Icertis becomes first true CLM unicorn, with $115M funding round — and it sits atop a market that’s red hot and ripe for M&A [Nexus]

Global Risk Management Solutions (GRMS)

Icertis announced today that its latest funding round raised $115 million and that the provider of contract lifecycle management (CLM) is now valued at more than a billion dollars, reaching proverbial “unicorn” status.

The funding round was led by two groups, Greycroft and PremjiInvest, with participation from B Capital Group, Cross Creek Advisors, Eight Roads, Ignition Partners, Meritech Capital Partners and PSP Growth, according to a press release. The latest round brings total funding to date to $211 million, the release said.

Mark Terbeek, a partner at Greycroft, said in the release: “We’ve seen (Icertis) become the undisputed CLM leader, acquiring a huge stable of blue-chip customers and generating a return on capital that is among the best we’ve ever seen. We have no doubt they will become the next giant in the enterprise SaaS market.”

The release also noted that “the AI-infused Icertis Contract Management (ICM) platform is used by companies like 3M, Airbus, Cognizant, Daimler, Microsoft and Sanofi to manage 5.7 million contracts in 40+ languages across 90+ countries.”

Icertis is private and doesn’t disclose revenues, but it has been growing extremely quickly (claiming 125% CAGR over the last four years), and with over 800 employees, a forward-looking revenue run rate approaching $200 million seems reasonable, and only requires a 5X multiple to get to a $1 billion valuation (we believe the revenue multiple to be higher than this).

Also, Icertis is a clear market leader in the CLM space based on our latest Q2 2019 SolutionMap deep-dive competitive assessment (available here for free). And, Icertis competitor Exari was recently acquired at roughly a 10X multiple, so there should be little doubt about Icertis’ favorable prospects.

Icertis announced that its new $115 million in funding will be used for continued product development in adjacent product areas (and geographies), verticalization, possible acquisitions, blockchain development and, of course, AI — which is red hot in CLM.

Spend Matters has covered Icertis for years, and while the firm’s stated mission to “become the contract management platform of the world” may seem a bit audacious, the firm has executed historically well due in part to its strong management team and focused strategy as a true CLM pure play that doesn’t focus on any one particular business process area (e.g, within the sell-side for customer contracts).

The firm is also buoyed by the fact that the CLM market is throwing off its shackles as a place for glorified document management systems set up by legal departments to transfer commercial risk to counterparties. Rather, contracts are becoming the ultimate system-of-record for B2B commerce, not just from a legal department standpoint, but a financial one (e.g., where contracts become the new ledgers that augment the G/L), a regulatory/risk standpoint, and an operational one relevant to any place where internal/external stakeholders make commitments to each other.

We call this concept “commercial value management” (CVM), and we discussed its framework in a recent Spend Matters PRO research paper titled “Commercial Value Management: Making Contracts the Commercial Core of Enterprise Value (Part 1).” In it, we stated:

“There is a subtle shift happening within the scope of contract and commercial management (CCM), and a not-so-subtle shift that is also happening within the digital realm (e.g., namely artificial intelligence, low-code platforms, open source, “XaaS”). What’s happening is that as contracts get digitized and more deeply modeled, they are becoming the single most important piece of master data within the enterprise that touches virtually every single stakeholder within these core processes and also within corporate functions such as R&D, risk management, strategic planning, treasury, audit, sustainability, digital/innovation and others.”

In the rest of this Spend Matters PRO / Nexus brief, we’ll examine the following topics:

* Icertis’ prospects relative to multiple CLM market segments and competitors
* How CLM’s evolution to “CVM” impacts Icertis. (Think of CVM as “extended CLM” on steroids.)
* M&A, exit and other considerations for Icertis — including potential acquirers as an alternative to an IPO.

And in a subsequent deeper dive in the August/September inaugural Spend Matters Nexus members’ newsletter for private equity firms/investors, corporate development teams and solution provider CEOs, we’ll feature Icertis and analyze:

* Icertis’ strategy: lessons learned and key takeaways
* Valuation drivers (for Icertis and similar firms) and possible Icertis M&A acquisition prospects/targets
* The prospects for procurement suite providers with legacy CLM capabilities and Apttus, Conga and others in a CVM world

OK, let’s get to it …

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