Nexmo, a quickly growing telco API firm that provides SMS and voice services, has locked down $18 million in fresh capital in a Series C round of funding that values the company at more than $100 million.
The new capital was led by Sorenson Capital, with participation from previous investors, including Intel Capital on a pro rata basis.
That Nexmo raised this tranche of capital is anything but surprising. It informed TechCrunch last October that it was raising, making the timing of this news in line with a reasonable funding schedule.
The most interesting part of Nexmo has been its rapid growth. According to CEO Tony Jamous, from 2012 to 2013, Nexmo grew its revenue by 350 percent. It promised investors around a 100 percent year-over-year revenue growth rate in 2014. Jamous told TechCrunch at the time that the company is currently generating revenue at a run rate of around $50 million on an annual basis.
Growth of 100 percent would put the company at around a $100 million annual revenue run rate by the end of 2014. This mirrors my prior projections for the company:
Extrapolating from the [company's $4 million] August revenue figure, assuming that Nexmo grows at 5 percent monthly – a reduced pace, but one that I think is a reasonable projection – Nexmo would generate just under $9 million in top line next December. That would put it on a nine-figure yearly run rate.
Jamous told TechCrunch today that the company is seeing revenue growth at a pace closer to 10 percent monthly, which would put it over the $100 million run-rate mark before the end of the year.
Nexmo intends to deploy its new capital into marketing efforts and expand its sales team. The company has run surprisingly lean thus far, with a staff that only grew to 40 from 30 in late 2013. Jamous expects hires of around 5 per month for the first half of the year, or a 75 percent bump in its staff size by the middle of 2014.
Unlike its traditional rival Twilio, Nexmo will not spend its marketing dollars directly reaching out to developers. Instead, it will continue to sell to larger enterprises. Jamous calls that sort of client his niche. The man has a point: Nexmo has grown on the back of the growth of the OTT market, where a few players dominate with massive volume.
The question for Nexmo is if its marketing spend can help it continue to grow rapidly. The company has been more transparent than most in disclosing its revenue, valuation, and the like. But all that becomes noise if its topline growth stalls.
Some context for scale here helps. Box had revenue of around $100 million in 2013, and recently raised $100 million at a valuation of $2 billion. Nexmo instead had total revenue of around $40 million (aggregate, not run rate) in the year. Box grew its revenues 100 percent in 2013. Nexmo expects to do at least that growth rate in 2014. Assuming Nexmo ends the year at a run rate of $100 million and, say, aggregate revenue of $80 million, what is it worth? Provided the market continues to value private technology companies as it does, Nexmo could be an odd bargain at its current valuation.
But if Nexmo’s revenue ramp slips, its fortunes and its valuation could find a very different trajectory. I’ll check back in with the company at mid-year to see how it is performing.
Top Image Credit: Flickr