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Marketo’s $50 Million In New Funding Opens Door To IPO, Draws Greater Financial Scrutiny From Analysts

The news that Marketo raised another $50 million in new venture financing has turned the spotlight on to the marketing automation and Revenue Performance Management categories. While the new round, led by Battery Ventures, highlighted the continued growth of Marketo and the two categories, talk of a 2012 IPO has drawn increased scrutiny on the financial performance of the emerging sectors.

In announcing the new round, Marketo CEO Phil Fernandez pointed out that the company 2010 revenue came in at $14 million, and projected sales in 2011 would grow by 140%, putting revenue in the $35 million range. He also forecasted that Marketo’s revenue would double in 2012, and said there is a “strong possibility” of an IPO in the next 12 to 15 months.

In total, Marketo has raised $107 million since its 2006 inception. From the $107 million raised, Marketo said it has $70 million available in the bank, and plans to use this for growth, both internationally and in product development, in the coming year.

“This new investment gives us a war chest in excess of $70 million,” Fernandez said. “We plan to use these funds aggressively to expand our award-winning product suite, further extend our global reach and look beyond our four walls to complement our own innovation engine.”

In 2011, Marketo has more than doubled its revenue, opened its EMEA headquarters in Dublin and launched Spark by Marketo, a new product solution specifically designed for the SMB sector.

The San Mateo, CA-based vendor was founded in 2006 and now has 240 employees. Fernandez projected the company would finish next year with nearly double that total.

While Marketo’s competitors applauded the fact that investors were stepping behind the industry, they also took the opportunity to question why Marketo would raise more just one year after its last round. Eloqua CEO Joe Payne wrote on Eloqua’s blog that Marketo’s recent launch of a low-cost product for the SMB would put the company squarely against other competitors like HubSpot, which, he argued, would be a costly move.

Payne argued that “acquiring low-margin customers” will be an expensive strategy. 

“When you compete against HubSpot, you’re not only competing against a well-funded, well-oiled ‘inbound’ marketing machine — you also compete against Salesforce and Google, each of whom recently made strategic investments in the company…To beat HubSpot + Salesforce + Google + a whole host of others, they are going to need every cent,” Payne said.

Some analysts have also cautioned that the amount Marketo is spending to acquire new customers could be a challenge. In his Customer Experience Matrix blog, industry analyst David Raab estimated Marketo’s “burn rate” last year was approximately $17 million. Based on the company’s customer count, Raab estimated Marketo’s revenue per client was $30,900 for 2011, versus total operating costs of $46,400 per client.