Everything you need to know about the UiPath IPO

March 26, 2021

On March 26, UiPath filed its S-1 in anticipation of an IPO on the New York Stock Exchange. The company said Tuesday it had priced its shares at $56, selling 23.9 million shares to raise $1.34 billion — over half a billion dollars for the company, with the rest of the proceeds going to current shareholders. Shares began trading Wednesday under the ticker symbol PATH.

The stock opened at $65.50 and had risen to $68.68, up 22% from the offering price, in early trading.

Bloomberg estimated the company would be worth $31 billion at the $56 price, including employee stock options and some other unissued shares. At the current market price, it's worth closer to $38 billion — more than 7-Eleven, Allstate or Okta.

UiPath, founded in Bucharest in 2005 by Daniel Dines and Marius Tîrcă, is a startup that provides robotic process automation technology to help run workflows across the enterprise on autopilot. (Those are figurative software robots, not hardware, by the way.) The company's goal is to "accelerate human achievement" by taking care of the more mundane aspects of jobs — think of pulling information from an attached PDF and automatically uploading it into a customer profile. That should free up workers to tackle higher-priority tasks.

Eventually, however, UiPath sees companies deploying RPA across all functions, allowing for more complex use cases. Because UiPath's business strategy is centered around providing the software to each individual worker, much of its success hinges on the ability to land and expand within large corporations.

The company got its start with a $1.6 million seed round in 2015. By the end of 2020, it had raised nearly $2 billion, making it one of the world's most valuable startups. But despite flying high on fundraising, UiPath has had a few hiccups. It laid off 400 employees in late 2019 following a $568 million series D round in earlier that year. Former CFO Marie Myers was also reportedly forced out for trying to rein in out-of-control spending.

What UiPath does

UiPath provides RPA software to help employees automate the monotonous parts of jobs. The software's AI learns how an employee works then emulates that behavior. That can range from simple use cases, like filling in forms, to more complex ones that can rely on several applications or touch points, such as onboarding a new employee. In that instance, RPA serves as the connective tissue between the different programs. UiPath also offers a low-code system for workers to build their own automated workflows.

IDC says the market is expected to reach $30 billion by the end of 2024. But UiPath thinks the ultimate market is a much larger $60 billion when factoring in the full potential of the technology, making the sector "one of the largest ever in enterprise software," per the company's filing. UiPath admits, however, that it is still early days in the quest to reach the "fully automated enterprise."

In such an environment, "automation will be woven into the central nervous system of the company and workers will continuously observe, interact with, automate, and improve all processes and operations across an enterprise," the company wrote.

UiPath's financials

UiPath mostly sells to large enterprises. And it banks on customers quickly scaling up its licenses once they see an initial return on investment. In 2019, for example, Nielsen licensed 100 software robots from UiPath. In 2020, the data analytics company added an additional 100 licenses. Overall, it automated 400,000 hours of work, per UiPath.

The company has yet to turn a profit. But revenue jumped 81% in fiscal year 2021 to $607.6 million. In that time, the company's net losses decreased from $519.9 million to $92.4 million. Much of that was due to deep cuts in marketing and R&D budgets. While the bulk of its revenue comes from licenses, UiPath made over $232 million in service and support in fiscal 2021.

As of Jan. 31, the company had 7,968 customers, including name brands like Chipotle, Chevron, Bank of America, CVS Health and Adobe.

What could go wrong

Two main themes stick out in the risk factors UiPath lists: the reliance on cloud partners and competition from RPA rivals, as well as from app integrators like Workato and service providers like ServiceNow.

UiPath has agreements with each of the top cloud providers, but those firms are also pursuing their own automation offerings or striking deeper partnerships with other RPA startups.

Google Cloud recently partnered with Automation Anywhere. As those companies jointly release more products that are catered to Google Cloud's platform, customers may be hesitant to tap UiPath.
In 2020, IBM bought Brazilian RPA provider WDG Automation and Microsoft purchased Softomotive.
"[A]s our market becomes increasingly driven by cloud-based solutions, native cloud providers may enter this market and provide competitive offerings at lower prices," UiPath wrote.

Outside of the cloud providers, an increasing number of vendors are seeking to address the same barriers to automation that UiPath is.

Companies like Boomi, Informatica and Workato, for example, also tout their ability to use APIs to link disparate applications on the back end to enable automation. Increasingly, that is being done in a low-code environment, which is enabling non-technologists to piece together their own workflows.
And other service providers are seeking to let customers integrate third-party programs into their applications in order to allow users to automate workflows. ServiceNow, for example, recently acquired Intellibot.
"A lack of education as to how our automation platform and products operate may cause potential customers to prefer more traditional methodologies or their limited, internally-developed automated processes, to be cautious about investing in our platform and products, or to have difficulty integrating our platform and products into their business architecture," UiPath wrote.

Who gets rich

UiPath has Class A and Class B shares of common stock. Each Class B share receives 35 votes per share; Class A receives one per share.

Accel Partners has 28.8% of Class A shares.
Earlybird Management has 11.4% of Class A shares.
CapitalG has 8.3% of Class A shares.
All directors and executive officers have 38.4% of Class A shares.

Other investors include Alkeon, Coatue Management, Credo, IVP, Kleiner Perkins and Sequoia Capital.

Notably, Dines currently owns all of UiPath's Class B shares, giving him 91% of the voting power.

Though that will be diluted slightly after the offering, UiPath warns that the CEO "will have the ability to control the outcome of matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or our assets, even if his stock ownership represents less than 50% of the outstanding aggregate number of shares of our capital stock."

Dines' co-founder, Marius Tîrcă, does not appear to have a significant stake in the company.

What people are saying

"It's not a moonshot project like a lot of AI, so companies are doing it like crazy," Forrester Research analyst Craig Le Clair told the New York Times about RPA. "[Y]ou can build a bot that costs $10,000 a year and take out two to four humans."

"UiPath develops solutions and services to enhance and add value to established enterprise business processes," Pund-IT Inc analyst Charles King told SiliconAngle. "Those are the kinds of organizations that have survived 2020 mostly intact and will likely continue doing well post-COVID-19."