PLEASANTON -- The Force is strong with with Silicon Valley's cloud-software startups.
For the second time in less than a month, a cloud-software company founded by a former Salesforce executive scored big in an initial public offering: Veeva Systems brought in more than $260 million and nearly doubled in its Wall Street debut Wednesday after Redwood City's Rocket Fuel accomplished a similar feat in September.
"Leaders are attracted to new movements early," Veeva founder and CEO Peter Gassner said Wednesday. "You saw this with PayPal, in a different area, and now you're seeing it with Salesforce.com, which was very early into cloud computing. The alumni that had the vision to go start something are doing it again."
Gassner's company found millions more than early expectations: After filing to go public at $12 to $14 a share, the company raised that range to $16 to $18 last week, then priced its initial batch of shares even higher, at $20. After trading began under the ticker symbol VEEV Wednesday on the New York Stock Exchange, shares nearly doubled, selling in a range of $35.06 to $39.64 before closing at $37.16, 85.8 percent higher than the IPO price.
Rocket Fuel went public at $29 a share last month and has more than doubled, closing Tuesday at $60.60; the company was founded by CEO George John, whom Gassner said sat roughly 25 feet away from him when the two worked at San Francisco-based Salesforce. Both companies are profiting in an industry that is in demand and an IPO market that has heated up ahead of highly anticipated offerings from Twitter and Chinese e-commerce giant Alibaba.
Cloud software -- which allows companies to access essential programs through remote servers, cutting down on hardware costs and allowing for quick updates and easy access from a range of devices -- has been the hottest segment of Silicon Valley's tech industry for IPOs and acquisitions in the past couple years. Just in Veeva's neck of the woods, Dublin-based Taleo sold to Oracle (ORCL) for $1.9 billion in February 2012 and cloud human-resources software company Workday went public a year ago at a valuation of $4.5 billion that has tripled.
Much of the excitement surrounding Veeva stems from its rare ability to produce profits ahead of its IPO while exhibiting stellar revenue growth of more than 100 percent in each of the last two years. Veeva has recorded a profit three years in a row, bringing in a total of nearly $27 million in that period.
In meeting with investors, Gassner said "they hadn't seen a cloud software company with our type of financials -- this combination of high revenue growth and consistent profitability."
Veeva is part of a wave of cloud software startups that focus on the needs of specific industries. The 6-year-old company was founded to take the life-sciences industry into the cloud, which allows companies to access essential programs through remote servers, cutting down on hardware costs and allowing for quick updates and easy access from a range of devices.
"In 2006, it became very obvious to me that the next wave of cloud computing would be these industry-specific lines of business applications for various industries," Gassner said in a telephone interview from New York, where he and fellow Veeva executives rang the opening bell Wednesday for the NYSE.
Since its founding, Veeva has managed to build its client list to 170 biotechnology and pharmaceutical companies, including industry stalwarts such as Pfizer, Eli Lilly and Genentech. Gassner pointed out that the $1.6 trillion industry faces strict and constantly changing government restrictions worldwide, which inflates the need for software developed especially for these companies, and is likely headed for strong growth.
"As the world economy gets more advanced, health care is always going to be important to people, and that's coupled with being on the cusp of some real breakthroughs in life sciences, with genomics and personalized medicine," Gassner said.
Veeva sold slightly more than 13 million shares in the IPO, collecting $260.9 million at a valuation of $2.44 billion; the company sold 9.7 million of those shares for a total take of $194 million, while early investors such as venture-capital investor Emergence Capital sold the other 3.3 million shares.
Gassner said the company would use proceeds to build on its software, including building data-focused applications to its product line, and adding to the Pleasanton company's 650-employee workforce.
"Absolutely, we're hiring. If you know anybody, please send them along," Gassner said.
Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.