Late-stage companies have been turning to venture debt and other nontraditional forms of financing as an alternative to raising a down round amid this year’s stock market slump.
One of the latest to fund operations with debt rather than equity is robotic process automation provider Automation Anywhere. The San Jose-based company said Monday that it raised $200 million in debt financing from SVB Capital and Hercules Capital.
The debt round is expected to help the company reach profitability, CFO James Budge said in a statement.
Automation Anywhere raised its last venture equity round in November 2019. The $290 million Series B round was led by Salesforce Ventures and valued the company at $7.3 billion. The company’s other backers include SoftBank, Goldman Sachs, NEA and General Atlantic.
Since the company’s latest round has no equity component, Automation Anywhere was able to avoid setting a new valuation at a time when stock prices are sharply lower among publicly traded comparable companies like UiPath. Debt financings essentially kick the valuation can down the road, and therefore help avoid the sting of a down round.
Shares of UiPath, Automation Anywhere’s main rival, have plunged 71% this year. UiPath went public in April 2021.
Venture debt deal flow, which has exceeded $30 billion annually in the past few years, has already notched over 1,900 deals totaling $22.4 billion through Sept. 29, according to PitchBook data.
Dedicated robotics process automation companies have failed to produce significant cost savings for adopters, according to Brendan Burke, a senior AI and software analyst at PitchBook.
“Leading RPA vendors are behind on integrating AI in their products and are seeing their growth slow drastically while Microsoft barges into the space,” Burke said. Microsoft introduced a less-expensive RPA offering in late 2020. The tech giant’s lightweight, user-friendly version of RPA is bundled at a discount with other Microsoft enterprise platforms, Burke said.
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