This March, UiPath, which is headquartered in New York, was valued at over USD 1 billion, which granted it admission to the elegant club of “unicorns”. However, the first Romanian “unicorn’s” road to success has been far from straightforward. From imminent closure, it’s been a long road to its global market leader position.
On 6 March, UiPath, which is the leader of the global Robotic Process Automation (RPA) market, received another USD 153 million investment, pushing its valuation above USD 1.1 billion. The new investment came after a year of record growth. In 2017, the firm’s customer base grew from 100 to 700 customers, pushing the company’s annual recurring revenue up by 690 percent. On the basis of the technology used, UiPath was named leader of the RPA market by Forrester, an extremely powerful research and consultancy firm.
Romania’s first USD 1 billion tech start-up had its origins in a software developer company founded by Daniel Dines (UiPath’s CEO) and Marius Tirca (its CTO), in 2005. We present the success story of the company on the basis of the Romanian Business Review article.
As originally a manufacturer of enterprise software, Romania’s first “unicorn” is an exceptional specimen. Especially considering that it started developing its core product for a market it had very little knowledge of, and only five years ago its owners were still thinking about shutting down the business.
In 2005, the company, which was still named DeskOver back then, had its first office in an apartment in Bucharest, near the Hyperion Private University. It built automation libraries and software development kits for large enterprises such as IBM, Google and Microsoft, which embedded them in their own products. But it wasn’t until 2012 that the team of 10 people realized how their products would fit the RPA market. And only then, seven years after the foundation, did they start putting their resources into building a platform for training and orchestrating software robots.
To sustain the growth, last year the company embarked on a massive expansion of its global presence, doubling its workforce to over 500 professionals and opening offices in ten countries, including Japan.
“During that period, we failed multiple times. Uipath is a series of all possible mistakes that one entrepreneur can make,” says Daniel Dines, Founder CEO, right after making the announcement that UiPath was now a unicorn for real. According to the founder, the first mistake was to build a start-up while also doing consulting work and outsourcing, which distracted them from the very essence of the business.
There were other mistakes too. According to the founder, they polished the product too much, instead of bringing it to market much faster, getting feedback and following market needs, not their own heads.
First, a client discovered them, not the other way round. The Indian division of a large BPO company launched a pilot project to find the best provider of RPA technology to meet its business needs. UiPath, still named DeskOver at that time, entered into the competition and came out on top.
In 2015 DeskOver was renamed UiPath, and concluded its first partnerships with the world’s leading BPO and consulting firms. Moreover, the company set up its subsidiary and opened its US office. The team was expanded from 10 to 100 employees. In August of the same year, after 14 months of negotiations, UiPath acquired a USD 1.6 million seed capital led by Earlybird, with Credo Ventures and Seedcamp as backers. A month later, it was already invited to Seedcamp Week in London.
The next large investment came from one of the Big Four. EY Romania became aware of UiPath’s technology in 2015 and immediately introduced it to its clients. Then the orders started coming in.
By April 2016, the company had released its Front Office and Back Office Server suites and made available its Studio Community Edition, reaching 10,000 active members in six months. By the end of the same year, it had opened new offices in London, New York and Bangalore, India, and expanded its portfolio with 250 more enterprise customers.
2017 brought UiPath industry recognition and the company’s global expansion continued. In February, it was recognized as an RPA market leader by the Forrester research and consultancy firm, after careful comparison of 12 RPA vendors. Based on the assessment of technology criteria, it received the highest score. According to Adrian Dorache, Software Developer, the prominent place achieved in the ranking counted a lot, as analysts consult a lot with the investment funds and companies. “Not only the product’s quality was good, but we also continuously performed well and expanded significantly”, adds the software developer.
The catalyst of growth was a USD 30 million investment, which was secured in April 2017 in a Series A round of funding led by Accel. Previous investors Earlybird Venture Capital, Credo Ventures and Seedcamp also participated in the capital increase. The lead investor on behalf of Accel was Romanian-born but London-based partner Luciana Lixandru, who also joined UiPath’s management board. In her opinion, what attracted Accel to UiPath was the team and its commitment to building a large company.
At that time, UiPath already counted about 200 large enterprises among its customers, including Lufthansa, Generali, Telenor and Dong Energy. They spanned all possible sectors including banking and financial services, insurance, manufacturing, utilities, healthcare and government, and about 30 percent were located in the US, with another 40 percent in Europe and 30 percent in Asia.
According to Boris Krumrey, Chief Robotics Officer, UiPath’s most important decision was to hire the best-trained professionals, grow the sales, improve technical customer service organization as well as continuous product development and expansion into key markets. Right now, they are focusing on the integration of leading technology partners such as Oracle, Celonis and ABBYY. In 2017 UiPath opened representative offices in Australia, France, Japan and Singapore, and had an employee base of over 400 people.
Last year, UiPath’s number of partners increased by 611 percent, and included Allianz, BMW Group, CenturyLink, Dairy Farm Group, Dentsu Inc., Huawei, Morningstar and Sumitomo Mitsui Financial Group. They also launched their own academy, which allows thousands of people worldwide to train with the UiPath RPA platform solution.
Turnover went up by 790 percent with unparalleled dynamics. “Our investors say they have never seen this level of growth on the enterprise software market, not even on the consumer software one”, says Dines proudly.
In March 2017, UiPath became the first leading global RPA vendor to set a strong footing in Japan.
The business sectors most eager to adopt RPA services are the banking and the automotive sectors, because their business depends on efficient usage of digital data. According to Koichi Hasegawa, the local subsidiary’s CEO, UiPath can compete in all industries.
