By Allie Garfinkle
Most of us don’t get hyped thinking about auditors. But Scott Arnold isn’t like most of us.
“We treat auditors like royalty,” he tells Term Sheet on an animated video call.
As the CEO of AuditBoard, Arnold lives and breathes auditors—and he knows you probably don’t get it: “Nobody says, ‘Oh, I’m so glad our auditors are here to talk to us today!’ But the reality is that if those people do their jobs really well, it makes a huge difference.”
AuditBoard is a VC-backed risk management software provider that’s been growing in recent years, and is now generating $200 million in annual recurring revenue, Fortune has exclusively learned. undefinedd in Southern California, AuditBoard has grown primarily organically, as the company has thrived on serving an underserved (and under-loved) customer—the auditor. Simultaneously, an increasingly risky environment has worked in AuditBoard’s favor. We came off the pandemic and careened right into a world rife with risks, from geopolitics to the banking system.
“What we fundamentally do is help people manage risk—and there’s no shortage of risk,” Arnold told me. “Whether it’s the impact of new technologies like AI or concerns with vendors, there are all sorts of different risks in an organization. If you can’t eliminate the risk, it’s about knowing what risks you’re taking and managing that effectively.”
In 2018, the company raised a $40 million Series B from Battery Ventures and Mucker Capital. For Michael Brown, Battery Ventures general partner, AuditBoard falls into the category of “office of the CFO software.”
“It’s one of the areas that’s still very much dominated by Excel spreadsheets or Word documents getting emailed around,” Brown said.
AuditBoard estimates that the company’s total addressable market is about $20 billion, which they describe as conservative. In part, what makes AuditBoard successful, Brown said, is the company’s idea of “connected risk.”
“They’ve got a one-of-a-kind centralized databr or, if you will, data story, then have modules that…all talk together. They’re all working off of one single version of truth for risks.”
In the foreseeable future, an IPO could be on the table for AuditBoard, but Arnold doesn’t view going public as an end in itself.
“We’re net cash flow positive over the life of the company and any of the last ten years, so we actually don’t need cash,” he told me. “The only reason we would need cash is if we want to go on a big acquisition spree or do a nonlinear expansion globally.”
I got an auditor who uses AuditBoard’s software to chat with me. Jeffrey Wing, VP of internal audit at Thryv, seems pleased with the software, and touts the community around AuditBoard (he’s a member of the company’s “Inner Circle,” a network devoted to helping auditors connect). The surprise comes when I tell him about this story—I run AuditBoard’s ARR by him and he’s caught off-guard.
“Wow, really? That’s more than I would have guessed.”
Which proves that, sometimes, even an auditor requires an audit.
See you Monday,
VENTURE DEALS
SocialCrowd, a Los Angeles, Calif.-brd employee performance management platform, raised $1.6 million. Bread and Butter Ventures led the round and was joined by VC414, Serac Ventures, and Gala Capital Partners.
Original article: https://fortune.com/2024/02/16/auditboard-risk-management-software-provider-generating-200-million-annual-recurring-revenue/
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