Veeva to plan IPO as Cloud startup challenges Oracle
Veeva Systems Inc. plans an initial public offering this year, people familiar with the matter said, stepping up a challenge to Oracle Corp with Web-based software for pharmaceutical sales.
Veeva is meeting with banks including Morgan Stanley (MS) and is seeking a valuation of about $2 billion, or 10 times projected 2013 sales, said the people, who asked not to be named because the talks are private. Revenue is on track to grow at least 50 percent this year as Veeva edges past Oracle in tools to help drugmakers promote treatments to doctors.
Breaking away from a model followed by Oracle and others delivering software via Internet to customers across varied industries, Veeva and companies such as Athenahealth Inc. (ATHN) and Dealertrack Technologies Inc. specialize in a specific business like medical offices or car sales. While its share of the $22.3 billion cloud-computing market is small, Veeva has won over many of the world's top drugmakers.
"Veeva's a shining star that came out of nowhere," Eric Newmark, an analyst at researcher IDC, said in an interview. "Veeva is No. 1 in pharma in the U.S., and they're not far behind Oracle for the global lead. They should pass them in the next year or so."
Word-of-mouth is key to Veeva's success. Within the drug industry, its software has built up a following for the ability to track prescribing habits and tailor pitches to specific doctors. Mobile tools also help sales representatives document samples given to doctors and obtain electronic signatures needed to meet drugmarketing regulations.
"Once you get in, there's a power of incumbency," said Peter Goldmacher, an analyst at Cowen & Co. "If a small guy can become No. 1 or No. 2 in that market, they can make a great living."
Veeva spends just 25 percent of revenue on product promotion, about half the percentage for Salesforce.com Inc. (CRM), the largest maker of online customer-management software.
Lisa Barbadora, a spokeswoman for Pleasanton, California- based Veeva, declined to comment on the IPO plans.
"In our particular market, our customers know us almost as well as they know Microsoft Office," Peter Gassner, Veeva's co- founder and chief executive officer, said in an interview. Salesforce CEO Marc Benioff helped pioneer the idea of delivering software as a service over the Internet, offering sales-tracking tools used by more than 100,000 customers, from donut shops to car makers. Veeva board member Gordon Ritter, who once founded a company with Benioff, said the narrow focus of his current venture offers a better profit model. "Marc Benioff and other general-purpose cloud leaders won the first round, but industry-specific companies will win the next," said Ritter, founder of Emergence Capital Partners, which has backed both Salesforce and Veeva.