RPA, the extraordinary company you have never heard of and the investment vehicle you have

Robotic process automation and the exciting opportunity it holds.

Article updated: 27 November 2018 10:00am Author: Michael Baxter

How about this! Annual recurring revenue increased from $1 million to $100 million in 21 months. It’s an opportunity alright, but it is not so easy for investors to jump on board; the solution is quite exciting though.

RPA stands for robotic process automation — although it has nothing to do with the kind of robots you might immediately think of. Instead, in this case, robots are software tools — and they are designed to automate routine tasks, the kind of tasks most of us find rather dull and boring.

PwC has projected that RPA and its cousin Artificial Intelligence (AI) will boost the global economy by $15 trillion between now and 2030.

So who are the main players in this market?

Operators in the RPA include Blue Prism, WorkFusion, EdgeVerve, Kofax, Kyron, NICE, Pegasystems, and Thoughtonomy.

But the ones that I find especially interesting are UiPath and Automation Anywhere.

Growth

Over a 21-month period, ending last July, UiPath’s average recurring revenue rose from $1 million to $100 million. Since July, this has increased again, up to $150 million. Just to reiterate, this is recurring revenue, meaning that it is generated in the form of subscriptions.

The company has seen multiple fund raising rounds, most recently raising $400 million, securing a valuation of $3 billion.

Automation Anywhere recently raised $500 million, extraordinarily, this was merely its Series A fund raising, it is now worth just a few hundred million shy of $3 billion.

Why so valuable?

It has been estimated that approaching 50 per cent of all work based tasks can be automated. So, that might give you a feel of the potential value. UiPath’s CEO Daniel Dines says that he wants to see a robot on every desk — paraphrasing Bill Gates’s famous target from several decades ago for a PC on every desk.

Jobs

I know what you are thinking, this technology will devastate the jobs market. Recently, I spoke to Guy Kirkwood, who is UiPath’s Chief evangeliser. He said: “One of the big myths of automation is that it replaces jobs, it doesn’t. Most organisations go into automation because they want to reduce head count, that’s what they base their business case on and they are all wrong, that doesn’t happen.

What actually happens is they put in automation and then realise that the value of their people, the value of their human capital, is much higher than they thought it was. So, they re-deploy those people, they raise them up the value chain.”

Investing in RPA

The snag, from the point of view of retail investors, is that few of the key players are listed on the stock market. One exception is Blue Prism, but Guy told me that he thinks the company listed too soon, seriously hampering its ability to raise money.

UiPath’s first investor was EaryBird Venture Capital, which invests in European tech companies — UiPath was founded in Romania. 

For retail investors, the options are limited. You could keep your powder dry and wait for its IPO, or you could invest into one of its backers.

One of UiPath’s biggest investors is Alphabet.

I previously wrote here that Alphabet is the firm most likely to take over Apple’s crown as the world’s biggest tech, because of its interests in AI. Well, now you have another reason to consider the Google parent company.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.