By Lisa Leiter
SilkRoad, the Chicago-based human resources software company run by veteran tech entrepreneur Flip Filipowski, raised $35 million in a Series C funding round.
New investors include Keating Capital and NTT Finance, joining Intel Capital, Crosslink Capital, Foundation Capital and Tenaya Capital, among others.
SilkRoad plans to use the new funding to further expand worldwide and to launch new products. It’s also planning an initial public offering. That news comes on the heels of rival Workday filing to go public last month.
Since launching in 2005, SilkRoad has raised a total of $129 million.
Crain’s Lisa Leiter spoke with Mr. Filipowski today about SilkRoad and the Chicago tech scene. (For more background on Mr. Filipowski’s recent doings — and his long, tangled history on Chicago’s tech scene as the founder of Divine Interventures — check out this Crain’s piece from 2010 by Senior Reporter John Pletz.)
How big is the market for human capital management software?
It takes a little bit of guesswork . . . $75 billion minimum total annual market opportunity. It makes it about the size of the automobile market.
Why do you see such potential in markets outside the United States?In China, for example, they have to have a very transformational impact in their own businesses so they become design leaders rather than a low-cost labor force. They are already outsourcing to Brazil and chasing the next low-cost labor markets. They know their top talent is being recruited by multinationals and they have to violently oppose that multinational approach and make their companies more progressive and more capable of employee engagement and commitment than they ever have in the past. If you were to ask me 10 years ago, I would have said that was surprising, but today I consider that the center of the human capital management movement.
Are you planning an initial public offering of your stock?
Yes. We think the earliest would be the fourth quarter of this year; otherwise, the first or second quarter of next year.
Why do you think now is a good time to go public?
Human capital management software generally that’s in the cloud has a profile where only so much can be developed under private investment. Private investment is a different kind of capital than public money; it’s much more expensive and it demands a different attention span. It has more emphasis on things like profitability, whereas public money has more emphasis on growth. And to converge on growth for a SAAS (software as a service) company, you have to drive the business on that fundamental need for growth. If you don’t do that, you will perish.
Most of your investors are in Silicon Valley, not Chicago. Why?
The cloud space has been more understood by the VCs on the West Coast. I think most of the investors and VCs in the Midwest do not have a technology software or cloud-based strategy.
How is the Chicago tech startup scene different today than it was during your time at Divine Inc. and the dot-com boom?
I think the Chicago tech scene is very vibrant. I’m very pleased to see that. I certainly know a lot of the folks in the tech scene and I am very enthusiastic for them as they are for us. I see quite a few very good stories coming out of this area. I, for example, love Groupon, and I am probably in the minority. I think their idea of forming an operating system for conventional property — whether that’s restaurant seats, or anything else — of knowing where mobile customers are and giving them reasons to purchase inventory that is going to go obsolete, is a brilliant strategy and will ultimately result in Groupon being extremely valuable.
Do you own the stock?
I own like 1,000 shares. That doesn’t move my mouth to endorse anything.
Follow Lisa Leiter on Twitter: @LisaLeiter.