Aneel Bhusri

Sources familiar with the company’s plans tell AllThingsD that Workday has chosen the four bankers that will lead it through the IPO process: Morgan Stanley, Goldman Sachs, Allen & Company and JPMorgan Chase & Co. The search for bankers caps a process begun in December.

The company’s IPO path calls for an S-1 filing to be made with the Securities and Exchange Commission by mid-July. After a late summer or early fall road show, its shares would debut between October and December, depending on how favorable market conditions are, sources familiar with the matter tell me.

The process began in earnest after Workday hired its new CFO, Mark Peek, away from VMware, where he was also CFO.

Workday is feeling emboldened in part by the successful offerings of Jive Software and Splunk, both enterprise companies with their hands in the cloud business. Workday itself is a pure cloud software play, specializing in human resources applications, a white-hot area of enterprise that has seen a lot of M&A activity of late.

In December, software concern SAP spent $3.4 billion to acquire SuccessFactors. Then, in February, software giant Oracle spent $1.9 billion to acquire Taleo, in a deal that took place shortly after I interviewed Taleo’s CEO. Even Salesforce got into the act, acquiring the start-up Rypple for an undisclosed amount in December.

Much of that dealmaking came in response to concerns about Workday, especially after its impressive $85 million Series F round of institutional funding at a $2 billion valuation, which AllThingsD reported exclusively in October. A Bloomberg News report said that round was oversubscribed and grew to $100 million when Michael Dell’s MSD Ventures joined.

Investors in that round included several who also took part in institutional rounds in Facebook and Web gaming player Zynga: T. Rowe Price, Morgan Stanley Investment Management, Janus, and Bezos Expeditions, the personal investment entity of Amazon CEO and founder Jeff Bezos. William Danoff, the manager of Fidelity’s $80 billion Contrafund, the mutual fund giant’s largest stock-based fund, also participated in that round.

A Workday IPO, which would raise about $500 million, would make for a sweet payday for the company’s earlier investors, which include Dave Duffield and Greylock Partners, who invested $90 million in four rounds, and New Enterprise Associates, which joined a $75 million Series E round in 2009. By my math, Workday’s total capital raised comes to a cool $195 million.

So how’s business? With the company having disclosed $160 million in billings total bookings in 2010, sources familiar with its operations tell me bookings in 2011 exceeded 100 percent growth. That would be above the $320 million in 2011 bookings CEO Aneel Bhusri told me he expected last October.

Workday is essentially the creation of PeopleSoft vets Bhusri and Duffield. They started the company in 2005, not long after losing a pitched battle to resist a $10 billion hostile takeover by Oracle. Bhusri and Duffield concluded that the next battlefield for enterprise software would be in the cloud. They kickstarted Workday using their own money and some funding from Greylock, and brought some PeopleSoft employees with them.

The idea was to re-create PeopleSoft, which makes software that businesses need to run day to day, but to deliver it from the cloud.

And unlike other cloud players that approach smaller companies and work their way up to ever-larger customers, Workday’s customers are already in the big leagues. The average Workday customer — there are 280 — has between 10,000 and 15,000 employees. The biggest is Flextronics, the huge electronics manufacturing company, which has 200,000 employees. Other customers include Time Warner, Thomson Reuters, Chiquita Brands and Salesforce.com. There are Workday records on more than two million employees on its system. All that after only four-plus years of active selling. A second, newer line of financial applications aimed at helping companies more efficiently manage their spending is getting traction, too.

Workday will probably be the biggest among a pending batch of enterprise-oriented IPOs set for summer and fall after the Facebook madness is over. For one, there’s Violin Memory, which I’ve been reporting on quite a bit. And Reuters is reporting that cloud storage and collaboration concern Box is looking like it’s eyeing an IPO in 2013. The bankers are going to be busy.

Aneel Bhusri

Allen is said to have advised Workday on its recent funding round, which closed in October. As exclusively reported by AllThingsD at the time, Workday raised $85 million at an implied valuation of $2 billion. The Series F was led by T. Rowe Price, Morgan Stanley Investment Management, Janus and Bezos Expeditions, the personal investment entity of Amazon CEO and founder Jeff Bezos. Bloomberg also says that Michael Dell’s personal investment vehicle, MSD ventures, was in on that funding round, which grew to $100 million since the closing.

Previous investors include Dave Duffield and Greylock Partners, who are in for $90 million across four rounds; and New Enterprise Associates, which joined a $75 million Series E round in 2009.

