Pendo opportunistically seeks buys while keeping eye on IPO market, CEO says

Breaking News 11 July

Pendo opportunistically seeks buys while keeping eye on IPO market, CEO says

Pendo, a cloud platform for software product adoption, still sees an initial public offering as the most logical next financing step for the company, though timing remains unclear, said CEO Todd Olson. 

The soonest the Raleigh, North Carolina-based company might re-evaluate an IPO is 2024, market conditions permitting, Olson said. 

Olson told this news service in May 2022 that Pendo had pushed out an anticipated IPO due to market factors. Those same conditions have seeped into 2023, further delaying an expected public debut, the CEO noted for this report. 

The company remains in early-stage talks with potential advisors and underwriters but has not secured any mandates, he added. 

Pendo is approaching USD 200m in annual recurring revenue, according to Olson. The company has concentrated on internal efficiencies the past year, in addition to growth, and now sees profitability as possible in 12-18 months, he said. Normalized annual revenue growth of 20%-30% is forecast in the current environment. 

Pendo’s software is designed to make software better. Using in-app messaging, product analytics and user feedback, the platform helps companies in all sectors drive adoption of digital products, without requiring engineering resources. The company has around 3,000 paying customers and more than 7,000 using its free product, Olson said.   

It competes with Mixpanel, Heap and Amplitude [NASDAQ:AMPL] on the Google analytics side and WalkMe [NASDAQ:WKME] in in-app messaging, the CEO noted. 

Since its inception in 2013 by Olson, Chief Technology Officer Erik Troan and Vice President of Business Development Rahul Jain (all in their late 40s), Pendo has raised USD 466m in primary and secondary funds. The company does not anticipate raising additional capital prior to a public listing, Olson said.

Pendo was valued at USD 2.6bn in its July 2021 USD 150m Series F round. In November 2021, it raised a USD 110m secondary investment at that same valuation, as reported.

Investors include B Capital Group, Silver Lake Waterman, Thoma Bravo, Sapphire Ventures, General Atlantic, Tiger Global, Battery Ventures, Meritech Capital, FirstMark Capital, Geodesic Capital, Spark Capital, Core Capital Partners, Salesforce Ventures, Idea Fund Partners, Contour Venture Partners and Cross Creek

Pendo has completed three acquisitions, most recently purchasing UK-based product management community firm Mind the Product in early 2022. Olson said Pendo continues to field inbound inquiries and is in exploratory conversations with a variety of potential targets. 

More than 80% of Pendo’s business comes from the US and the rest largely from Europe, the UK, Israel, Japan and Australia. The company, which has eight offices worldwide and considers acquisition targets globally, last year opened an office in Sydney, Olson said.

Any target with a complementary offering will be considered, especially those that leverage product data, given Pendo collects 15 billion unique data events daily, according to Olson. Artificial intelligence and generative AI capabilities are highly attractive, as Pendo is building those capabilities into its products, he added.   

With funding harder to come by, Olson expects more startups to come to market. Multiples in the space are currently averaging between 5x and 10x revenue in most cases, he said. 

For the fiscal year ended 31 January 2023, Pendo reported a 40% growth in customers paying more than USD 100,000 and double the number of USD 1m-or-more contracts, the addition of 17 new Fortune 500 customers, and a 118% increase in free subscribers. 

The company, which has 750 employees, plans to launch several new products in October, Olson said. 

Pendo uses law firm Gunderson Dettmer and accounting firm EY

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