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Turning Donkey Work Into Dollars


Imagine it is 1986 and your cable TV connection just went out. You call the 800 number for you provider. After about 15 minutes of waiting and some person takes your call from Billing. Oh you have a connection problem she says, well you’ve got the wrong number. There is a different 800 number for Technical Support. After another 10-minute wait for Technical Support, you give up and read a book instead.

This scenario may sound like a view of the Paleolithic era, but it’s not. Today of course the world is different. But if you think of each 800 call as a separate App, then you will begin to get an idea of what Mulesoft is all about.

What Does An API Do

What we have just described above starts an API or Application Programming Interface. There are bazillions of applications today with more added all the time. Making them all work together is a mind bogglingly tedious process. That’s where Mulesoft comes in.

Blame it all on things like mobile and the cloud that is turning API’s into a big and rapidly growing business. To understand why a company with a funny name like Mulesoft should be taken seriously, we have to step back almost 15 years.

It was in 2003 the Mulesoft founder Ross Masons day job involved integrating different corporate IT systems. The work was drudgery. He dubbed his chores as “donkey work” and set out to develop open source software to solve the problem. Voila, Mulesoft was born.

Big Name Early Backers

Like everybody else, Mulesoft needed money to translate its vision into reality. This is where most startups fail to sell investors on the so-called proof of concept. Apparently Mason did not have this problem as he managed to get early funding from the likes of Cisco, Salesforce.com and ServiceNow.

Either Mason was one super salesman or his Anypoint Platform had some real potential. The company raised $259 million prior to any public equity offering. That as they say, is no chump change.

Application software is extremely tricky to understand. You can’t really see it. So the litmus test for a complex software startup company is the pedigree of early stage backers. Mulesoft not only got the smart industry money but the research analyst as well.

Various market research reports envision the global enterprise application integration market nearly doubling in size over a five-year period reaching $13.4 billion by 2019. That is a pretty solid outlook for the business and Mason aims for Mulesoft to outgrow the industry’s 11% average annual rate.

Mulesoft is no one trick pony. Today it serves 7 industries from financial services, government, healthcare, insurance, education, media/telecom and retail. More will be added over time. This is just part of Mulesoft’s plan.

We are dealing here with the management of big data and the Internet of Things. The names on Mulesoft’s customer list reads like the “Who’s Who” in these two fields including Operational Intelligence Company Splunk. The well regarded technology research organization; Gartner named Mulesoft the leader in “Full Lifecycle API management.

Mulesoft must be doing something right. It is not like they have the field to themselves. Big names like IBM and Oracle dot the list of nearly a dozen players in the field. Then there are more specialized operations like Informatics, Jitterbit that deal with information management and cloud integration solutions. The fact is the business category is huge and no single company can do it all.

Mulesoft Files IPO

On a recent February day, the company filed a Preliminary Prospectus for it’s intended IPO. This provides the first real insight into the financials. The numbers are interesting.

The company is trying to go public at a proposed valuation of $1.8 billion. For this sum, here is what investors are looking at. In 2016, Mulesoft revenues grew a whooping 70% to $188 million but the company lost about $50 million. Last years loss however was less than the $65 million recorded in 2015.

Should investors be concerned about the sizeable losses? That types of advise is not what we do. This we can say with certainty. Software can be a highly profitable business, just look at Microsoft, Oracle and others. The cost of marketing software is where big costs come into play and this appears where Mulesoft is spending some dough. Mulesoft has the attention of Wall Street as a gage of the IPO market following the recent Snapchat offering, so we will be watching also. If all goes on schedule, sometime around Memorial Day, the offering could become effective.

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