Apparently encouraged by the successful IPO of Jive Software earlier this month, and the performance of its shares, which are up nicely since the debut, Workday now appears poised go through with the IPO that CEO Aneel Bhusri (pictured) hinted in October would take place during the second half of 2012.

And there’s no question that Workday is in a hot space. SAP’s $3.4 billion acquisition of SuccessFactors last month, plus Salesforce.com’s deal for Rypple last week, attest to the urgency with which larger companies want to be in the HR software business.

Think about it: Every company — of any size — needs to keep track of its people, their salaries, performance-review information and so on. And why bother with software that runs on the local machines, when the cloud is so much more efficient?

Bhusri was a senior executive and co-chairman of PeopleSoft’s board, and was on hand for that company’s hostile takeover by Oracle. After losing that battle, he and co-founder Dave Duffield concluded that the next battlefield for enterprise software would be in the cloud.

Workday’s average customer has between 10,000 and 15,000 employees. Among its 250-odd customers, the biggest is Flextronics, the huge electronics manufacturing company, which has 200,000 employees. Others include Time Warner, Thomson Reuters, Chiquita Brands and, perhaps unsurprisingly, Salesforce.com. Workday has some two million employees in its system.

And while there’s no S-1 filing with the US Securities and Exchange Commission to peruse yet, the IPO watch on Workday officially begins now.

Aneel Bhusri

Today, Workday will announce that it has just raised $85 million in new financing, bringing its total amount of capital raised to $250 million. Sources familiar with the terms of the deal tell me that the investments value Workday at $2 billion.

The funding round isn’t coming from traditional venture capital players, but from institutional investors who will want to be shareholders of Workday when it goes public in the second half of next year. The round, which is being described as a Series F, includes T. Rowe Price, Morgan Stanley Investment Management, Janus, and Bezos Expeditions, the personal investment entity of Amazon CEO and founder Jeff Bezos.

I’m also told, by sources familiar with the deal, that William Danoff, the manager of Fidelity’s $80 billion Contrafund, the mutual fund giant’s largest stock-based fund, has participated in this funding round. This would be the Contrafund’s third recent investment in a privately held Internet company, the other two being Facebook and Zynga. In fact, it’s the same group of funds that took part in a huge round with social gaming force Zynga in February; in Groupon in January; and which earlier this year bought nearly three million shares of Facebook for $25 each.

Previous investors include Dave Duffield and Greylock Partners, who are in for $90 million across four rounds; and New Enterprise Associates, which joined a $75 million Series E round in 2009.

Why raise from institutionals and not VCs? “Because Workday is going to go public, and probably before the end of next year,” Bhusri told me. “Rather than do a round that adds an overhang to the existing capital structure, this is a group of investors who will likely buy more in the IPO,” he said. “In some ways, it’s an early debut of an IPO.”

And while there’s no S-1 filing from Workday to peruse just yet, Bhusri told me that Workday is growing plenty fast. Having disclosed $160 million in billings in 2010, Workday, he says, is on track to do twice that — or about $320 million in 2011 — and that it’s close to breaking even. So this round of capital is insurance. With the world economy so out of joint, if no logical window for an IPO emerges in 2012 — a reasonable worry — then Workday won’t be forced, should the need arise, to raise more capital in a difficult market.

So what is Workday, exactly? For the answer, you have to turn the clock back to 2004, when the software giant Oracle made its initial hostile bid to take over PeopleSoft. Bhusri was a senior executive and co-chairman of PeopleSoft’s board. After losing the battle to resist Oracle, he and co-founder Dave Duffield decided that the next battle for enterprise software would be in the cloud. Workday was born within months of their departure from PeopleSoft.

The plan, Bhusri says, was to create the next generation of PeopleSoft’s software, or the next generation of SAP’s Human Resources and Enterprise Resource planning software — essentially, software that businesses need to run day to day. But rather than deliver it in the traditional manner — run it on machines at the customer’s location — it’s all delivered via the cloud. “It’s as if you were going to start over with a clean sheet of paper and design this kind of software all over again,” Bhusri says.

And Workday’s customers aren’t exactly small players. Its average customer has between 10,000 and 15,000 employees. Among its 250-odd customers, the biggest is Flextronics, the huge electronics manufacturing company, which has 200,000 employees. Other customers include Time Warner, Thomson Reuters, Chiquita Brands, and perhaps unsurprisingly, Salesforce.com. There are some two million employees on the system. All that after only four years of actively selling the product.

