AppDirect Secures $8.5M Funding Round, Rackspace Partnership

Founded in 2009, the San Francisco-based company already has several major partnerships, from Deutsche Telekom to Appcelerator to Bell Canada. It offers a cloud service marketplace and management platform to power other companies' app stores, the idea being that service providers can white-label the platform to sell apps and services from a branded marketplace, and that developers can integrate with AppDirect to sell their software using various app marketplaces in AppDirect's syndication network.

"The white-label model works for us because when businesses are buying software, they're buying from a local trusted provider," Daniel Saks, president and co-CEO of AppDirect, told CRN this week. "If a business has built a relationship for years with a Deutsche Telekom, that business wants to continue to buy from those people. We want to help broker that."

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AppDirect previously raised $3.25 million in seed funding in 2011. The new $8.5 million Series A financing was led by iNovia Capital and other, unnamed existing investors, and AppDirect plans to continue to invest in its platform and continue to hire. It had two employees at its founding and now has about 40, according to Saks.

AppDirect also confirmed Wednesday a partnership with Rackspace through which AppDirect will power the Rackspace Cloud Tools Marketplace. Rackspace will offer applications to its customer base of more than 180,000 that will help them maximize their use of the Rackspace Cloud, from billing and online backup tools to well-known business apps such as New Relic and SendGrid. Customers can search for and browse reviews of products in their Rackspace environment and pay for multiple applications through a single billing portal.

"It opens up a new beachhead for AppDirect," Saks said of the Rackspace relationship. "Anyone buying Rackspace can also consume those [applications] on the Rackspace cloud. This adds a lot more value to the ecosystem."

AppDirect's revenue streams come from the implementation and monthly service fees it charges for launching and managing custom marketplaces, and from a share of the revenue generated by apps sold through those marketplaces. According to Saks, AppDirect negotiates those rates with the marketplace owner and AppDirect's cut ultimately depends on the level of investment and other factors specific to that customer engagement.

AppDirect will continue to extend its platform to VARs, systems integrators and ISVs that want to administer their own application marketplaces and leverage AppDirect's network of partners.

"What's core to growth is taking a software platform and turning it into a software ecosystem," he said. "So this is our opportunity to create a flexible partnership where we can integrate with really any type of white-label partner."

PUBLISHED JULY 18, 2012