Odoo is a Belgium-based open-source business management software developer. Recently the software company got a funding injection. The news came that Summit invests in Odoo $215 million. Since its inception in 2005, it has made a profitable operation by developing business management software too. Their software ranges from inventory management and ERP to human resources and CRM software, marketing tools, and more.
Why Summit invested in Odoo?
Summit invests in Odoo this time as a secondary investment. It means that Summit is buying shares from existing investors. Specifically from Sofinnova Partners and XAnge. Fabien Pinckaers, the CEO and co-founder of Odoo explained that the company is and has been profitable for many years. Hence, it didn’t need to raise more cash by giving away more equity. He added that this investment values the startup at over €2 billion making Odoo the first unicorn out of Wallonia.
Summit is Odoo’s earliest backer. This is the second time that it has snapped up secondary shares. The firm made a similar investment of $90 million in 2019.
With 7 million users on its platform, Odoo is a prime example of the strong payoffs to be had from economies of scale in the most successful open-source projects. But it’s also doing so with a twist.
Odoo’s business model
On the open-source front, Odoo provides a version of its services that is “open source” and free. Pinckaers said that these free services contain about 80% of all of its features. It then offers a paid, proprietary version of the product with the remaining 20% of the features.
He said that about 90% of Odoo’s customer base takes the free tier. Only 10% take the paid, proprietary tier. But with 7 million users, that is enough to run the business at a profit. And the profit is big enough that it can continue investing in growth without giving away more equity.
Odoo’s pitch is also interesting. Open source is usually seen as the domain of developers and the technical community. Whereas Odoo designs software on its platform that is actually aimed at others in the workplace, not engineers.
We are one of the only exceptions of open-source built for non-technical users.Fabien Pinckaers, CEO and co-founder of Odoo
Odoo’s customer base
It targets users both directly via its SaaS platform and via an extensive channel partner operation. In this, the channel partners will host the services themselves. Its traction with these partners is strong because of the free nature of Odoo. This is not only a contrast to the SAPs, Microsofts, and Oracles out there, but makes it easier to sell with a channel partner. There are nearly 4,000 partners now, with another 90,000 individual community members contributing software on the Odoo platform.
The company has been growing revenues and customers at a rate of 50% over the last 10 years. It now has 1,700 employees with plans to add another 1,000 this year. Billings are expected to be €160 million in 2021. Pinckaers said that Odoo’s next steps will be to continue growing the software that it provides to users on its platform. Specifically, it is focusing on e-commerce and website development, he said, two areas that he feels could benefit from more non-technical, user-friendly open-source tools.
“We are thrilled to support the Odoo team for this next phase of growth,” Han Sikkens, managing director and head of Europe at Summit Partners, said in a statement. “We believe the future is bright, and Odoo clearly has the potential to disrupt the market led by software giants like SAP, MS Dynamics, and Oracle.” Sikkens is joining the board with this round.