OutSystems Raises $150M at $9.5B Valuation - Low-Code Platform

OutSystems Secures $150 Million in Funding

This morning saw an announcement from OutSystems, a provider of low-code application development services, regarding the successful completion of a $150 million capital raise. The investment round was spearheaded by Abdiel Capital and Tiger Global.

It is important to note that this funding event doesn't represent the largest capital injection the Portugal and U.S.-based software firm has received. TechCrunch previously reported on a $360 million round secured by OutSystems in 2018.

Company History and Market Trends

Founded in 2001, OutSystems boasts a longer operational history than many companies frequently featured on TechCrunch. Despite its longevity, the company remains privately owned.

Like numerous startups, OutSystems appears to be benefiting from the increased pace of digital transformation initiatives undertaken by organizations of all sizes.

Valuation and Equity

Through the sale of $150 million in shares, representing approximately 1.6% of the company, OutSystems achieved a valuation of $9.5 billion. Investor confidence in the company’s future prospects is evidenced by their willingness to acquire such a small ownership stake at this price point.

Potential IPO

The newly acquired funds likely position OutSystems for a potential Initial Public Offering (IPO). However, the company declined to discuss any public market plans with TechCrunch.

The timing of a potential IPO could be relatively soon, as this funding round resembles pre-IPO financing. OutSystems emphasized the “efficient” nature of its business model to TechCrunch, suggesting prudent cash management.

Investment Allocation

TechCrunch inquired about the company’s plans for deploying the new capital, specifically regarding investments in go-to-market (GTM) strategies and product development (R&D).

OutSystems CEO Paulo Rosado explained via email that the company had already been consistently increasing its investment in both R&D and GTM capabilities, demonstrating a commitment to growth.

The CEO further stated that the company remains “focused on building scale in an efficient way.”

Low-Code vs. No-Code

OutSystems specializes in low-code app development, differentiating itself from startups and established companies focused on no-code solutions.

No-code tools require no coding knowledge, while low-code platforms combine visual programming interfaces with some coding elements.

Complexity and Extensibility

In a 2020 interview with TechCrunch, Rosado highlighted the key distinctions between no-code and low-code approaches, emphasizing complexity – the ability to handle intricate corporate workflows – and extensibility – the capacity for adaptation.

OutSystems believes that low-code is better suited for developing substantial corporate applications.

As Rosado explained, no-code proponents argue that improvements in their tools will reduce the need for coding in development.

Regardless, OutSystems’ approach to the market appears successful, as indicated by its recent funding round.

Pricing Model

Regarding OutSystems’ market position, TechCrunch asked the CEO about its competitive advantages in customer pricing discussions.

Rosado responded that the OutSystems pricing model is based on platform utilization, differing from traditional Software-as-a-Service (SaaS) pricing structures.

While acknowledging the existence of seat limits on lower-priced tiers, the emphasis on consumption over traditional SaaS subscriptions resembles on-demand software models, rather than those pioneered by Salesforce.

This distinction is particularly relevant given recent shifts in the SaaS market.

Competitive Landscape

According to the CEO, OutSystems’ primary competitor isn’t another startup, but rather “non-consumption.” This analogy mirrors Netflix competing with activities like sleep, instead of other streaming services like HBO.

Market Demand

TechCrunch has been covering the no-code and low-code sectors for some time, including OutSystems’ $55 million funding round in 2016.

Recently, demand for both no-code and low-code corporate applications appears to have accelerated. Startups in this market have consistently reported strong demand to TechCrunch over the past four to six quarters.

The question remains whether this momentum will be sufficient to propel OutSystems to a successful public offering.