By chance, I know the company well as it is based in my region, as well as knowing a bit the "owner brothers" and their family. Myself and people whom I know have worked for them (in the begging and later) don't have anything but the words of praise for them. They have built the company on hard work and innovation in a country that doesn't favor and sometimes punishes entrepreneurship. Furthermore, instead of moving the company to some place more favorable, they decided to stay and continue providing job opportunities for people in the region they were born and raised in.
All the best luck to them in their further endeavors, sincerely by fellow Istrian
Well, thats not a fair comparison. A key aspect of valuation here is governed by Gross Margins. Infobip and a lot of the companies mentioned below on this thread have gross margins in the early to mid twenties in contrast to Twilio, which is in the early fifties and thats one major reason for the difference in valuation. The other is growth % YoY.
Well, the profit could be $1 if you're "profitable" which would warrant a bad valuation (like if you just resell SMSes with no value add at all). But another commentor quoted an 18% margin so if that's true it seems weird. Why raise $200M by equity if you make around $150M in profit. It can't be the whole story..
They were apparently Twilio before Twilio and yet given the clear example of Twilio doing what they do better and years of opportunity to catch up they have failed to do so. A company with a known growth trajectory that will be at best #2 in its market can’t command the same kind of multiples as one that still has potential as opposed to a track record, or one that has a much better track record.
Sure, but capital isn't geographically limited. I live a lot further away from the US than Croatia and I have multiple friends here who've raised from the US.
"Software startup". I don't know where this label came from. They've been the largest leading SMS services provider in all of Europe for about 5 years now.
I guess private tech companies are called "startups" for very long time until either they go public or they are so big and old it doesn't make sense to call them startups anymore.
One example would be Kingston Technology which is private and over 30 years old with $10bn of revenue.
In my opinion this seems like a low valuation for what they do and the customers (Costco, Uber). If it would be based in San Francisco it would be several billions.
It's between the lines - EU prefers or demands GAAP/conservative especially for startups versus financial engineering/stratospheric approach to growth in the US.
Valuation for investment purposes and GAAP for accounting purposes are quite unrelated. Valuation is the art of estimating future cashflows, GAAP is the practice of reporting current cashflows that are comparable between firms. Obviously, valuation gets easier when the accounting is "more" GAAP. But just as firms are allowed to report all kinds of non-GAAP measures to further enhance their attractivity, the valuing party can use all kinds of measure, like future growth rates or debt schemes to enhance the valuation (caveat emptor). So there might be a huge difference in valuation and P/E between EU and US, but GAAP has little to do with that. In second order effects we could discuss whether US GAAP vs IFRS has an effect on how aggresively investors can account for these investments but I don't think that's the main driver of what I look at as runaway valuations in the US.
Edit: Seeing the rest of the thread. If the valuation seems low I'd expect that the due dilligence turned up some nasty things that where not in line with the non-GAAP financial statements of Infobit in the past. I couldn't find any audited financial statements. € 700 mln. revenue with growth potential at 18% margin does not lead to a € 1 bn. valuation in the absence of red flags.
I wouldn't call it a startup, looking at their careers site they have more than 10 locations and at least 5 engineering locations (Russia, Croatia, Bosnia, India, Colombia)
They seem to be leveraging relatively low-cost countries for their engineering, good for them!
A term "scale-up" has been recently gaining traction and I believe it's more accurate and better distinguishes companies at different stages of growth. Still, "start-up" became so popular it lost its original meaning and is now umbrella for any company taking private funding
What are their man competitors in this space? And what is the innovative part? Do they just provide a SMS + other messaging platforms gateway for businesses?
Twilio[1] and MessageBird[2] come to my mind as competitors. They both are a "Voice & SMS" communications platform and I guess the innovative part is that they provide an easy way of connecting companies to their customers via multiple channels.
Don't forget about Nexmo, which was purchased by Vonage.
We have been using all of those companies (and others) for years at https://www.engagespark.com , and they all have pros and cons / strengths and weaknesses. Infobip excels in some areas and stinks in others; same with Twilio and Plivo and Nexmo and MessageBird. That said (and this is no plug, just based on experience), Nexmo has been the most reliable by far and has consistently offered the best support across the industry.
