One financial metric discussed liberally by cloud software companies is the recurring revenue driven by subscriptions.
Slowly, but surely that model is permeating other industries, especially when it comes to selling services. One obvious example is GE’s predictive maintenance business, now driving at least $1 billion annually.
The catch: accounting for subscriptions and managing renewals is far different than logging a product sale. That’s where Zuora’s software comes in, and it is finding plenty of investors ready to buy into its worldview.
That includes a new $115 million late-stage investment announced this morning by several investors that usually wait until a startup enters the public market before jumping in: Wellington Capital, Blackrock and Passport Capital.
“This is like a mini IPO or maybe a private IPO. We have the benefits of the capital without the hassle,” said Zuora co-founder and CEO Tien Tzuo. “We can continue to put our heads down.”
Zuora’s relationship management software is used by the likes of Box, Dell, DocuSign, HubSpot, Marketo, Zendesk, and Schneider Electric to manage subscriptions, invoicing and (ultimately) renewals. Collectively, organizations working with Zuora handle more than $42 billion in invoices on the platform.
“The word ‘customer’ implies that someone may or may not buy something. The word ‘subscriber’ implies an ongoing relationship,” Tzuo said.
The new round brings the total capital raised by the eight-year-old company to $250 million, but Tzuo declined to discuss the valuation. All of the company’s existing investors participated in the new round, including Benchmark Capital, Greylock Partners, Redpoint Ventures, Shasta Ventures, Vulcan, Next World Capital, Workday founder Dave Duffield and Salesforce chairman and CEO Marc Benioff.
One growth area for Zuora centers on services enabled by the Internet of things, which is what attracted companies like Honeywell and Qualcomm. To consider a specific example: ThermoFisher Scientific’s Life Technologies division (which specializes in medical diagnostics) uses Zuora to manage analytics services for gene sequencing.
“The shift to recurring revenues and subscriptions is everywhere,” Tzuo said.
IDC research vice president Amy Konary echoed that sentiment: “Across many industries, the business of enabling experiences and nurturing relationships is augmenting or replacing product catalogs, shopping carts, and ownership. Success in this new world requires monetizing relationships instead of simply selling units.”
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