In 2017, the biggest investment for UiPath was the new Japanese office, where the number of employees grew from 3 to over 60. And this growth was much needed, considering that they’ve acquired more than 200 Japanese customers within one year, including the biggest banks and several manufactures.
On the Japanese market, UiPath has conducted the most extensive RPA deployment initiative in the world: in 2017 they saved over 400,000 hours across 200 operations.
Less than one year after receiving its first substantial investment, UiPath raised USD 153 million, again led by Accel, with new investors CapitalG and Kleiner Perkins Caufield & Byers contributing, alongside early investors Earlybird, Credo Ventures and Seedcamp. The company’s USD 1.1 billion valuation granted UiPath admission to the exclusive club of unicorns. According to Accel representatives, the new financing will be used for product development, particularly around innovations that integrate machine learning and AI algorithms within customers’ digital business operations.
The addition of CapitalG, the late-stage growth venture capital fund financed by Google’s Alphabet Inc., paves the way for collaboration with Google’s technical advisors to continue advancing AI and machine learning capabilities.
Needless to say, in 2018 UiPath proved to early investors that they had backed the right horse. “Two and a half years ago, when we invested, the company consisted of 12 people huddled together in an apartment in Bucharest. There was still no product presentation and no company deck. Commercial model and pricing were still to be tested with clients,” recalls Dan Lupu, partner at Earlybird, the largest Venture Capital Fund for Emerging Europe.
The fact that a Romanian company got into the league of unicorns is not only excellent news for its founders and shareholders, but also great news for the Romanian tech ecosystem, as something like that has almost never happened in the region, except for LogMeIn from Hungary, a few years back, whose investor was 3TS Capital.
The growth of the company, both in size and in value, was explosive. There is no other Romanian company like UiPath that grew from a start-up to a global company in such a short time. “In June 2017, we had only one person in our finance team and no one in the legal team.”, explains the founder. “Now we have about 40 lawyers worldwide and almost 40 people in the finance team, that fast was our growth”, he adds.
Although overall the RPA market is still considered an emerging one, its turnover is expected to grow to USD 8.75 billion by 2024. According to UiPath’s CEO, being a newcomer brings more advantages than challenges, because you can acquire a substantial market share for yourself. An incumbent enterprise is more difficult to replace. UiPath is planning to double its 700-strong customer base by the end of this year. According to Dine, for new start-ups, even if they succeed in building a better technology than UiPath, it’s hardly possible to replace them on a market where they have excellent relationships and carry out continuous development. “Being new in the market allows you to be ahead in the race, and it is very difficult to catch the market leader.”
It’s certainly in the cards that UiPath will become a decacorn in the foreseeable future. According to Accel’s expert, Lixandru, we can expect to have a multi-billion dollar company out of Bucharest. Their goal is to be listed on the NASDAQ in two to three years’ time.
Can other Romanian start-ups replicate UiPath’s success?
Romania’s first unicorn started off as an outsourced software developer. According to Valerica Dragomir, executive director of the Employers’ Association of the Software and Services Industry (ANIS), the Romanian IT industry provided excellent services and this made the outsourcing business model very successful for Romanian companies. “It is a natural stage of evolution for emerging economies. But further growth tends to be limited by capitalization. However, the case of UiPath helps set an example that even Romanian firms can make it.” According to Dragomir, it is still early to say if and when there will be another Romanian-born unicorn.
According to Dan Nechita, president and co-founder of Smart Everything Everywhere, a local initiative for accelerating Romania’s transition into the digital age, the success of UiPath came not due to the conditions offered to start-ups, rather, it was down to the start-up’s team and business acumen. “The Romanian IT industry and workforce has little to do with the success of a startup and company – we don’t see as many successful startups in Romania not because IT specialists lack technical skills but because building a successful company requires other skills as well, from business development and marketing to sales. The culture of entrepreneurship is quite young in Romania when compared to the West – and the growth of an entrepreneurial ecosystem takes time. UiPath’s success is encouraging because it shows this ecosystem is developing and is now capable of producing competitive companies – before going global, UiPath was backed by Romanian actors.”
What does RPA do?
RPA is the abbreviation for Robotic Process Automation. UiPath has created a software platform that helps organizations automate business processes. The ‘robotic’ term can be misleading, as it has nothing to do with physical robots. Instead, it is an IT tool that digitizes highly repetitive work processes. Hence, the company’s mission is to eradicate tedious, repetitive tasks and let software robots do the work.
UiPath enables businesses and organizations to develop an agile digital workforce by providing a state-of-the-art platform for software robots orchestration. Their products automate processes across all internal or web-based applications and databases, and have unmatched solutions for Citrix, SAP and BPO automation.
Being magical creatures, unicorns are very rare. According to TechCrunch, there are currently 279 private venture capital backed start-ups in the world that are valued at over USD 1 billion. Last year, only 60 new start-ups were added to the unicorn club, 6 fewer than the year before and way behind the record-setting 2015, which brought 99 newcomers.
Unicorns are also highly unpredictable. Traditionally preferring the financial- and innovation-driven climate of Silicon Valley, lately they have found in China a friendly place to develop. But although in 2017 the majority of newcomers still emerged from the US and China, which contributed 29 and 24 unicorns respectively, thanks to the rise of cloud computing and easier access to international funding, new unicorns have started popping up in more exotic locations across the globe. Europe currently boasts 31 unicorns, with the UK contributing with four of these rare creatures and Switzerland with one.
Unicorns have a preference for markets. They are more likely to be found near them. As trends go, in recent years start-ups in sectors such as ridesharing, bike-sharing and co-working have consistently attracted strong funding. The USD 1 billion valuation itself carries with it a magic formula. Being fully known to investors only, its algorithm takes into account besides intuitive factors such as the size of the market, for instance, growth potential that outsiders easily overlook