And what Workday sells is a system that tends not to get replaced very often in large companies — perhaps once a decade. That gives the company an advantage when it asks for contract commitments that last three years; most cloud companies offer their services on a pay-as-you-go basis.

Workday’s targets are Bhusri’s old customers who bought PeopleSoft software to run their businesses one product generation back, and also those who run SAP software. So when a new customer signs on it’s usually one or the other being displaced. Other rivals include Lawson, Infor and, occasionally, the payroll giant ADP.

The typical new customer, Bhusri said, is using one of those other platforms and is ready to upgrade. “To upgrade to the newest version, they get a price quote that’s so high they start looking for a better way,” he says. “That’s when they find us.”

And Workday isn’t sitting still with HR software. Its next battle will be in financial planning software that companies rely on to handle money — accounting, expenses, procurement. Workday already has 50 customers running the financial stuff. Once they try Workday’s HR, they like what they see, making for an easy upsell. Others just swap out both the HR and financial parts in one go, Bhusri said. And the competitive targets are the same as well: Oracle and SAP. One wonders if they aren’t just a little worried.

According to sources close to the situation, Wal-Mart Stores paid just over $300 million in cash for Kosmix.

The six-year-old Mountain View, Calif.-based company–which has built a social media platform that organizes content by topic–has raised $55 million from a large group of Silicon Valley venture firms.

The acquisition by the Bentonville, Arkansas-based retail giant was announced earlier today.

Wal-Mart did not disclose terms of the deal, which is focused on building out its social and mobile e-commerce offerings.

The price for Kosmix is a pricey one to do so, but traditional retailers need to jump into the digital market now dominated by app-happy, smartphone-wielding customers.

Kosmix will join the newly formed @WalmartLabs, the company said.

Kosmix was founded by the team that sold pioneering e-commerce company Junglee to Amazon in 1998.

After that, Venky Harinarayan and Anand Rajaraman raised $55 million in funding from Time Warner Investments, Accel Partners, Lightspeed Venture Partners, DAG Ventures, Bezos Expeditions, and angel investors Jon Miller and Ed Zander.

As eMoney’s Tricia Duryee wrote earlier today:

The company may be best known for powering TweetBeat, which it defines as a real-time social media filter for live events. It also operates Kosmix.com, where people go to discover social content by topic, and it operates RightHealth, which it claims to be one of the top three health and medical information sites by reach.

One interesting aspect of the deal: Accel’s senior partner Jim Breyer–who was not the principal VC in the Kosmix investment–is on the board of Wal-Mart. Presumably, he recused himself from the decision.

The company did not disclose terms of the agreement, but said the acquisition would be instrumental in building out both its social and mobile initiatives.

Kosmix will join the newly formed @WalmartLabs and continue to be based in Silicon Valley, the company said.

Wal-mart said the @WalmartLabs team will work on building out its social and mobile commerce strategy to link together its bricks and mortar stores with e-commerce. Today, Wal-mart operates physical stores in 15 countries and e-commerce businesses in nine countries.

Kosmix was founded by Venky Harinarayan and Anand Rajaraman, who sold their first company, Junglee, to Amazon.com in 1998.

The six-year-old company Kosmix has raised $55 million in funding from Time Warner Investments, Accel Partners, Lightspeed Venture Partners, Dag Ventures, Bezos Expeditions, Jon Miller, and Ed Zander.

In explaining what the company does on its Web site, it writes: “On any given day, people share 830 million items on Facebook, upload 6.1 million photos to Flickr, add 2.1 million minutes of video to YouTube and send 65 million tweets. Kosmix cuts through this noise to find content that matters to you.”

It’s not particularly clear how Kosmix leads to better mobile and social interactions. The company may be best known for powering TweetBeat, which it defines as a real-time social media filter for live events. It also operates Kosmix.com, where people go to discover social content by topic, and it operates RightHealth, which it claims to be one of the top three health and medical information sites by reach.

The transaction is subject to the customary closing conditions; the company anticipates it will close during the first half of this year.

Qliance Medical Management Inc. says it has raised $6 million in new funding in a financing round led by Bezos Expeditions, the personal investment company of Amazon.com’s (AMZN) CEO; additional financing came from MSD Capital, Michael Dell’s investment firm. The actor and comedian Drew Carey, Seattle venture capital firm Second Avenue Partners and other investors also joined in the funding of Qliance, which has raised a total of $13.5 million to date.

