Qualtrics Raises Funds at $2.5 Billion Valuation

Qualtrics CEO Says IPO Is a Step, Not Final Destination

Qualtrics, the enterprise-software maker whose customers include General Electric Co. and Microsoft Corp., raised $180 million in its latest financing, valuing the company at $2.5 billion.

That compares with a valuation of about $1 billion that the company received in its previous funding round in 2014, according to a statement Wednesday. Insight Venture Partners and Accel led the round, and Sequoia Capital also invested.

Qualtrics received the funding even as the number of late-stage, venture capital-backed companies raising money is shrinking. Fundraising by venture-backed companies in the first quarter fell to the lowest level for a three-month period since late 2011, according to the PitchBook-NVCA Venture Monitor.

The market is down 22 percent from its high in December, according to the Bloomberg U.S. Startups Barometer, an index that tracks fundraising and other deals in the private market.

One reason why Qualtrics was able to secure financing may be its results: Chief Executive Officer Ryan Smith said the business is cash flow positive and he expects it to post revenue of about $250 million this year.

That’s an alluring combination for technology investors, who’ve become more discerning, according to Bryan Schreier, a partner at Sequoia. They want to see more than just revenue growth.

“The real leaders have separated from the pack,” Schreier said by phone. “There is a small, elite group of companies that are scaling both growth and cash flow. That is where investments will be concentrated.”

Built to Survive

Qualtrics, which makes experience-management software including for customer surveys, waited about a decade before taking any venture capital funding from from Accel and Sequoia, according to CEO Smith.

“We built a business that had to survive without having to go to the war chest,” Smith said in an interview.

The money raised will go toward scaling the business as it gets ready to go public, Smith said. Some employees are being allowed to sell shares in the financing round to gain some liquidity, he said. The company introduced its new Qualtrics XM Platform a few weeks ago.

With an initial public offering in mind, the company has named Murray Demo, chief financial officer of Atlassian Corp. to its board. Demo also will chair Qualtrics’s audit committee.

Atlassian went public in December 2015. In January, the enterprise software company, which makes work collaboration software Jira and HipChat, agreed to acquire Trello, which offers a popular project management app.

“He’s seen the rodeo,” Smith said.

While the market for U.S. technology IPOs has picked up steam this year, including Snap Inc.’s $3.9 billion offering in March, including an overallotment, Smith isn’t quite ready to take the company public. For now, the extra cash will help the company weather whatever business environment it faces in the near term.

“The market is at all-time highs and that doesn’t resonate with me having gone through 2007, 2008, 2009,” he said. “It would be irresponsible not to be prepared in every way possible. The good thing is, I’m not smart enough to time the market and we don’t have to.”

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