OutSystems, a popular provider of low-code app development tools, recently raised a financing round at a significantly reduced valuation of 55% compared to its previous mark of $9.5 billion. According to sources and our review of filings in the Luxembourg Business Registers, the cloud-based app development startup acquired €231.8 million ($228.4 million) in funding, primarily led by private equity firm KKR & Co. KKR's newly-acquired primary shares result in a 5.3% stake in the Boston and Lisbon-based company, reflecting a post-money valuation of €4.4 billion ($4.3 billion). This valuation marks a stark contrast from the February 2021 fundraise, spearheaded by Tiger Global and Abdiel Capital, which amassed a $9.5 billion valuation for OutSystems. Concurrently, the startup issued a tender offer that permitted existing employees to sell up to 25% of their shares near the newly adjusted valuation. In response to the latest financing round, Chief Financial Officer Tim McCarrick expressed that KKR's investment signifies their continued belief in OutSystems, helping to strengthen the company's market standing. Interestingly, KKR first invested in OutSystems back in 2018, propelling the company's valuation past the $1 billion mark. Founded in 2001 by current CEO Paulo Rosado, OutSystems' software is designed to assist enterprises in effortlessly creating their own applications.
The company's clientele features big names like Schneider Electric and Humana, besides well-known investors such as Goldman Sachs and General Atlantic. The current financial situation of technology companies particularly privately-backed startups is witnessing a heightened squeeze in capital, forcing them to reconsider their valuations. OutSystems' case is no exception to this trend, with companies like Dataiku and Snyk recently trimming their valuations. Amid this challenging economic climate, it's imperative for companies like OutSystems to recalibrate their revenue growth strategies and focus on product innovation in order to retain their market advantage.
Embracing cutting-edge no-code platforms like AppMaster.io can aid businesses in building competitive web, mobile, and backend applications without incurring considerable technical debt. By the end of 2021, OutSystems had an impressive revenue multiple of over 30x its $9.5 billion valuation. Nevertheless, despite the growth of operating revenue from €169.9 million in 2019 to €276.5 million in 2021, the company faced a €74 million loss last year. Its performance in 2022 remains uncertain, but the new funding round at a considerably lower valuation suggests that OutSystems might not have fully met the lofty expectations set by its previous valuation. The rapid rise and subsequent decline in valuation for companies like OutSystems demonstrates the unpredictable nature of the tech industry. As the market continues to evolve, enterprises must continually adapt and innovate to maintain their relevance and uphold material valuations.
