Mithril, doubling down, leads $50 million investment in AppDirect

[February 11, 2015] By Sarah McBride

SAN FRANCISCO (Reuters) - San Francisco-based AppDirect, which helps developers and businesses create, use and sell apps, said it raised another $50 million in a funding round led by Mithril Capital Management, the same firm in charge of its last round.

The latest funding values AppDirect at $600 million, double the valuation when it raised $35 million in April.

By doubling down, Mithril is making a big bet on the growth of apps, specialized software that users tap into via the Internet rather than through a specific computer. As part of the trend, also called cloud-based software, developers try to make sure the apps work seamlessly with smartphones.

Last year, venture firms invested $2.89 billion in software, up from $2.41 billion the year before, according to the National Venture Capital Association. Software has led venture investing since 2008, the height of a clean-technology boom and a time when venture capitalists preferred industrial energy.

From its founding in 2012, Mithril was seeking investments that benefit from the increasing tendency of companies to move software to the cloud, said partner Ajay Royan. However, he wanted to find new ideas within that well-trodden route.

“You’re looking for something that is slightly hidden,” he said. “The secret that was hidden in plain sight.”

He liked AppDirect in part because it makes it easy to tap into what he says is a quietly emerging trend that allows employees to use their own software at work, much as they now bring in their own computers and phones instead of using workplace hardware.

AppDirect does this by creating an online marketplace of apps that work well in business environments and integrate with each other, Royan said. It also simplifies the app-publishing and selling process for developers and intermediaries, and runs the app marketplaces for customers such as AT&T Inc.

To mitigate risk, venture firms typically lead just one round of a start-up's financing. If they like the company and want to increase their stake, or alternatively, if they cannot find an outside investor willing to pay a higher price, they sometimes lead two or more rounds.

In this case, new investors Henry Kravis, co-founder of buyout firm KKR & Co LP, and Paul Fribourg, chief executive of Continental Grain, joined the round. Existing investors Foundry Group, iNovia Capital and StarVest Partners also participated.

(Reporting by Sarah McBride. Editing by Andre Grenon)

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