RingCentral, which operates a cloud-based phone platform, has filed for an IPO today, and in light of the overall positive performance of other cloud IPOs, expect this to be a hot deal.
The mastermind of RingCentral is Vlad Shmunis, who started the company in 1999. His belief was that the Internet could disrupt the traditional business phone market; that there would be no need to buy expensive hardware, such as private branch exchanges (PBXs).
From the start, Shmunis built RingCentral with a mobile-centric approach, thinking that the work force would become more disbursed, and that employers eventually would require employees to use their own devices for communication. According to the S-1:
“We have designed our user interfaces to be intuitive and easy to use for both administrators and end-users. We believe that we can provide substantial savings to our customers because our services do not require the significant upfront investment in on-premise infrastructure hardware or ongoing maintenance costs commonly associated with on-premise systems. Our solutions generally use existing broadband connections.”
The company has a base of just more than 300,000 customers, spanning a diverse set of industries including advertising, consulting, finance, healthcare, legal, real estate, retail and technology. A key part of the sales strategy is to use resellers, with AT&T (T) its biggest.
Growth has been explosive, with RingCentral ramping up revenues from $50.2 million in 2010 to $114.5 million in 2012. However, the company continues to bleed red ink, including a net loss of $35.4 million last year.
Still, those losses are a little easier to stomach considering RingCentral’s huge market potential. From 2008 to 2012, 61 million PBX lines were sold in North America, according to a report from Infonetics Research. Assuming a per-user subscription fee of $20 per month, the addressable market is a whopping $15 billion.
And that might be an understatement of the opportunity, considering many business don’t use sophisticated comm systems at all because of the heavy expenses.
RingCentral has not yet selected an exchange or set the terms of the offering. But the proposed ticker is “RNG,” and the lead underwriters include Goldman Sachs (GS), JPMorgan (JPM) and BofA Merrill Lynch (BAC).
Tom Taulli runs the InvestorPlace blog IPO Playbook. He also is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.