The crowdsourced app testing startup formerly know as uTest, which is rebranding to Applause and earlier this year took in a $43 million Series E funding injection led by Goldman Sachs, has just spent some of that warchest on acquiring German rival Testhub to strengthen its hand in Europe — in a multimillion dollar deal.
The exact price of the acquisition is not being confirmed, but it’s described as a combination of cash and equity. As part of the deal Berlin Technologie Holding (BTH) is becoming a strategic investor in Applause — and will also serve as an advisor, and help the company expand its customer base in the local market.
The TestHub team will form the basis of a new Berlin-based HQ for Applause, co-founder and CEO Doron Reuveni told TechCrunch, as it looks ahead to an IPO — likely in 18 to 24 months time.
Expanding geographically to bring more testers into its network, as well as acquiring more European customers on the road to IPO is the clear strategy here. It’s the company’s second acquisition, after buying Apphance back in 2012.
Reuveni confirmed Applause will be looking to do more acquisitions as it heads for IPO — either as a way to expand into new territories and markets, or technology acquisitions focused on grabbing complementary tech, with a focus on “mobile and app quality”.
“We’re a U.S. company and up until now we’ve operated primary in the U.S…. We want to grow into Europe in a big way,” he said. “From our perspective [buying Testhub] is a significant investment both on the acquisition side, as well as the cash inclusion and the hiring, and having another partner that helps to build companies in Europe and scale them to manage Central Europe is very important to us.”
“We liked BTH because they bring a lot of value into that deal. One because of their relationship in the local market, and their connection in the local market — and two because they are very engaged in the app economy, and they can help us grow with their experience and mature as a central European operation,” he added.
On the testers front, the Testhub acquisition beefs up Applause’s network with another 20,000 testers, adding to the 120,000 Applause had already. And on the customer side it adds Testhub’s 250 to its circa 2,500.
“We have today some strategic customers in Europe — primary in Germany and in Switzerland — and having this central European operation and the capability to cater on locale is also very important to us,” said Reuveni. “We’re looking at Germany and Berlin as a technology hub to manage central Europe.”
“The plan is to expand the office — we’re moving to a bigger office in Berlin. We’re currently negotiating a new lease, and there’s significant additional headcount which is on the hiring horizon for that office — primarily in sales and marketing, but also in customer support,” he added. “Today they have 15 or 16 employees. The plan is to double that by the end of this year.”
Reuveni said Applause evaluated other European startups in the app testing space — including another German startup Testbirds, which recently took in a $2.9 million funding round — but he said Testhub’s team and approach to the market was the best fit.
“First and foremost we liked the management team,” said Reuveni. “We saw a joint vision… As we talked to more and more customers, and we did due diligence on the company, their attention to focus on quality, and their attention on customers — the type of value that they bring to customers — it something that we really like,” he added.
Testhub’s growth also impressed — both in terms of customer acquisition and revenue. “Just like us they’re not just solely in the project space, the majority of their customers are recurring customers, they’re subscription customers, so from a financial perspective it was a very healthy company.”
Applause offers a range of app testing services, and sees the app testing market in the round — in other words it’s not just focusing on mobile apps but looking at emerging categories such as wearables, smart TVs and in car apps.
“For us the app economy it’s wearable, it’s hardware devices, it’s apps in cars,” said Reuveni. “Fragmentation of devices and OSes is continuing in a big way… We see that as a big boom.”
Applause also does app analytics as well as functional testing, along with additional testing services such as localisation testing, usability testing, security vulnerability testing and loaded performance testing.
It also offers some consulting services — primarily for its larger enterprise customers, such as Google and Microsoft. Increasing adoption of mobility in the enterprise is a major area driving Applause’s business growth, said Reuveni.
“At the moment around 60% of our revenue is driven from enterprise customers. If you look at Testhub, the majority of the revenue is driven from SMBs. We believe that the shift more towards enterprise from a revenue perspective in Europe will follow what’s happening in the U.S.,” he said.
“We ended 2013 with a run rate of about $40 million in revenue. We plan to end 2014 with significant growth of about 90% on top of that, and we’re tracking very well to do that. We expect Europe to contribute — not immediately, but over the next three years — to 20% of that.”
Post acquisition, Reuveni said Testhub’s brand will be closed and integrated into Applause over the next six months.
Commenting on the acquisition in a statement, BTH Managing Partner, Joern-Carlos Kuntze, said: “Testhub is the first crowdtesting startup to successfully exit – and it’s joining the company that created the entire crowdtesting category. This sends a clear message to the German market about Testhub’s success, and positions Applause as the clear leader in the global crowdtesting space.”