ScaleUp Milestone Series – nCino’s IPO

Published

When Insight led nCino’s Series B in early 2015, the world of vertical software was a bit different. We invested with a 'WYHTB' (What You Have to Believe) of reaching a $500m+ enterprise valuation at exit. This sized outcome, though not unheard of, was considered very large at the time. However, Insight’s more notable investment in nCino came in early 2017. We began to see how special the company really was and made an aggressive move to buy as much of the company as we could – at a valuation north of our initial exit target.

Our excitement hinged on many differentiated elements that make nCino special, as outlined below. And although Insight technically took a control position (>50% ownership), the word “control” is a misnomer: Insight only kept 1 full board seat, did not change management, and let the team run its own vision. The functional purpose of this investment style was not to run the business, but rather clean up the cap table and align the management team with us and all other remaining shareholders toward a unified goal. This created a clear timeline and definition for a successful exit – arguably the most important ScaleUp milestone. We also served as thought partners and a set of deep pockets for additional capital to fund growth, M&A, and liquidity. nCino represents one of our earliest examples of “growth buyouts”, which is an investment style we have continued to pioneer over the last several years (other examples include 6sense, Tricentis, Checkmarx, ComplianceQuest, RecordedFuture, Armis, etc).

There is plenty online about nCino’s success story: the notable banks which are hitching their long-term plans to the platform; the rapid digital transformation in banking that is now even further accelerated in the COVID-19 era; the KPIs around subscription revenue with high growth and retention pointing to long term profit potential; etc. From Insight’s viewpoint, though, there are a few important ingredients in nCino’s success that may not be immediately evident from the S-1 that got us excited in 2015, motivated us to double down in 2017 (and thereafter), and are as important today as ever:

Bank on Experience

  • Grey hair matters. Well, in the case of nCino the metaphor for experience is more aptly represented by the white hair of its CEO Pierre Naude. Either way, nCino breaks the typical Silicon Valley model by placing a deep emphasis on aligning with, instead of disrupting industry experience. The software was created by bankers, and it was thoughtfully battle tested within Live Oak. Founding team members, including Pierre, have deep banking software experience. The company intentionally started gaining traction with community and regional banks, allowing it to get meaningful customer feedback on its products as it approached serving the enterprise segment. At the ownership and governance level, alongside Insight, the company took money from banks as strategic investors (sometimes strategic investors add nominal value, but in nCino’s case they had real impact). Solving meaningful problems within an industry vertical takes a deep understanding of the customer needs, and nCino’s journey is a series of well-orchestrated decisions to inject the maximum amount of this understanding into the DNA of the business.

Born in the Cloud, Raised in the Cloud

  • The banking industry has had software for decades, but it has not had SaaS for very long – especially in its core business applications. To this day, some of the biggest names in banking software are the likes of FIS (founded 1968), First Data (founded 1971), Jack Henry (founded 1976), Fiserv (founded 1984), and Temenos (founded 1993), all of which are anchored to their massive on-premise installation bases. nCino has never deviated from its vision to be a pureplay SaaS company. In the early years of the business, this required a lot of patience as customers were demanding on prem to meet the security needs of banks. But, staying stalwart on selling on SaaS allowed nCino to rise above its competition as the technology matured and the market moved toward them. Additionally, while the company provides professional services for implementations, this is not a point of emphasis; in fact, it is willing to offload healthy margin services to Systems Integrators. All of this kept the product cutting edge and innovative, with an additional perk of maintaining robust subscription pricing.

Dancing with the 800lb Gorilla

  • The largest B2B tech companies like Microsoft, Google/GSuite/GCP, Amazon/AWS, Adobe, and Salesforce can create significant opportunities for ISVs to fill in white space around their core offerings. However, deriving sustained value out of these ecosystems can be tricky. It is difficult to navigate the waters of partnership through alliances, application marketplaces, and integrations because the commercial and product strategies of these ecosystem creators are effectively ever-changing. There is potential to be strategically aligned one day and direct competitors the next. For nCino, they are particularly tethered to Salesforce because they chose to build on its force.com platform. As such, in the eyes of the customer, there should be absolute cooperation between nCino (as the third-party software vendor) and Salesforce (as the mothership). This creates a natural tension, especially as Salesforce has increased its verticalization, including its relatively recent creation of Financial Services Cloud. Yet, nCino has stayed laser focused on solving meaningful and challenging bank-specific problems, not just looking to provide CRM solutions that overlap with Salesforce’s FSC. nCino’s ability to define and defend a highly differentiated swim lane speaks to the team’s deep understanding of the market and ultimately enables joint success between the businesses. And, to its credit, Salesforce has provided a stamp of approval in the form of funding and direct guidance to nCino over many years as an investor and partner. nCino’s achievements as an independent company built on force.com is only rivaled by Veeva, and each are a direct statement: as long as they focus on solving their customers’ most challenging problems, businesses can build amazing technology and shareholder value leveraging the force.com platform. This statement is also a big win for the 800 lb Gorilla that is Salesforce.

And We're Live!

  • In most software companies, new bookings are the most celebrated events. While nCino has an incredible go-to-market engine, including international presence and multiple customers paying multi-million-dollar annual subscriptions, the emphasis of the company is on customer success. This emphasis is not only manifested in high 90s gross dollar retention, but also in the way nCino thinks about interacting with their customers. Large-scale software applications are difficult to deliver; this is especially true in banking where software needs to have the utmost security and reliability. The most nerve-wracking time for many software vendors is customer go-live, the moment of truth for the software’s functionality and initial adoption. Not at nCino; nCino relishes go-lives. In fact, it celebrates go-live dates more than any other in the life of the customer journey. In Insight’s 2015 investment memo, the first bullet under “Why We’re Excited” reads: nCino has yet to lose a customer. nCino’s continued emphasis on customer success has enabled its own.

Surf Town Software

  • nCino’s commitment to Wilmington is proof that enterprise software companies can be built anywhere, including North Carolina beach towns, as all software companies are really people businesses. nCino has demonstrated a fervent commitment to the people that comprise the Wilmington community, including younger college grads who require training. The willingness to invest in recent grads with little experience but plenty of aptitude and grit, coupled with the appeal to its city’s culture (you’ll see surfboards throughout their buildings, for example) allowed nCino to cultivate a deep talent pool in Wilmington. This is not an investment that can be measured in months, or even quarters – and there is no shortcut – but nCino has remained committed. This has not only given nCino an operational cost advantage relative to software companies in other, more expensive geographies, but also allowed for productivity gains via the creation of a team-oriented and community-oriented culture. This culture is evinced in the company’s 93% employee retention rate and laudable Glassdoor page.

This week, nCino went public at $3bn, setting the mark for the highest priced forward revenue multiple for a vertical SaaS company at IPO. The world has certainly changed since 2015.

It has been a pleasure to be along for the ride for the last 5 years, and we are excited to support the company in its next chapter as a public company.

  • Jonathan Rosenbaum

    Jonathan Rosenbaum, Vice President

    Jon (also known by friends and co-workers as “Rosie”) joined Insight in 2014. He focuses on vertical and horizontal application software and is responsible for executing transactions and assisting in portfolio management post-close. He has also specialized in helping portfolio companies source and execute M&A. He currently sits on the board of…