VCs Believe Sunny Gupta Is Engineering a New Business Category

Sunny Gupta thinks he has discovered an entirely new business category, and he’s apparently having little trouble making his case to customers — or investors.

Today, his Bellevue, Wash.-based SaaS startup, Apptio, announced that it has raised a $16.5 million round of funding — its third in just three years — bringing the company’s total funding to $37.5 million. Shasta Ventures led the round, joined by Andreessen Horowitz, Greylock Partners and Madrona Venture Group. All are previous investors.

Ignition Partners, which had participated in Apptio’s Series A round, was not included in what Gupta characterized as an “oversubscribed” round that attracted term sheets from numerous outside investors, all of which he says were turned down.

“In all honesty, I screwed up in [the] B round, as I thought [the] deal was too expensive, given the opportunity,” says Ignition Managing Director John Connors. He adds, “Sunny is doing a great job of building this company, and I missed [an] opportunity … that we should have participated in.”

Apptio offers software as a service that CIOs use to monitor, analyze and improve their IT spending. Gupta calls it the first company to focus on “technology business management,” replacing the Excel spreadsheets and homegrown intelligence tools that companies have historically relied on.

Gupta acknowledges that big companies such as Hewlett-Packard and BMC are chasing the category, too, but he argues that “they’re starting to talk about what we do, but they don’t have the same technology. They’re trying to sell their existing products, and when customers look at us vs. them, they realize it’s apples and oranges.”

Apptio sells five modules as part of its service that address service quality, benchmarking and budget forecasting. Each module has a price associated with it, one that scales based on number of users and the features being used. Customers pay between hundreds of thousands of dollars yearly to several million dollars.

They must like what they’re paying for. The company says it has doubled its stable of Fortune 1000 companies to 50 over the last 12 months — customers include Blue Cross Blue Shield, JPMorgan Chase, and Hallmark — and that it’s enjoying 300 percent year-over-year bookings growth.

Gupta says that Apptio is still sitting on capital from its previous round and that investor interest drove the company’s latest round. He will use the new funding to grow the business and add another 30 employees to Apptio’s 85-person staff by year end. Half of Apptio’s employees are engineers, while about 20 percent are in sales and marketing and the other 30 percent do administrative or work in customer service.

Gupta is an enterprise software veteran with deep ties to his current investors. Before founding Apptio, he co-founded Bellevue-based iConclude, whose software helped companies troubleshoot and resolve any IT infrastructure problems.

That startup, which raised $12 million from Madrona, Greylock, and Shasta, was sold two years after its 2005 founding for $30 million in cash and stock. The acquirer? Opsware (formerly LoudCloud), which was founded by Marc Andreessen and Ben Horowitz and sold to Hewlett Packard four months later, turning iConclude’s $30 million into a $70 million outcome for investors, according to Gupta.