Qliance operates three clinics in the Seattle area that offer primary care treatment to patients who pay a monthly membership fee ranging between $44 and $84, depending on their age. The company accepts no form of health insurance for its services. Qliance intends to use its financing to expand in Washington State, with plans to open clinics beyond the state as early as next year.

Read the rest of this post on the original site

Perhaps plow it into more start-ups like Aviary, a Long Island-based design software company.

Bezos, via his Bezos Expeditions fund, has followed up an investment in the company earlier this year with another slug of cash. It’s part of a $7 million Series B round led by Spark Capital, best known in these parts as the guys who made a very big bet on Twitter, which Bezos also invested in.

If you’re sick of hearing about Web start-ups with just the vaguest sense of a business plan, Aviary may be a refreshing change. It is trying to make money by selling cheap, Web-based alternatives to popular, expensive design software, primarily the stuff that Adobe (ADBE) sells, like Photoshop and Illustrator. Granted, it doesn’t make much money yet: The company only began selling $24.95 subscriptions to its software suite earlier this year.

Down the line, Aviary also imagines it will be able to create an online marketplace where the creative types who use its software can bid on work assignments. Sort of like eBay (EBAY) meets Craigslist meets Etsy meets Amazon’s (AMZN) own Mechanical Turk.

Here’s the full press release:

Aviary Secures $7 Million in Series B Financing Led by Spark Capital

Provider of Creative Application Suite in the Cloud Makes Creation Accessible to All and Advances the Growing Digital Economy

LONG ISLAND, New York (October 26, 2009) – Aviary, Inc., a pioneer of a creative application suite in the cloud, today announced that it has received $7 million in Series B financing led by Spark Capital, with participation from existing investors, including Bezos Expeditions, a personal investment company of Jeff Bezos. With a suite of digital creation and editing software available as an online service, Aviary offers a simple and cost-effective solution for creators of all genres–from graphic design to audio editing – to express their creative talents and participate in the burgeoning market for digital goods. In conjunction with the investment, Mo Koyfman of Spark Capital will be joining Aviary’s board of directors.

“Aviary’s robust suite of online creative tools is fundamentally democratizing digital creation. Whereas the market for digital goods was once reserved exclusively for creators using proprietary desktop software, Aviary is delivering creative applications that allow anyone with a browser to participate,” said Koyfman. “And by doing so in the cloud, Aviary allows for seamless online creation, collaboration, distribution and ultimately monetization previously not possible. The Aviary model has the potential to exponentially increase the number of creators and collaborators contributing to the digital economy.”

Until now, the digital creation market has been largely dominated by desktop software solutions which are often cost prohibitive and involve complicated interfaces. By contrast, Aviary offers a powerful creative toolset in the cloud that enables professional and amateur creators alike to easily create their own digital works. The basic Aviary suite is available for free to users and includes an image editor, vector editor, audio editor and more. Users can also upgrade to the pro suite to gain commercial features such as unlimited private storage, as well as collaboration and community enhancements. For more information, visit http://aviary.com/.

“We are disrupting the status quo by eliminating the long-held barriers to digital creation and giving creators the tools they need to create, market and monetize their vision,” said Avi Muchnick, founder & CEO of Aviary, Inc. “We are extremely excited to have Spark Capital on board. Their broad-ranging internet, software and consumer experience will be a tremendous asset to us in furthering our mission to make creation accessible to creators of all genres.”

[Updated with new details about deal, including who worked on it and info on a cash component.]

About three weeks ago, Facebook and Twitter ended several weeks of serious talks, in which Facebook was offering to acquire Twitter for $500 million of its stock, which also included a cash component.

While rumors of Facebook’s interest were brought up in an interview with Facebook CEO Mark Zuckerberg at the Web 2.0 Summit a few weeks ago, some shot down the idea as silly.

Quite incorrectly, as it turns out, since top execs at both Facebook and Twitter were right then at the tail end of discussions, which were initiated by the privately held Facebook in mid-October, about bringing the two together.

Those talks, sources on both sides said, are now over.

So why did the deal break down?

Well, as is usually the case, over price–was $500 million worth of Facebook stock actually worth $500 million?–and the typical concerns about integration and costs.

But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

“It’s more about timing,” said one person familiar with Twitter’s motivations. “There is a strong feeling that there is still an opportunity–even with the economic downturn–to blow this thing out.”

