers represent almost 25% of revenue for the latest three-month period
- Big competitors: Fiserv, Intuit, etc.
- Privacy and regulatory concerns are always a possibility in financial services
- Unclear as to whether the products are really different or just different positionings of the same product
What is intriguing about Yodlee is the apparently accelerating growth over the last 15 months. This growth is not coming from the top three customers, but it is hard to tell where the growth is coming from. I’d like to know more about the money movement, security, and data analytics products. If those are real and growing, there could be something very interesting here. I’m hoping many of our readers, who are experts in this space, will chime in for the better good!
The market will have to decide what value to give to a slightly slower grower than they are used to and one that is more of an infrastructure play than an end application/brand. I’m going to watch this IPO carefully. I’m a sentimental sucker for companies that have slogged through slow-moving industries for 15 years and finally started to see some success.
Most of the time patience is, indeed, a virtue. But sometimes it is just prolonged obliviousness!
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