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Inside the Road to Acquia's Possible IPO

The open-source model for software is shaking up the Web Content Management System (CMS) business. One company that has greatly benefited from this is Acquia, one of the Boston area's most successful startups. Co-founded by Drupal's creator in 2007, Acquia has doubled its revenues in each of the last two years and sparked chatter of a US initial public offering (IPO) in 2014.

The Burlington, Mass.-based startup's savvy move to pick Drupal, the open-source CMS development platform, takes a page out of the Red Hat Software book. That model leverages the speed and flexibility of an open-source community while providing the service and support infrastructure to reassure enterprise customers who want to make sure the software is mission-critical. 

While in Boston last week, several sources in the startup and venture capital (VC) community identified Acquia as one of the leading IPO candidate for 2014. On the record, nobody affiliated with Acquia will confirm an IPO is in the works. Despite the chatter,  VCs never want to talk about an IPO, but that's usually on an agenda — cash and liquidity for investors and insiders is always welcome when you can get it

Michael Skok, an Acquia investor and board member and a partner with North Bridge Venture Partners, wouldn't confirm any imminent IPO plans. But he did confirm the company's solid business model is linked hand-in-hand with Drupal's growth.

"We, as investors, Tom Erickson (the CEO of Acquia), and the team at Acquia are all committed to building an enduring business for the long-term," Skok wrote in an email in response to questions. "They continue to build a strong foundation for future growth fueled by massive digital disruption as organizations of all sizes scramble to keep up with the speed of the web."

Drupal's Global Growth

Drupal is now one of the largest and fastest growing open-source projects in the world. There are close to 1 million people involved in 228 countries, according to Drupal.org. Acquia is spiritually intertwined with Drupal. The inventor of Drupal, Dries Buytaert, is a co-founder and CTO of Acquia.

Acquia has been doubling revenue every year of the past three. The company is on all sorts of "top company" lists these days, including the Deloitte 500 list of fastest growing private companies in North America. Sources close to the company say it will exceed its revenue goal of $75 million in revenue this year. The company had $45 million in revenue in 2012 and $22 million in 2011, according to the company.

Both investors and customers say that Drupal and Acquia have succeeded because of the speed and flexibility of the open-source model. The strength may have come as a surprise to some folks in the traditional CMS space, who have tried to downplay the idea of Drupal becoming a serious enterprise product. But customers say the flexibility and speed of innovation in the Drupal space are for real.

"It's about innovation and access to developers, contributors and marketers that are continually evolving the platform," says John Grayson, the CEO of Genuine Interactive, a customer of Acquia's and a fan of the Drupal platform. "We are pro-Drupal, but we have also have the benefit for using other CMS platforms."

Grayson said that traditional licensed software vendors will have a hard time keeping up with a platform that is continually evolved via open-source contributors and can respond to changes in the market in a matter of weeks.

One example he gave was Acquia's recent integration of localization management into Drupal Commons, announced last week, as well as continued partnerships with translation technology company LingoTek to integrate translation workflow into the content management platform.

"Marketers love that," said Grayson, referencing the work to automate localization and translation features into the Web content platform.

Skok, a 20-year veteran of the software business and a former entrepreneur, concurs that the flexibility of Drupal is a big draw. "It’s incredibly flexible, reliable and robust," he says. "It’s well known for its meticulously crafted and well-designed code. But above all, it's an amazing group of people that keep it growing. No other content management solution has as vibrant a community."

 

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