The Other Successful Tech IPO: Veeva Systems

All eyes are on Twitter, but cloud vendor Veeva Systems has something Twitter doesn't: real profits and a sharply defined source of future growth.
Alissa PonchioneNovember 12, 2013

Standing on the floor of the New York Stock Exchange, Veeva Systems’ CEO Peter Gassner, CFO Tim Cabral and its original 10 employees were feeling excited and a little nervous. Recently, technology companies have become a lucrative investment, and Veeva, whose beginning as a public company started with the ringing of the NYSE’s opening bell, was hoping for the same luck. Surreal as it may have been, the executives and the original 10 employees, who are still at Veeva, worked six years to get the cloud-computing company to that very spot.

Peter Gassner, CEO, Veeva Systems. Photo by Joseph Seif

That was four weeks ago, and the company is still riding high on favorable analyst ratings, a high share price and positive news coverage. While everyone may be talking about Twitter’s initial public offering, Veeva may prove to be the real tech-stock success story. After pricing its IPO at $16 to $18 per share, the first trade in Veeva (NYSE:VEEV) on October 16 was at $37.16 per share. The stock’s closing price on Nov. 11 was $37.19.

Veeva offers pharmaceutical companies specific technology to help drug-sample tracking with electronic-signature capture, management of documents during clinical trials and maintaining health-care providers’ master data.

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CEO Gassner has a background in enterprise software, with stints at IBM and In 2006, when cloud computing was gaining traction in the business world, Gassner had the foresight to see that it would be one of the “most important kinds of systems that companies have.” He started Veeva the following year.

While most cloud-computing companies  have a diverse group of customers, often to help insulate against economic uncertainty, Veeva focused on life sciences from the very beginning. The $1.6-trillion life sciecnes industry spent $44 billion on information-technology software and infrastructure in 2012, according to International Data Corp. estimates. Despite its 6 percent annual growth rate globally between 2007 and 2011, life sciences was sorely underrepresented when it came to cloud computing, Gassner says.

Although Veeva’s vertical approach to software-as-a-service could appear limiting, the company’s focus allows it to have deep knowledge of strict regulations in the life-sciences industry. Gassner also says Veeva is able to meet IT needs that larger, legacy systems can’t. Veeva clients are “drawn to our cloud nature,” Gassner says. “They want to move to the cloud because it’s a more efficient model, and they need industry-specific cloud computing.”

“We’re well-known in the industry, so the cost of acquiring customers becomes low,” CFO Tim Cabral says.

Veeva has more than 650 employees and generated $129.5 million in revenue in its last fiscal year, up 111.5 percent over the year before. Profitable the last three years, its net income grew to $18.8 million in 2012 compared with $4.2 million the year prior.

Tim Cabral, CFO, Veeva Systems

Ironically, it was, the combination of high revenue growth, profit and not having to raise a lot of capital that drove the company to go public, the executives say. Gassner, who had been a part of IPOs before, knew there was a pattern to follow before going public. There are two ingredients a business needs, he explains. “You need 500 or more employees and visibility of a revenue stream.”

CFO Cabral had worked at public companies but never took one public. He started by building internal and external teams that had experience with the IPO process, and Veeva started “acting” like a public company — adding new hires like a vice president of finance and a general counsel. It also brought underwriters, such as Morgan Stanley and Deutsche Bank, into the fold.

While Cabral was working the external angle, the company also worked internally, informing employees of the IPO six months before the filing of its registration statement in order to coach them through the event. Education and communication about the process was constant. Expectations for the coming year were talked through during the quarterly company call, and the executives reiterated long-term strategy goals. The team responded by focusing on the work that needed to be done and meeting deliverables in an efficient manner, Cabral says.

Meanwhile, Gassner reminded employees that the IPO was “the beginning of something” big. Investors, too, seemed excited in the months leading up to the IPO. The road show with investors was “incredibly productive,” Cabral says.

Veeva may not carry the same cachet as a Twitter or a Groupon, but Gassner says that being a public company is the extra push Veeva needs to raise awareness and attract employees it wouldn’t have been able to attract before. Going public is “like learning to ride a bike,” he explains. “You need someone to give you the extra boost you need to go faster.”