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. Based 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 database 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,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.
Joe Abrams curated the deals section of today’s newsletter.
VENTURE DEALS
- Lambda, a San Jose, Calif.-based provider of cloud computing services for training AI software, raised $320 million in Series C funding. US Innovative Technology Fund led the round and was joined by B Capital, SK Telecom, Crescent Cove, Mercato Partners, and others.
- Orienspace, a Shandong, China-based space launch firm, raised $83.5 million in Series B funding from Liangxi Science, Technology Innovation Industry Fund of Funds, Hongtai Fund, Xin Ding Capital, and others.
- Higharc, a Durham, N.C.-based provider of generative design technology for homebuilding operations, raised $53 million in Series B funding. Spark Capital and Pillar VC led the round and was joined by SE Ventures, Fifth Wall, Starwood Capital, Standard Investments, Home Depot, Ferguson, and others.
- Scribe, a San Francisco-based platform for documenting and sharing business processes, raised $25 million in Series B funding. Redpoint Ventures led the round and was joined by New York Life Ventures, Amplify Partners, Tiger Global, and XYZ Ventures.
- Flower Labs, a Hamburg, Germany-based platform for training AI models, raised $20 million in Series A funding. Felicis led the round and was joined by First Spark Ventures, Factorial Capital, Beta Works, Y Combinator, Pioneer Fund, and others.
- Clarity, a Tel Aviv, Israel-based developer of technology designed to detect AI manipulation and deepfakes in videos, raised $16 million in seed funding. Walden Catalyst Ventures and Bessemer Venture Partners led the round and was joined by Secret Chord Ventures, Ascend Ventures, Fusion VC, Flying Fish Partners, and others.
- Alembic, a San Francisco-based platform for tracking marketing initiatives, raised $14 million in Series A funding. WndrCo led the round and was joined by MXV Capital and Liquid 2 Ventures.
- Knock, a San Francisco-based platform for building and integrating customer notifications, raised $12 million in Series A funding. Craft Ventures led the round and was joined by existing investors Afore Capital and Preface Capital.
- Fever, a Stockholm, Sweden-based provider of software designed to allow energy asset owners to run and monetize their own virtual power plants, raised €10 million ($10.8 million) in seed funding. General Catalyst led the round and was joined by La Famiglia and Norrsken VC.
- Helika, a Toronto, Canada-based provider of data analytics and data infrastructure for traditional and web3 gaming, raised $8 million in Series A funding. Pantera Capital led the round and was joined by Sparkle Ventures, Diagram Ventures, Sfermion, and others.
- Guardrails AI, a San Francisco-based provider of tools designed to monitor and mitigate AI risks, raised $7.5 million in seed funding. Zetta Venture Partners led the round and was joined by Bloomberg Beta, Pear VC, Factory, GitHub Fund, and others.
- Arch, a San Francisco-based data intelligence platform for HVAC contractors, raised $6.2 million in seed funding from Gigascale Capital, Coatue, Floodgate, ReGen Ventures, and MCJ Collective.
- Celadyne, a Chicago, Ill.-based developer of fuel cells and other decarbonization and hydrogen solutions, raised $4.5 million in seed funding. Maniv and Dynamo Ventures led the round and were joined by EPS Ventures.
- SocialCrowd, a Los Angeles, Calif.-based 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.
PRIVATE EQUITY
- Capstreet acquired Analytic Stress Relieving, a Lafayette, La.-based provider of on-site heat-treating services. Financial terms were not disclosed.
- Clarence Technologies, backed by Genstar Capital, acquired Safe Fleet, a Belton, Mo.-based provider of safety solutions for fleet vehicles. Financial terms were not disclosed.
- Davies Group, backed by BC Partners, agreed to acquire Matson, Driscoll & Damico, an international forensic accounting firm. Financial terms were not disclosed.
- DwyerOmega, backed by Arcline Investment Management, acquired Miljoco, a Mt. Clemens, Mich.-based designer, manufacturer, and distributor of temperature and pressure management devices. Financial terms were not disclosed.
- Fenix Parts, a portfolio company of Stellex Capital Management, acquired Pacific Rim Auto Parts, a Ft. Worth, Texas-based automotive recycler. Financial terms were not disclosed.
- Flexera, backed by TA Associates Management and Thoma Bravo, acquired Snow Software, a Stockholm, Sweden-based technology intelligence platform. Financial terms were not disclosed.
- Shamrock Capital acquired a majority stake in Carnegie, a Westford, Mass.-based provider of marketing and enrollment strategies for non-profit higher education institutions, from New Heritage Capital. Financial terms were not disclosed.
OTHER
- Pathstone agreed to acquire Crestone Capital, a Boulder, Colo.-based provider of investment management and wealth advisory services for entrepreneurs and business owners. Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
- RW3 Ventures, a New York City-based venture capital firm, raised $60 million for its first fund focused on early-stage blockchain and Web3 companies.
PEOPLE
- BVP Forge, a Redwood City, Calif.-based private equity firm, hired Tom Obermaier as an operating partner. Formerly, he served as chief executive officer of SurePoint Technologies.
- HLM Venture Partners, a Waltham, Mass.-based venture capital firm, hired Michael Ludwig and Joseph Mayer, M.D. as partners. Formerly, Ludwig was with MTS Health Partners and Mayer was with Onehome.
- Renovus Capital Partners, a Wayne, Pa.-based private equity firm, promoted Lee Minkoff to managing director, Moe Tufail to managing director, and Pat Heath to vice president.
This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers in venture capital and private equity. Sign up for free.
