Business & Tech

Software firm Applause sold to private equity firm as tech IPOs stagnate

Doron Reuveni, chief executive of Applause App Quality Inc., the Framingham company that helps some of the world’s biggest brands test software.
Applause handout
Doron Reuveni, chief executive of Applause App Quality Inc., the Framingham company that helps some of the world’s biggest brands test software.

Applause App Quality Inc., the Framingham company that helps some of the world’s biggest brands test software with real users, said Wednesday it is being acquired by a private equity company after a decade in which it raised $115 million from venture investors.

The buyout by Texas-based Vista Equity Partners highlights a trend in the tech community, with startups turning to private equity firms as a way to return early investors’ capital amid a dearth of initial public offerings.

Applause will continue to operate independently with no changes to its executive leadership, according to a statement from the two companies. The firms did not disclose the terms of the deal, expected to close in coming weeks.


Chief executive Doron Reuveni said the sale to Vista was a “great outcome” for Applause employees and investors.

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“This is something that we did not have to do, but I think it provides a great opportunity to grow and scale the company going forward,” said Reuveni.

Being owned by Vista, said Reuveni, will give Applause more flexibility to grow its products, which companies use to test their software, get user feedback, and view insights into their markets.

Applause draws on 300,000 on-demand product testers for clients that include Facebook, Microsoft, Google, Coca-Cola, Disney, Walmart, McDonalds, and the National Football League.

Venture capital firms are getting fewer opportunities to cash out their investments in recent years. The IPO market is only now showing signs of life after a long period of low activity, putting strain on venture firms seeking to get their money out.


There were 40 IPOs of companies backed by venture capital firms in 2016, according to the research firm PitchBook, which had reported a five-year high of 125 just two years year earlier.

Corporate acquisitions are also fewer in number these days, while private equity buyouts are comparatively more common: Through June, there had been 65 buyouts by private equity firms, or 19 percent of all venture capital exits — the largest share in years, according to PitchBook.

Private equity investors have a lot of money on hand and are competing for deals, especially in the technology sector, according to Jeff Roberts, director of private equity research at NEPC, which advises large institutional investors.

Private equity deals often leave a company’s management in place under new oversight, and they are far less complicated than initial public offerings.

Andy Palmer, a long-time area entrepreneur and investor who is chief executive of Cambridge-based Tamr, said he welcomes the infusion of money from private equity firms in the world of startups. The traditional choice between corporate acquisitions and IPOs “caused people to make unnatural decisions,” he said.


“There were radical unintended consequences associated with doing one or the other.”

Palmer said startup executive founders must choose private equity firms carefully, because not all will have the same time span or patience as early investors who bought into a vision for a company.

Bill Aulet, managing director of the Martin Trust Center for MIT Entrepreneurship, said such buyouts can also free up venture capitalists to return money to their own investors.

“At the end of the day, money’s money. Once I get cash and there are no strings attached, that’s a wonderful thing,” he said.

Reuveni said Applause was under no rush to make a deal. It still had cash available from a $35 million funding round in 2016 led by Direct Equity Partners, an arm of Credit Suisse.

Discussions with Vista advanced over the summer, he said, and Reuveni became convinced that he could grow the company under the new ownership.

The company has about 350 employees in its US and European offices, 200 of whom are in Framingham. He doesn’t expect any change to staffing levels under the deal.

Reuveni said he will now look to make acquisitions and expand internationally, and that an IPO is still a possibility down the road.

The market for such offerings has been picking up in recent months, according to a report from Renaissance Capital. There were 52 IPOs that raised $10.6 billion in the second quarter of this year, two-year highs in both number and value.

Andy Rosen can be reached at Follow him on Twitter at @andyrosen.