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Mergers & Money: Back With A Vengeance — Money And Dealmaking Return To Robotic Process Automation

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Editor’s note: This is Mergers & Money, a monthly column by Senior Reporter Chris Metinko that covers dealmaking in the enterprise tech space.

After a couple of quiet years, robotic process automation is back in the headlines.

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In 2018, robotic process automation — or RPA as it’s called — was one of the biggest buzz phrases in enterprise tech and the venture capital world. The promise to automate repetitive, noncomplex tasks in the workplace through software attracted $1 billion in venture funding, according to Crunchbase data.

That number dwindled over the next few years, but 2021 has brought RPA very much to the forefront of those who watch tech and investing. Friday’s news of UiPath officially filing to go public served as an exclamation point after several smaller M&A deals took place in the space through the last couple of months.

In fairness, while headlines about RPA slowed, the space itself never has. Enterprises have always been hungry for the ability to automate simple workplace tasks as they look to save costs and push efficiency. RPA software allows companies to do just that, automating aspects of invoicing, data entry and even now customer service and marketing.

The recent push of dealmaking seems like the natural outcome of that maturation of RPA technology past very straightforward back-office tasks and into new realms like customer service, as well as the growing market with more companies digitizing and moving processes to the cloud.

The deals

After hitting $1 billion in funding in 2018, funding to RPA companies dropped to $920.2 million in 2019 and bottomed out at just $296.4 million last year, according to Crunchbase data.

However, this year already has seen significant funding and dealmaking. It started in late January when SAP acquired German process automation company Signavio. Then just last week, ServiceNow decided to get into the RPA game when it bought India-based startup Intellibot.io.

UiPath even made news before its filing: Last month, the company raised a $750 million Series F co-led by existing investors Alkeon Capital and Coatue at a post-money valuation of $35 billion, and just last week it acquired Denver-based API integration platform Cloud Elements.

The market

All that interest and activity likely is because of the size of the RPA market. While large public companies like Microsoft, Blue Prism and SAP compete in the space, there is a lot of room.

UiPath’s S-1 filing includes some market size estimates including those from IDC, which expected the sector of intelligent process automation to be $17 billion by the end of 2020 and $30 billion by the end of 2024. UiPath, however, believes its total global market is more likely around $60 billion currently.

That size has made the market attractive to investors. Even though venture capital flowing into the market seems to have slowed, funding deals have actually remained rather unchanged in the space. In 2018, there were 16 financing deals and 20 the following year, according to Crunchbase. Last year still saw 14 deals although the amount of dollars was low.

The actual dollar amounts also are somewhat skewed, as UiPath and Automation Anywhere soaked up much of the funding as the top private players in the market.

UiPath has raised $2 billion to date, according to Crunchbase. In November 2019, Automation Anywhere closed a $290 million Series B funding at a post-money valuation of $6.8 billion, led by Salesforce Ventures1. The company has raised $840 million to date, according to Crunchbase numbers.

While others in the space such as New York-based Kryon and China-based Cyclone also have raised significant amounts, they do not come close to those two behemoths.

A path to the public market

The market size and its growth also seem to be shown out in UiPath’s numbers. According to the S-1, the company saw 81 percent year-to-year revenue growth, increasing from $336.2 million for its fiscal year ended Jan. 31, 2020, to $607.6 million for the fiscal year just ended.

The company also significantly trimmed its net losses from $519.9 million in 2020 to $92.3 million. UiPath also flipped an operating cash burn of $359.4 million to a positive operating cash generation of $29.2 million.

Next month likely will tell if those numbers are enough to impress public investors. With its current fiscal year revenue number and valuation, the company carries a multiple of nearly 58x — which may not make investors’ response automatic.

Illustration: Dom Guzman

  1. Salesforce Ventures is an investor in Crunchbase. It has no say in our editorial process. For more, head here.

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