Still, combining the world’s fastest-growing social-networking site with what is quickly becoming the best-known microblogging service is actually a natural fit.

That’s especially true given that Facebook–for all its powerful online social connections–has seen Twitter race past it in innovating in the “status update” arena.

While some sources at Facebook said Zuckerberg was becoming frustrated by the buzz Twitter was getting–a market that should have been dominated by Facebook–others at the company said he was interested in buying Twitter because of his respect for its progress.

Indeed, at the Web 2.0 interview, Zuckerberg called Twitter an “elegant model” and said that he was “really impressed by what they’ve done.”

Indeed, with about six million registrations, as reported in October, up 600 percent over the last year, the San Francisco-based Twitter–launched in 2006–has had impressive growth.

(It has also been plagued by technical issues, which are–to be fair–decreasing.)

In any case, for those not familiar with it, the premise of Twitter is dead simple: A registered user logs in via the Internet or a mobile phone and answers the “What are you doing?” question the service asks in only 140 characters or fewer.

It’s quite a clever idea, although–so far–not a money-making one.

To try to goose that, Twitter’s board replaced the engineer who created Twitter, Jack Dorsey, with another founder, Evan Williams, who had served as its chairman and chief product officer.

The more experienced Williams (pictured here) had already built one company–Pyra Labs, which created the Blogger blogging service–that he sold to Google in 2003. He also started the audio and video search site Odeo, where Twitter was actually born.

Still, its investors have not come down on Twitter to hold back its growth efforts, and have handed over $20 million to the start-up so far. In its last round, Twitter was valued at $98 million.

Its funders include: Union Square Ventures, Charles River Ventures, Digital Garage, Spark Capital and Bezos Expeditions, backed by Amazon Founder and CEO Jeff Bezos.

In addition, well-known Silicon Valley figures, such as Marc Andreessen and Ron Conway, have also invested. Interestingly, Andreessen is also on Facebook’s board.

Other private investors include FeedBurner Co-Founder (and now Googler) Dick Costolo, former Epinions Co-Founder Naval Ravikant and former Googler Chris Sacca.

Twitter needs all the investors it can get, since it has no revenue, although it has been exploring things like charging business customers and adding advertising into the consumer service.

Lack of revenues was an issue for Facebook, said sources, especially related to fees Twitter pays for delivery of its messages to cellphones.

While the issue has been manageable in the U.S., Twitter cut off its SMS support in some international markets this summer because of too-high costs.

But, if Twitter was offered to Facebook’s 120 million users, Facebook execs estimated that it might have to deal with huge SMS fees–up to $75 million annually.

“Facebook has its own revenue-generating challenges,” said one person close to the company. “As much as Twitter would give them a lift in the status area, it was still a worry.”

Not enough, said several sources, to stop Facebook from making another approach at some point in the future. “We’d hate to see Twitter go to another company,” said one source.

Indeed, while all are even more price-conscious than Facebook, large companies that could also be interested include: Google (GOOG), Yahoo (YHOO), Microsoft (MSFT) or a large telecom company, such as Verizon (VZ).

If it had completed the deal to buy Twitter, it would have been Facebook’s most significant acquisition by far.

Zuckerberg and Williams did meet and get along well, but the deal was primarily negotiated by Spark Capital partner Bijan Sabet (Spark is a Twitter investor) and Facebook deal guy Dan Rose.

But in this time, at least, the Twitter side was still not interested in selling at the price Facebook had offered.

The $500 million offered was in an all-stock form, said sources on both sides, at the $15 billion valuation that came from the Microsoft’s investment in the company last October.

The Twitter side felt that figure was inflated and the shares should be valued at the lower figures that have also been reported for Facebook’s true valuation, more in the $5 billion range.

That would have given the deal a $150 million price tag, which was seen as too low, especially since it was in Facebook stock and not cash initially.

In fact, Twitter wanted cash, which some sources say was offered by Facebook in the $50 to $100 million range, in addition to stock, but taking too much stock was still a major issue.

There are other ways the pair could have approximated a safer choice for Twitter, via warrants, of course, or other methods.

But, said several sources close to Twitter, the primary reason for not selling was because its board simply did not want to yet or perhaps ever.

Said one source: “The question is, is it really a good idea to sell on the first chance you get?”

Well, for Twitter, we’ll just have to wait and see about that, of course.

[Photo of Evan Williams by Joi Ito. Licensed under Creative Commons 2.0 By-Attribution license.]

Read the rest of this post