AppDynamics

App Performance Company AppDynamics Raises $50M, Plans IPO

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AppDynamics has raised $50 million in a round lead by Institutional Venture Partners (IVP) for the expansion of its application performance monitoring service. The Series D round also included AppDynamics’ current investors: Greylock Partners, Kleiner Perkins Caufield & Byers, and Lightspeed Venture Partners. The company has now raised a total of $86.5 million and plans to do an IPO.

The AppDynamics service manages capacity, scaling, monitoring, troubleshooting and the user experience.  The company has grown 300 percent in the past year. It has 500 customers, up from about 250 last year. It has 200 employees with headquarters in San Francisco and offices in the United Kingdom, France, and Germany.

AppDynamics-FlowMap

Jyoti Bansal, CEO of AppDynamics said in an interview today that software is eating the world, referring to the phrase made popular by Marc Andreessen, who uses it to describe how businesses of all varieties are now using software to fundamentally change their business and in turn is changing entire markets. The companies that execute effectively win.

“It is happening in every business,” Bansal said. “People have to use the new architectures that are coming up. People are using Agile and DevOps. The challenge people have is how to manage these apps.”

The apps people are building resemble the ones built by Amazon.com, Facebook and companies that are using vast, distributed infrastructures to build out their ecosystems. AppDynamics customers such as ExactTarget have 5,000 server instances. Overstock used AppDynamics on Cyber Monday to make sure the biggest online shopping day of the year went smoothly.

The application performance market is worth $2 billion, according to Gartner. It is supposed to grow to $4 to $5 billion over the next few years.

The market landscape is still dominated by legacy vendors such as CA, IBM and Compuware that built their software stacks 10 years ago for J2EE applications. They also have complex software licensing that takes months to close.

Like a lot of new cloud services, AppDynamics, can be downloaded for free. Companies can test without anyone pestering them.

AppDynamics is in the same market as service such as New Relic. Its difference is in its market approach. AppDynamics has its view set on the mid-sized enterprise company as opposed to New Relic, which for the most part works with startups and smaller companies. It has enterprise customers but is not focusing on the mid-market to the degree that you see from AppDynamics.

Another aspect of these large raises is the further validation of the SaaS market. What you are seeing out of that are more executives leaving the ranks of enterprise software companies. We’ll see more of this in the year ahead as people look for the exciting opportunities that come with the new models of modern infrastructures and the services on top that are replacing traditional enterprise software solutions.