How does Smartsheet make money?

The company, which offers a cloud-based platform for work collaboration, has filed to go public

While 2016 was a rough one for the IPO market, turning out to be the worst year since 2009, 2017 began to see an upswing. In the second half of last year, they doubled from the same time in 2016, and they've continued in that direction this year: in the first quarter of 2018, things really heated up. With 43 IPOs raising $15.6 billion it was the best quarter for the U.S. IPO market in three years and the best first quarter in eight years.

That was thanks, in part, to Dropbox's public offering and, given the success of that IPO, there's no sign of things slowing down now, with companies like DocuSign and Spotify getting ready to hit the market later this year as well.

Another company that has already filed to go public is Smartsheet, a SaaS application for collaboration and work management.

This is how the company described what it does in its S-1 filing with the SEC: "We are a leading cloud-based platform for work execution, enabling teams and organizations to plan, capture, manage, automate, and report on work at scale, resulting in more efficient processes and better business outcomes."

Its products include: 

• Smartdashboards, which provides real-time status of trends, summary reports, and important deadlines.
• Smartportals, which allow business users to create customized landing pages for teams to locate and access from any device the entire set of resources available for a project.
• Smartcards, which provide a visualization tool for teams to organize, share, and act on workflows.
• Smartgrids, which offer a customized view of work to keep teams on task and on time by easily tracking multiple moving parts.
• Smartprojects, which allows teams to view the activity log to understand who is doing what and access all relevant project files through a central location.
• Smartcalendars, which provides a comprehensive view of activities and critical timelines, including third-party calendar applications such as iCal and Google Calendar.
• Smartforms, which allows used to create and customize forms using a user-friendly interface.
• Smartautomation, which automates repetitive processes and accelerates work by creating automated actions triggered based on preset conditions. 

Smartsheet is currently had 3.6 million customers. That include 90 companies in the Fortune 100, and two-thirds of the companies in the Fortune 500. Clients include Starbucks, Cisco and MOD Pizza.

The company makes the bulk of its money from subscriptions, which involves individuals or enterprise customers playing annual fees to access the service. 

"Subscription revenue primarily consists of fees from customers for access to our cloud-based platform. Subscription revenue is driven primarily by the number of domain-based customers and changes in their subscription levels, and, to a lesser extent, subscriptions to cloud-based premium solutions," the company wrote in the filing.

It currently offers four plans:

• The Individual plan, which is $14 per user per month, when billed annually. It comes with 10 sheets.
• The Team plan, which is $15 per user per month, when billed annually. It comes with 50 sheet per use and requires at least three users.
• The Business plan, $25 per user per month, when billed annually. It comes with 100 sheets per use and requires at least three users.
• The Enterprise plan, which has customized pricing. It comes with unlimited sheets. 

In the year ending January 31 of this year, Smartsheet made $100.4 million from this revenue stream, or 90 percent of its $111.3 million in total revenue. Revenue from subscriptions jumped 60 percent from the year before.

The other 10 percent or so of Smartsheet's revenue comes from professional services, which are fees for consulting and training services.

"Our consulting services consist of platform configuration and use case optimization, and are primarily invoiced on a time and materials basis, with some smaller engagements being provided for a fixed fee. We recognize revenue for our consulting services as those services are delivered," the company explained.

"Our training services are delivered either remotely or at the customer site. Training services are charged for on a fixed-fee basis and we recognize revenue after the training program is delivered. Our consulting and training services are generally considered to be distinct, for accounting purposes, and we recognize revenue as services are performed or upon completion of work."

In the year ending January 2018, Smartsheet made $10.9 million from this revenue stream, up 142 percent from $4.5 million the year before. 

Founded in 2005, Smartsheet had raised $106.1 million in venture funding from investors that included Insight Venture Partners, Madrona Venture Group Sutter Hill Ventures and Summit Partners. In May 2017 it raised $52.1 million, valuing the company at $800 million.

(Image source: smartsheet.com)